Hi all,
We all probably have a weakness when it comes to this property investing business, and one of mine is the skill (or lack there of) to negotiate.
I would love any tips that experienced investors might pass on in helping to snare a good deal.
Just how do you START to get that ridiculously high starting price down?
What clauses have you introduced that have appealed to vendors and got a deal over the line?
What’s the best way to approach and deal with real estate agents?
How do you find out the vendor’s circumstances and possible motivations to sell?
I just want to know any tricks or approaches that have worked for you.
thanks,
Carlin1. Always substantiate your claims: eg – Mention that you’ve seen or bought a property at the same price with a higher yield when the agent quotes what they think the property will sell for.
2. Attach a cheque for the deposit amount when making a written offer to a vendor. This works especially well when you know the vendor’s circumstances, or if you find out that they want a short settlement term.
3. Whoever quotes a price first will “generally” lose the negotiation – Why else would car sales people always say “So how much do you want to spend?” or “How much are you willing to pay for it?” rather than telling you how much it is.
4. Invent a fictitious business/decision partner. This is a perfect “out” when someone tries to back you into a corner negoiation wise. eg: Car sales person says “Well if I drop the price to $x, will you sign the contract today?” You say “Not too sure yet, I need to consult my girlfriend/wife/business partner etc etc.
5. Do not antagonise the agent/vendor or insult their asking price/offer price. I’ve heard of a few people that have lost potential deals due to comments like “$120k for that? You’ve got to be kidding me!? Hahaha”. Just be professional and polite, and then justify why you think the property is/isn’t worth that much.
6. Be willing to negotiate on terms OR price, but never on both (Direct from the readings of the prophet Steve McKnight [specs]) – What’s more important to you? Slightly longer settlement period or hanging out for a few thousand dollars extra? The best situation is where one party wants to negotiate on terms, and the other on price (happens more often than you might think!)
I worked in a job for 2 years where Negotiaton skills was on the job description. I’ll surely remember some of the technical stuff later on – and when i do… “I’ll be back!”
Hope this helps kick off the conversation!
Regards,
Steve (YI)“Knowledge is Power”
My one tip is for those who cannot tell a lie!
Do all what what Steve recommended and be sure you believe in your rationale. Dont just pick a number and put fluff around it! Have strong, justifiable evidence.
No science here, but the other side will react more in your favour if you strongly believe in your offer.
Hi Carlin
One way of improving your negotiation skills is next time you purchase something, anything negotiate it. It doesn’t have to be a property, negotiate on the next appliance purchase and learn on small deals first. Experience is a great teacher.
Mark
“Is this taking us CLOSER to our goal?”
What clauses have you introduced that have appealed to vendors and got a deal over the line?We find that no clauses appeal to Vendors. Cash – unconditional is what they are ultimately looking for…..and at the end of the day, just prior to settlement, this is what all contracts end up being, so the quicker you as purchaser can get into that position, the more pleased the vendor will be….and hence more likely to accept your offer. Phaffing about with all of these sneaky little “out clauses” that all the experts teach you in seminars simply p**s the vendors off.
We concentrate on properties with very large land content, so building and white clauses mean little to nothing for us. A soil examination is probably more important.
What’s the best way to approach and deal with real estate agents?Don’t. Go straight to the Vendor. Why Phaff around with someone all dressed up like a two bob watch who rarely knows anything about the property other that the short info sheet the vendor fills out for them….and more importantly has absolutely no legal position in the contract of transaction. To us they are a hinderance to be avoided.
How do you find out the vendor’s circumstances and possible motivations to sell?Find out who they are and then sit down and have a chat with them. Normally the vendors are real people, who have a mouth and can actually talk. If the vendor is a company or trust, have a chat to the CEO or the trustee….they are normally real people too.
Cutting through the blatant lies and “my client’s wishes” of the REA is one of the first tasks to be smashed down on your way to a successful transaction.
Anyway…..that’s how our group approaches things….it’s working OK so far. If you wish to be really really nice to everyone, and don’t want to tread on any toes or upset REA’s, then don’t try any of the above.
Micheal Yardney has an interesting free e book download on his site titled “How to become a power negotiator” this could be of interest to you.
Dave
Here’s the link to Michael Yardney’s negotiation info… very good stuff.
Hi,
As a real estate agent myself, ( i know i shouldnt be admitting this on this forum!![biggrin]) dont go around the agent to the vendor. This will only p!$$ the agent off straightaway, [grrr] and if there is a close relationship between the two, the agent will tell their client not to deal with you. AT ALL. trust me ive heard it happen to friends of mine in my suburb. Starting out, not worth it, losing out on a good deal. Its kind of like lowballing your offer TOO low, you can annoy the vendor and they wont negotiaite with you, because you have offended them. One other thing in handling agents – be firm. [comp] If you show any level of doubt, [crying] they will jump right on that, its their job to spot those weaknesses. Fake it till you make it![aacool]
My main tip would be to you – be prepared to walk away
easier said than done, ive done it myself, and stuffed up because i was too weak to walk away, and paid too much. At the end of the day, a good deal comes round on average every 14 days. It may not seem like it at the time, but it will.[thumbsup2]
One other thing, if you are that worried about your first one, how about employing a buyers agent to get that saving in there. What you can spend on a buyers agent to negotiate for you, can sometimes triple in what you save by what they managed to negotiate the price.
If you want to ask any questions, send me an email.
GOOD LUCK![thumbsup2][thumbsup2][thumbsup2][thumbsup2][thumbsup2][thumbsup2][thumbsup2][thumbsup2][thumbsup2]Originally posted by audrey123:Hi,
As a real estate agent myself, ( i know i shouldnt be admitting this on this forum!![biggrin]) dont go around the agent to the vendor. This will only p!$$ the agent off straightaway, [grrr] and if there is a close relationship between the two, the agent will tell their client not to deal with you. AT ALL. trust me ive heard it happen to friends of mine in my suburb. Starting out, not worth it, losing out on a good deal. Its kind of like lowballing your offer TOO low, you can annoy the vendor and they wont negotiaite with you, because you have offended them. One other thing in handling agents – be firm. [comp] If you show any level of doubt, [crying] they will jump right on that, its their job to spot those weaknesses. Fake it till you make it![aacool]
My main tip would be to you – be prepared to walk away
easier said than done, ive done it myself, and stuffed up because i was too weak to walk away, and paid too much. At the end of the day, a good deal comes round on average every 14 days. It may not seem like it at the time, but it will.[thumbsup2]
One other thing, if you are that worried about your first one, how about employing a buyers agent to get that saving in there. What you can spend on a buyers agent to negotiate for you, can sometimes triple in what you save by what they managed to negotiate the price.
If you want to ask any questions, send me an email.
GOOD LUCK![thumbsup2][thumbsup2][thumbsup2][thumbsup2][thumbsup2][thumbsup2][thumbsup2][thumbsup2][thumbsup2]From experience we were also told we were not to contact the owner. This is what happened;
we were about to settle on a property but found out too late that there was major structural damage (first building report was bogus). We then contacted the owner direct because we received no satisfaction from the (his) agent.
That conversation we had with the owner ultimately released us from the deal that would of cost us at least an extra $50,000 to rectify the damage that the owner was aware of and did not disclose to us. Sometimes you just have to look after your own interest because no one else will.
Ros
Many many thanks! I’ve started a “negotiating tips” file. I’m sure this info is helping many other investors who, like me, are just starting out.
When you read about successful property investors one of the things they all have in common is that they bought well. It seems essential to buy at wholesale, not retail, prices if you want to build a decent portfolio. But almost always the advertised price is retail.
Thus it’s clear that if you don’t learn how to get that price down, you’ll fail.
So please keep those tips coming.
thanks again,
carlin>>>>>From experience we were also told we were not to contact the owner. This is what happened;
we were about to settle on a property but found out too late that there was major structural damage (first building report was bogus). We then contacted the owner direct because we received no satisfaction from the (his) agent.
That conversation we had with the owner ultimately released us from the deal that would of cost us at least an extra $50,000 to rectify the damage that the owner was aware of and did not disclose to us. Sometimes you just have to look after your own interest because no one else will<<<<<<<
Hi Ros,
Very helpful reply.
Sorry to be so thick, but how did u contact the vendor? Did u just knock on their door? What was it about the agent that you didn’t like?
Secondly, why did u suspect that the first building report was bogus and so decide to get another one? How should those of us who can’t tell a hammer from a scredriver proceed in getting an understanding of things like building reports?Thx,
JBAlright here are the basics. I don’t have the time to run right through this so some quick basics for you for now and a paid lesson later! No. Not really unless you say please…
CHOOSE YOUR TOOLS:
There are a number of tools a negotiator can bring to the table and these include non-verbal sensitivity, listening, questioning and persuasive and signalling skills, strategies and tactics, cultural and gender sensitivity, and familiarity with with the communication channels.NON-VERBAL SENSITIVITY:
To be a complete negotiator you must learn to be a complete communicator. You must be aware not only of what is being said out loud, but what is NOT being said, including posture, gesture, eye contact, clothing (not to mention my favourite – FALSE body language as a tactic.)
PERSUASIVE SKILLS
Learning to negotiate requires learning to persuade people to your point of view, AND being able to detect persuasive techniques when they are being used on you. This is vitally important in determining the way we negotiate and our success at it.
LISTENING AND PROBING SKILLS
To be a good negotiator not only do you need to be a good listener and set aside everything else other than what is said, but you also need to be a great questioner and be able to probe your opponent.
SIGNALLING SKILLS:
In the negotiation process you must not only listen to the spoken word, but you must listen to the Body Language of the other side as well. It is crucial to winning that you have to be able to decipher their body language and determine when they are using false signs in order to lure you in.
CULTURAL AND GENDER SENSITIVITY
I think this one speaks for itself really. If you stay sensitive to cultural differences then you should be well respected at the close of business and through the future.
COMMUNICATION CHANNELS:
Know all the Pro’s and Cons of the different mediums available to you to use during your dealings and the powers they have. These are things such as Phones, Email, faxes and in person etc;
STRATEGIES AND TACTICS:
Identifying the tactics being used by the other side will save you no end of trouble whilst on the floor in the thick of it all.Some people think they are overrated, but you still need to know what they are and be able to identify them as they arise if only to defend yourself from them.
PLANNING:
No doubt you’ve heard the saying Prior Preparation & Planning prevents Pi$$ Poor Performance? It is never more true than in the midst of a negotiation. If yu fail to plan you plan to fail. research, research, research. Knowledge is the true sword you have to defeat your opponent with. If you plan well you will win. Maybe not everytime, but it will leave you in much better stead than if you lob up and start the game…
That was just a simple version of a much more complex animal. Remember this – The K.I.S.S. Principle applies just as much to negotiation as it does to any other form of business transaction.
Now you know the basics, next time you get confronted with a negotiation, you can smile, kick back relax and enjoy yourself. After all it’s fun. Otherwise we wouldn’t do it right?
And remeber the end of the negotiation is really just the beginning of a whole new adventure.
Stuart Milne
Non-Conforming Specialist
READY Mortgages
http://www.readymortgages.com.au
[email protected]
Mob: 0404 056 055Ok – confession time.
I am manager of a new car sales yard for a wage. (600+cars per year)
I am involved in on average 6-10 negotiations a day in person, and 10-20 over the phone.
The 4 best tips I can give you are:
1. Do your homework – don’t rely on what you are told – do it yourself – It is only important to you if YOU are involved. If it is not important to you – don’t listen. There is only so much room in your head when you are stressed out. If you do your own homework/research – YOU understand what is important – and can make quick decisions if required.
2. Be honest. Don’t tell lies – because you will never remember what you told each agent/buyer. You may need to deal with them again!. But withhold information
Keep something to yourself. It is not necessary to disclose your real budget. It is not necessary to disclose anything except what you want people to know. Remember that if you behave badly, why would you not get treated that wayas well.
3. Have an actual objective. Don’t drift. if the property is not what you are looking for – stop looking!. If it migt be – make it happen. Meeting your objective is the only issue. Get the required information – process it – and ACT!. People lose out on opportunities because they “can’t make a decision now”
If the return is the objective – then process what is required to gain the return – is the price right, but rent wrong? Or the price wrong, but the rent right? adjust BOTH maybe?
BUT ACT! Do, Doing, Done – Only DONE gets you a return all else is smoke.
4. Leave something for the next guy. it helps get a decision. I negotiated a 10%+ reduction in price by buying 2middle units of 4 units, and leaving the end ones for “an expected profit” for the vendor. All four were advertised for 230+, and I bought the two middle ones or 204 each, by convincing the agent that a quick sale would enhance the prospects of the end 2, and maybe the profit. he has since sold one of the end ones for 240. (this was Monday of this week).
I got what I wanted, and the vendor got an opportunity to realise some of his losses on the other units. He over capitalised on the refurbishments, and had spent too much – bank closing in – any cashflow is good.The agent had previously failed to negotiate a deal on one of the units, by negotiating poorly. It was actually a higher offer than ours. We ‘Helped” him by being able to ACT, having the tools at hand to make a decision, and presenting it in a manner that the vendor could see something for himself in it.
We left something on the table for the other guy – HOPE.
I see a steady parade of people who want to sell cars, some do, but the successful ones act honestly, and ensure that the customer feels that he wasn’t screwed.
The real estate business is no different.
So,
Do your homework
Behave honestly
Have an objective and stick to it.
ACTAvailable for any discussions on negotiating – one of the pleasures in life that is legal and non fattening.
Peter,
Thanks for your GREAT ADVICE on negotiating!!
I am currently trying to learn the art of negotiating and was wondering if you could recomend any books, websites or other sources of info that may be of help to me?
Cheers,
Robert[biggrin]
“You don’t have to be rich to invest in Property, but to be rich you have to invest in Property”
Short list – remember – my opinion, so may not suit you.
Most are available from a library! for free!
You can negotiate anything – Herb Cohen ISBN 0 207 14738 8
Older book, but the wheel is still round, and it has been around for thousands of years.Getting past No – William Ury ISBN 0 7126 5327 9
Found on a bargain table at a shopping centre for $1. Actually deals with more real life scenarios than other books. Worth more than the price.What they don’t teach you at harvard Business School – Mark McCormack (head of IMG) ISBN 0 00 217335 2
More a management book, but makes you realise negotiating is just managing objectives and behaviour.Strategic Selling Robert Miller/Stephen Heiman/Tad Tuleja. – ISBN 0 9619073 0 4
My favourite, but really a Professional selling book. The staple text of Hewlett Packard sales force for many years. Again, about managing the objectives. If you want to get professional results – you must know what a professional would do in that situation.I have been in professional sales for 20+ years, and you need to mine books and libraries for ‘NUGGETS’ ie things that will assist you without spending weeks trying to remember them.
Selling done well, and buying, is fantastic fun, and negotiating is one of the things that separates the men from the boys. It is the DOING part of thegunna, doing, done trilogy for results.
Take you time reading these texts, buy them if possible, and fill the margins with notes, add post its etc so you can come back to them.
Have fun
Thanks Peter for that awesome reply.
I will be sure to look those books up.
Robert[biggrin]
“You don’t have to be rich to invest in Property, but to be rich you have to invest in Property”
Interesting reading some good statagies
We buy properties cash fast settlements no fees no fuss. contact me on 0408 355568
[email protected]Had formal approval of our loan to buy 2 units today – so am celebrating.
Ended up with a negotiating case study.Rang the agent to enquire about rental management, and ended up negotiating their management fees.
dialogue went like this.me: Have you done a rental appraisal on these properties?
Agent: yes, we decided between 205 and 210 per week will attract the right tenants and be fair market rent.
me: One unit has a larger backyard – Is it fair to have that one at 210, and the other one at 205?
Agent: yes.
Me: what about management fees?
Agent: we charge 7% for each unit.
Me: I have discussed this with other agents, and 5% seems to be the norm. (Blatantly untrue, only discussed on this forum)
Agent: OK, we can work with 5%. Letting fee would be one months rent.
me: gee, that sounds high, what services do you provide for that?
Agent: vetting, history checks, collection of bond, inspection reports etc.
me: Since they have been recently refurbished, and everything is new, should be easy.
Agent: yes, quite simple.
Me: so, 1 weeks rent would be suitable then as a letting fee?
Agent: 2 weeks would be better.
me: So 1 week is ok, since there are 2 units together?
Agent: OK.Spot the flaw in the agents negotiating.
I had done my homework, and they could only acknowledge the conversation, and try to keep themselves in the management picture.
The person in control is the one who wins.
If I had no idea of the ‘norm’ of charges, I would have just probably paid the first response. I would have ‘negotiated myself out of 2% management fee, and 3 weeks letting fee. per annum this is $1680 per annum if letting cycle is one year. We intend to buy and hold for 5 yrs, so this is a substantial amount!.Do your homework, and treat it like a conversation, but with your STRONG points written down in front of you, your OBJECTIVE close at hand, and be gently spoken and slow in your speech.
I hope that this provides a lesson that you can use.Any critiquesof my style? regards
You are a champion peter-reebok. That was great to read. Unfortunately I think I lack the gumption for comments like “me: So 1 week is ok, since there are 2 units together?”
I’m just too nice I think. Maybe I will have to work on that.He is no fool who gives what he cannot keep to gain what he cannot lose. – Jim Elliot
Yeh I agree, you you have to be quite tough sometimes. I’m too soft, but my husband is just great at negotiating – we got great deals with our property managers because he quietly and politely keeps pushing during the conversation until the agent backs down – or comes to a compromise. He also recently bought a new car and sat quietly calmly haggling for ages whilst I sat beside him squirming!!! Some people just have a knack of staying cool as a cucumber in situations like these – goodness knows how they do it!! [wacko]
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