5 Crucial Steps for Successful Real Estate Negotiations
I read a great article a while back in Magazine. The title of the article was "The Art of Conversation." This article was written by George Stephanopoulos who certainly knows a lot about this subject.
After reading this article, I began to think about just how much this applies to real estate investing. When you are having a one-on-one conversation, it really doesn't matter if you are speaking to a motivated seller or the president of the United States. The same rules apply.
The 5 Crucial Steps for a Good Conversation (According to George)
1. Prepare Extensively
When you have an appointment with a motivated seller come prepared to present yourself as a credible investor.
- Make sure you have completed your due diligence on the property.
- You will need to know the comps for the area.
- You should know the amount of the tax assessment for the property.
- Be sure to arrive a little bit early and drive around the neighborhood. Compare this house to the other homes in the area.
Do everything necessary to be prepared for your appointment.
2. Don't Be a Know- It-All
Now that you have done all the necessary preparation, you are almost certain to feel like an expert on this property. That's great but it will be very intimidating to the seller if and it won't really do you any good if you do all the talking. Ask the seller questions so he will become involved in the conversation early on. You can ask about the history of the house and the neighborhood. Let them contribute any information that might be helpful to your negotiations. This is one time it really pays to listen
3. Ask "Why"
Getting someone like a seller to answer "why questions" takes a little finesse at times, but it is well worth the trouble.
If the seller throws out a price for the house that you know is too high, ask them why they think the house should be priced for that amount. The next time they bring up an objection, ask them why they feel that way or how they came to that conclusion. I have found in the past, sellers often admit that they are way off base with their prices once they are forced to explain their reasoning.
I once asked a seller why he thought his house should bring a particular price and this was his response; "I didn't really think it was worth that much, but you can't blame a fellow for trying". He then laughed and accepted my offer.
4. Watch for Facial Clues
You can often tell how the negotiation is going simply by looking at the person's facial expressions. You may need to back off if they seem upset or agitated. If the person appears to be offended, they may simply just be "blowing smoke" as the expression goes by trying to get the upper hand in the negotiations. In this business it's essential to get to the point where you can read people especially when you enter into negotiations.
5. Force Yourself to Be Interested
One of my early mentors told me that when you ask a homeowner to tell you about their situation and why they need to sell, to be prepared to just sit back and listen patiently for the next 30 minutes. They will almost always proceed to tell you every detail about their problem and their life (most of which you would rather not know). I have to say that I have found this to be true in most cases. There is just nothing you can do but listen.
But here's the thing; you need to show some interest in what they are saying. Pick one thing they have said and focus your comments on this particular part of the conversation. This is the time when you are most likely to get valuable clues about their true motivation.
Being skilled in the art of conversation has everything to do with succeeding in negotiations. Done properly, it helps you to build rapport with the seller very quickly. Our job as real estate investors is to solve problems. As boring as this process is at times, it often turns out to be the quickest path to finding out what the seller really wants.
Remember that there is always something else the seller wants; something other than the money.
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This article is Copyright 2014 BiggerPockets, Inc.
The article 5 Crucial Steps for Successful Real Estate Negotiations originally appeared on Fool.com.Sharon has been investing in real estate since 1998. She owned and operated a successful home inspection company for 17 years. In January of 2008 she took the leap of closing her business to become a full time real estate investor.Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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