10 tips to negotiate real estate

Getting what you want with ethics and grace.

Negotiating Real Estate

My style of negotiation is to find mutual benefits for both parties, so as to leverage a smooth exchange or transaction. Quite often you will find yourself negotiating with the same people more than once. If you act unethically by, for example, throwing tantrums, lying or being disrespectful, you may get what you want in the first instance, but it is not sustainable. Negotiating in bad faith or being unpleasant to other parties will ultimately damage your reputation and ensure that prospective sellers/buyers treat you with distrust and wariness.

1. Engage your target

When negotiating real estate, it is important to be very precise about where you want to start. If you make an offer too low, the other party might just flatly reject you or ignore you. If you want to avoid being rejected or ignored in the first instance, you must choose your opening offer carefully. It must be low enough to flush out the rock-bottom price you can transact at, but high enough not to be dismissed. You have to find the goldilocks ‘just right’ zone, from which you can engage and get to work. If your opening offer doesn’t hit the mark and you are unable to engage the seller, your only option is to wait and hope that they re-engage at a later date and/or that there is no interest from other buyers. You don’t want to be in a position where you are just bidding against yourself by offering a ridiculous opening offer that ‘kills the deal’. 

When presenting your opening offer you must DO YOUR RESEACH! You need to know what you are talking about (comparable sales, market trends, buyer activity). Make the information tell a story that sounds reasonable and credible. A reasonable offer backed by facts (even if they are tipped in your favour) will garner attention and at least get you to the negotiation table. It might help to send an email with information supporting your offer so the other party can digest it in their own time. This is especially useful if there is a ‘middleman’ involved and you want to deliver a message to the decision maker.

2. There is never only one deal

Do not fall victim to a seller’s story of scarcity. A seller wants to sell and if there is substantial interest in a product, the price will be pushed up. In most cases, the only way you can purchase property with heavy competition is by paying a premium. But that is not negotiating. As difficult as it may be, you MUST be willing to walk away if the deal is unfavourable. Walking away from a poor deal is not losing a negotiation. When you have resources for a deal, all possible options are part of the same negotiation. Do not be lured into someone else’s one-dimensional dealing. Play it cool!

3. Take your time, ignore all deadlines!

Taking your time is consistent with the ‘there is never only one deal’ approach. A popular sales tactic to be aware of is the use of a deadline. Deadlines are used to create pressure and fear of a potential loss. If you conform to someone else’s deadline, you are not negotiating. Most deadlines are fictitious and are designed to create competition, whereby you will be required to pay a premium to finalise a purchase. Don’t be afraid to take your time, ignore all deadlines, and walk away if necessary. One of the greatest negotiators of all time, Herb Cohen, coined the phrase ‘care, but not that much’. This really embodies the blueprint for a successful negotiation.

4. Higher power

Avoid being seen as the sole decision maker. If you get backed into a corner, panic or drop the ball, a good salesperson will notice and apply the pressure. Even if you are the prime decision-maker, it is useful to tell the seller “Thank you for all of your time but I can’t make a decision without running it past my ______”. This will buy you time, give you breathing space and relieve some of the pressure.

5. Work with the seller

You must work with the seller in the right way. Remember the good old saying ‘less is more’. The less information you give and the more you extract the better. But beware! Many people are very protective about why they are selling. The reason for selling might be extremely personal to them. You must be gentle, seriously interested about the purchase and build a good rapport to earn the right to ask personal questions.

6. Ask permission

If you wish to make an offer at any time during a negotiation, a useful strategy to ‘soften the landing’ is to ask permission. No one can react adversely to a low offer if they invite it. You might say something like, “we ran the numbers and we love your product, but we want to be realistic about where we see value”. How do you think a prospective seller is going to respond to that? Probably with, “where do you see value?”

7. Listen

Gathering information is a key ingredient to a successful negotiation. The more you can understand the wants and needs of the seller, the easier it will be to prepare an attractive offer. Money is a big factor, but there can often be non-monetary factors that can be important to the seller as well. Time, size of deposit……be creative! The more you listen the more you will learn.

8. Choose your style of offer

An offer can be used to extract more information, chip away at the price or put a seller under extreme pressure.

There are a few different ways to make an offer for real estate:

Verbally: You can use a verbal offer to start a conversation and try to ascertain the seller’s realistic expectations.

Email: An email offer is considered a little more serious in a seller’s eyes. You can make an email offer on its own or after an initial verbal offer, assuming your verbal offer engaged the seller. Emails are useful because you can provide all the cold, hard supporting facts.

On a contract: The most serious way to make an offer for real estate is through a contract, with a cheque and a 66w (66w is a certificate added to the contract that waives the cooling off period). An offer can’t be much more serious than a contractual offer. If accepted, the owner can counter sign the contract on the spot and the deal is complete. As the buyer, you need to make sure that you have completed all your due diligence and are happy to exchange. This is an excellent way to present a ‘take it or leave it’ offer. If the owner doesn’t accept the offer, you can withdraw the contract and the owner has little option but to watch their potential sale ‘walk out the door’.

9. Package your offer

People love choice! The more you can add to a negotiation, apart from price, the better. In real estate, there are many factors that can be important to a seller. Listening carefully can help you determine what the other party values and help you offer a great package. For example, you may be able to offer a favourable settlement time, deposit size or other less obvious benefits if you know the other party’s preferred wants and needs. Maybe you can even help them with their next move. If they are elderly, perhaps you can settle and give them a week’s free rent to move their belongings. Be creative!

Once you have three or more different points of interest, you can package a range of offers. Make three separate offers, each purposely different. You must also be able to explain clearly why each offer has a different structure. One offer may be just acceptable, another may be quite good, while the third offer should be very enticing indeed. 

10. Do not become emotional

Remain calm! There are a range of different negotiation styles. You can stare down the cheap and easy tactics if you know what to look for. A popular negotiation style is the emotional negotiator or the ‘bully’. One will cry, the other might shout. All you need to do is refuse to engage with their antics. You might say something like “look this feels like it is starting to get a little heated, I am going to step away and review everything we have spoken about. Let’s pick this up again tomorrow.” If you keep disarming the only weapon a primitive negotiator has, they cannot use it.

I hope the above thoughts provide you with a blueprint to apply in any situation and help you develop and implement effective negotiation strategies.

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