Implementing a solid marketing plan to have motivated sellers call you to buy their house places you halfway to creating a profitable deal. The other half is negotiating.
Having always been in operations in my careers prior to investing, I did not see myself as a sales person and certainly not as a negotiator. So how could I succeed talking with motivated homeowners.
So I attended a day-long workshop on negotiating and learned an invaluable lesson:
Negotiating is not about being a silver tongued devil or a slick salesman.
It’s about discovering the other party’s wants and satisfying them.
My whole perspective changed. I wasn’t a salesman…I was a consultant. They have a problem and I need to solve it. To the degree that I can solve it, we have a deal.
Furthermore…it’s usually not even about the money. The price isn’t what’s important. It’s whether you can solve their problem quickly and easily and give them RELIEF!
With that in mind, the very first objective in any negotiation is to determine what the other side needs and wants. What is their motivation? How severe is it? That’s why we pre-qualified our callers, right?
The next step is to determine if we can meet their objective and still reach our goals: a profitable deal. Then present the offer in terms of the solution it offers.
Now I wish it was so easy that they would just accept at this point. But they still need time to process and they need to be able to attempt to make the deal better.
Here are some negotiating tips that have been very helpful to me to getting to “yes”.
Give and Take: Every time you give in on a point, you must take away somewhere else – even if you really don’t care what you get. The seller will quickly realize that every concession comes with a price and will be less likely to continue asking.
Move in smaller increments: When negotiating on price, do not move in the same size increments as the seller, and each move should be in smaller and smaller increments. For instance suppose the seller drops their price $10,000, you might come up only $2,000 on your offer. On the next round, you might only raise your price $600. This suggests that you are reaching your bottom line. When you continue to move in the same large increments, the message is that you still have a lot of leeway in your offer.
Pregnant pause: This is one of my favorite techniques. If the negotiations are coming to an impasse, I’ll make an offer and then just be quiet. Not one word. The silence is deafening. The seller will become increasingly uncomfortable and feel compelled to say something – usually a counter offer in my favor.
Plan B: If I can not get the seller to accept my offer, I’ll ask them about their Plan B. In other words, what will they do if I don not buy their house today. This works especially well when they have a severe time issue like an impending foreclosure. Often times the seller has never contemplated that they have no other options. They simply want more from the negotiations forgetting that you do not need to buy, but they do need to sell. When I wake them up to that fact, it often stimulates the seller to come around to my offer.
Objections: Most people are scared of receiving objections when in fact they should be encouraged. Objections mean the seller is interested and wants the deal to work, but simply has some concerns. Once their concerns have been satisfied they will agree to the offer. On the other hand, if their objections are never addressed, they won’t sign the contract. Anytime a prospect has a stream of objections, I know that I will most likely get the deal. Encourage sellers to tell you what they’re thinking.
When prospective sellers trust you and feel that you are working to create the best deal for them, they will open up and the negotiation process will be relaxed and productive. Simply look to create a win-win proposition and you will become a master negotiator.
In our last and final segment of this series, I will show you how I out this all together.
Expect abundance,
Lou Castillo
