There is an old saying “You don’t make your money when you sell the home, you make your money when you buy”. From my experience that statement is about 50% true. Your ability to negotiate can end up playing a huge role in how much money you will make on a deal. Learning how to negotiate with sellers and buyers will be one of the keys to your success as a real estate wholesaler
Good negotiation with the seller will save you money on the purchase home. Good negotiation with the buyer will allow you to sell the home for more money. It goes without saying that spending less and selling for more is the key to maximizing profits.
Negotiation strategies for all situations
1.Identify your wants and needs ahead of time. Needs are the things that must happen in order for you to put a deal together. Wants are the things that you would like to happen in order to put a deal together. Always stand your ground when it comes to needs, if you must compromise your position be sure that you do so with your wants.
2.Try to identify the sellers/buyers wants and needs- By knowing what the sellers needs are you may be able to keep a deal together by making it a win-win for both of you.
3.Know what you are trying to accomplish ahead of time- If price is most important to you then focus you efforts on price. If financing is your primary goal then focus your efforts on getting the type of financing that you want.
4.Be sure that all of the decision making people are at the negotiation- Make sure that all of the decision makers are at the negotiation with you. There is no need to waste your time negotiating when the buyer or seller needs to consult with another party before making a decision.
NEGOTIATION STRATEGIES FOR WORKING WITH SELLERS
1. Make your offer for an odd amount of money. If a seller sees an offer like 123,000 they may think that you have just pulled a number out of nowhere. If you offer an odd amount like $121,768 a seller will be more likely to think that you know what you are doing and some actual thought was put behind the number.
2. Never say “This is what I think you home is worth”. Instead let the sellers know that “This is the amount that I can afford to pay for your home”. This slight change in dialogs will help eliminate discussions about how much the seller thinks his/her home is worth.
3. Don’t be an expert. Sellers are apt to feel that they are being duped if they have a sense that you know far more than them. I am not saying to act like an idiot but definitely avoid appearing that you are an expert.
4. Move past sticking points. If you come to a sticking point in your conversation with a seller don’t sit and dwell on it. Move onto the rest of the negotiation and come back to the sticky point later on.
5. Ask for everything. In most real estate purchases there will be a variety of things that you could care less about including in the contract. Things like appliances, window coverings, antique fixtures, etc. Even though you may not really want them, include them in your initial offering so that later down the road you can give back those things to leave the seller feeling like you are willing to budge a little in the negotiation.
6. Use an expense letter. Layout the expenses that you think will be incurred in purchasing the sellers property. Be sure to include ghost expenses like interest paid while marketing the home, taxes, Realtor fees, closing costs, etc. You may not end up doing many of the things on your expense list, but it will give the seller something concrete to look at while evaluating your offer.
7. Make the seller feel good about themselves. If a seller likes you, the chances of your offer getting accepted at a lower price increase significantly.
8. Set up an imaginary deadline. This is a great tool for getting indecisive sellers to make a decision. Do not push too hard or you will appear fake. Example: Try to bring up the fact that your partner and you are going to look at some other homes tomorrow. Let the seller know that you only have the money to buy one home right now, and you would love it too be the theirs.
9. Test the seller. Don’t make them a firm commitment but ask them things like “If I could offer you x, do you think we might have a deal”.
10. Find out why the seller is selling before making an offer. One of the best ways to uncover the motivation of the seller is to find out why they are selling. If the seller MUST sell you can negotiate a far better price than if they are just CHOOSING to sell for no particular reason.
11. Find the sellers time line for selling. Prior to making an offer find out what kind of time line that the seller is on. The seller’s time line will often dictate the type of terms that you should be offering.
12. Do not get emotionally involved. Emotions have a strange way of affecting your profits if they are not controlled. Remember your goal is to save money, and if a seller knows that you are in love with their home then you have lost. Keep in mind if one deal does not work out, more deals will come along.
13. No bragging. A potential seller does not want to hear how much money you have made real estate investing. Bragging about your success will only increase the likelihood that the seller will feel that they are being duped.
14. If price is your main concern make everything else easy. If you want the seller to come down substantially in price then write a very clean offer. Clean offers often include fast closing times, cash, no inspections, and a good procession date.
15. Prove to the seller that you are a strong buyer. A seller will be far more likely to lower their price to a strong buyer than a buyer who may not have financing lined up. If you are sending the deal to someone else then a testimonial letter from someone else who you have helped may do the trick.
16. Be animated. When the seller lets you know what price they would like to get for the property show a surprised look, or take a deep breath. This non verbal cue may get them second guessing there price.
These are a few of the strategies that have worked great for me, I would be interested to hear what other people are doing.
Eric