Top Negotiating Tips When Learning How To Invest In Real Estate

How To Invest In Real Estate And Negotiate Like A Pro

So a couple of weeks ago I was asked to share some of my top negotiating tips to help a new or experienced real estate investor buy or sell more properties. Before we dive into different negotiating techniques that teach you how to invest in real estate, I think it is important for you to realize a few things:

  1. Building Rapport With Your Buyer Or Seller Is Key - This can be done through "Active Listening". Active listening is easy to do with a little practice. It works like this... Call your buyer or seller by name, repeat or paraphrase the last thing they just said to you, then end with a probing question. For example "So Bob what your telling me is your mother-in-law has Alzheimer's and is now living in a long-term care facility. I can completely understand why you wouldn't want to make the necessary repairs to sell through traditional channels...or wait 3-4 months before you get any money. Doesn't it just make so much more sense to get the cash you need right now and be able to focus on your family issues?
  2. People Like To Do Business With Others They Know And Trust - If your seller is a fast talking, straight to the point type of guy (or gal), then you need to be like a chameleon and morph into a non-exaggerated form of that type of personality. If your buyer is a "good-ole boy" from Texas that likes to take things slow... well... I bet you can guess my suggestion!!!
  3. Uncovering Your Sellers Hot Buttons Is Mandatory - In order to be a successful negotiator you have to over prepare yourself. You need to know as much as possible about the property (needed repairs), comps, sellers motivation, and sellers wants. This will help you position your offer, stage your demeanor, and ask strategic questions. The goal is to ask as many open ended "optimistic" questions as possible to get to know the situation. A great question to help open up the motivated seller and uncover their hot buttons is "So tell me (insert homeowners name), what's happening in your life to make you want to sell your property to me today?"
  4. When Selling Wholesale Real Estate, Cash Buyers MUST Play By Your Rules - I know you have heard the phrase "cash is king". While this may be true when dealing with traditional buyers that pay retail (or close to it), this is not the case when buying deeply discounted wholesale real estate. Remember that there is no such thing as a really nice, wealthy wholesaler. It is perfectly okay to demand your wholesale buyers to use your paperwork, abide by your terms, and use your title company.
  5. Selling Is The "Transfer Of Emotions" -Motivated sellers are typically not rational or making decisions based of logic. In many cases they are driven by emotions and get tunnel vision on their life's problems. Remember that "sympathy" means you feel like the other person feels. "Empathy" means that you understand "how" the other person feels, but you do not feel the same way! ALWAYS enter into each negotiation with a feeling of empathy as you are a SOLUTIONS driven investor and there to help solve their problems. A great way to "transfer emotions" is to tell relatable stories that help the seller visualize their lives down the road without their housing problems looming over their heads! Let me give you an example of a simple story that transfers emotion...
    • Cody: Mr. Homeowner, let me ask you a question. Do you want to sell your house, get the money you need to take care of your situation, and gain peace of mind? Mr. Homeowner: Of course. Cody: Imagine waking up one morning, having a good breakfast, and heading off to work. You get a phone call from your wife saying she just received a postcard in the mail from a guy that is offering to pay cash for your property. Skeptical you call and see what the "catch" is. After talking for a while you and the investor reach an agreement. You go home and tell your wife the good news. Within an hour you have a new email message with the attached agreement. You guys sign it and within days your home sells, and you receive all the cash you've been needing. How would that feel? Mr. Homeowner: That would be fantastic. Cody: Now picture the first full night sleep you have gotten in months. Imagine feeling that you made a good decision choosing to work with an investor that focuses on quick solutions to your situation. Because of your choices you can finally focus on the things in life that matter most!
    • So for example you can say phrases like - "Take advantage of our offer and begin enjoying the benefits instantly. You deserve to be happy and I am positive you will be proud of your decision to do business with me today.
    • So for example do not call your paperwork a "contract". Instead call it an "agreement" and have the other party "o.k. the agreement" instead of "signing the contract".
  8. Objections Are A Good Thing - That means that your buyer or seller is interested in doing business with you, but are not convinced to choose working with you at that point in the process. When your prospect has no objections at all...that is when you should be worried!

So now that we have that out of the way, let's dive into...

Cody Sperber's Top 5 Negotiating Tactics When Dealing With Motivated Sellers, Cash Buyers, And Even Loss Mitigators

1. I Call This First Tip The "Phantom Partner". Anytime you're negotiating with a buyer or seller, and they think you are the final authority, they will try and pin you down for an answer or commitment. This is never a good position to be in, but you cannot simply avoid their advances without seeming like you're evasive or hiding something. At the end of the day you want to be as appear non-threatening as possible. I have found a great way to do this is always have a "financial partner" that is the ultimate decision maker that way you can "pass the buck" on to them. Obviously this partner can be real or fictional but either way they are not physically at the negotiation with you.

For example when dealing with a motivated seller always write everything you are offering down on a sheet of paper in front of them. NEVER say things like "We will offer you X dollars for your property". This locks you in and can possible shut you down and shift the power to them if they say "Were not interested in that price".

Instead always start off your offer with "After getting to know you better and seeing all the repairs that will need to be done to the property I am going to need a minute to run some numbers." Get out your pad and pencil and make sure they can see you penciling out your offer. I use a yellow legal pad with red pen!

SIDE NOTE: When you start off begin very excited with a HUGE grin on your face. As you pencil the numbers slowly turn your grin into a very serious look as if your getting a little frustrated. Keep on running your numbers and end back at a big smile when you deliver your offer.

"Ok... I have some wonderful news for you today. (Now show them the piece of paper) Because we have some available money right now I can offer you $X dollars in cash and close within 14 days pending a small inspection from my partner."

If they panic or say "NO" just remain calm and say "well what were you thinking you wanted for the property?" No matter what their answer is I always reply back with "Well, you will have to do better than that if we are going to be able to make a deal today." After I say that once or twice and I feel I have come as far as I can at this moment I then "pass the buck" onto my phantom partner. I say things like "While I think we are close to making a deal I can tell you there is no way in a million years my partner will go for this price." Then you write the price they are asking for the property down on a piece of paper. I say one final thing before I step outside to call my phantom partner. I say " Mr. Homeowner for a second let's just forget about (insert the price they are asking) because I don't think I will be able to get my partner on board. Let's look at (then write down on your paper a price that is in the middle). Now this is out of my hands but if I can talk with my partner I am certain i can get him to commit to that much money for the house." Then I reach out across the table and go to shake their hand and say "The best part about dealing with us is that we never back out of a deal unless we find something terribly wrong with the property!"

SIDE NOTE #2: Never spend time trying to justify your lowball offer! This never works and will only cause frustration on both sides of the deal! Remember this is a business transactions and you are a professional.

2. Nibbling. Now I learned this technique from an investor that did it to me when I was learning how to invest in real estate, and trying to wholesale him a property I purchased at the foreclosure auction that was full of garbage. The concept of nibbling is done after you make a deal with the person. It works by you saying things like "Now I am assuming this property will come completely cleaned out before you deliver it to me?" Or " You plan on leaving the appliances as part of the deal correct?" These little "assumptions" get you some extra bonuses after a deal has already been made so I always "Nibble" every time I make a deal now!!!

3. I Call This One "The Switch Up". I use this technique when dealing with unruly, rude loss mitigation negotiators. Now remember that these people feel as if they have all the power. They want to intimidate you by talking sternly or simply telling you exactly "how it is going to be"! I actually really like these type of loss mitigators because they are very predictable and always follow the same pattern. At first they are an "Intimidator", but after they realize you can't be bullied they turn a corner and try to win you over by being extremely friendly and helpful. Here are some tips and tricks to helping them turn the corner:

Always stay calm and stand your ground - In the beginning I am always a bit more aggressive just to prove I can hang, but I let up if the conversation gets ugly.

  • Fight your case with facts (Comps, crime statistics etc.)
  • Realize they are always testing you to see how you react

Focus on establishing rapport - If I get into a heated debate with a loss mitigator the next day I always call and say something like "I know we got off on the wrong foot yesterday and I know we both want to see this deal get done quickly. I just want this family to avoid foreclosure so let's try and work things out okay?" Then begin asking personal questions to try and get to know the loss mitigator and build a relationship.

4. Dealing With "Take It Or Leave It" Statements. This comes in handy when dealing with Real Estate Agents that think they know everything. Many times I get a low ball offer from a real estate agent and when I call to begin negotiating they say something like "Don't you know it is a buyers market and my client is looking at many good deals. That offer is the best we will make...TAKE IT OR LEAVE IT." Now this is obviously very difficult to overcome but I always try and redirect their statement by saying something like "I may be willing to meet your price but your client obviously needs to throw in some extra benefits that are worth the difference in what I am asking. How about letting me take back a note at reasonable terms for the difference?" Or "The price you are offering is obviously much lower than what I want to accept. If you won't raise your offer then I will have to think it over and get back to you."

A statement like this takes the edge away from the "Take It Or Leave It" comment and allows you to continue negotiating. Your ultimate goal is to keep trying to bridge the gap and "make the deal work" even if you have to slow the negotiations down to fight another day!

Now if you are on the other side of the table and the one making the offer try saying "After reviewing all the numbers that's the best I can do". This is a much nicer statement than saying "take it or leave it"!

5. The Alternative Close - People love choices. It makes them feel in control. A good negotiator always has the other party in the transaction "feeling" like they are in control. A good way to do this is by employing the "alternative close". This works by saying something like "Well Mr. Homeowner I have looked at the property and have come up with a couple of offers that I believe are fair for both of us. Now the only decision you have to make is if you would rather have all your cash right now and take a small discount (and point to your written down all cash offer), or if you want to get a higher sales price for your property but wait two years and during that time I will make payments (pointing towards your terms offer). Which works best for you?

As usual I wrote another long and detailed blog post that shows you how to invest in real estate...but I am sure you appreciate it ;-). So appreciative in fact that I know you are just dying to comment below. Let me know if you have ever used any of these techniques in your investing adventures. Do you know of any others that you could share? Have you ever been in a situation where a great salesperson had you buy or sell something and then you looked back and said to yourself..."what in the heck just happened?!? Damn that salesperson was good!"

This is Cody Sperber signing off till next post,

P.S. As a little freebie (because I love you and know that you do appreciate when I teach you how to invest in real estate)...check out this awesome training video I did at my semi-annual real estate investing mastermind event:

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