The expression in real estate goes “You make your money when you buy,” and great buys are typically a result of great negotiating. In more than a decade of buying houses, I’ve made a ton of mistakes and blew some great opportunities. From many of these painful and expensive lessons, some truly “ninja” negotiating tips and techniques were born that enabled me to eventually build a small real estate empire that continues to grow to this day.
Perhaps by sharing some of these negotiating tips with you, you can avoid the costly mistakes I have made?
Before even entering a negotiation to buy someone’s house, understand that 95% of all houses sold will sell for retail. There’s zero discount [of any real significance] to be had here. These are the people that “want” to sell. Just 5% of all houses sold will sell below retail… at a discount. These are the people that “need” to sell.
You are looking for the 5%!
When you find that 95% of the people you’re talking to won’t sell at a discount, understand that you’re doing it right. Knowing this does wonders for the psyche.
Now, if the idea of negotiating in real life for real money makes you nervous, let it go. For the most part, you can’t say the wrong thing to the right person, and you can’t say the right thing to the wrong person. This is why I share this 95/5 reality with you. Everything you already know about negotiating is likely enough for you to succeed in this 5% realm of real estate transactions, if you just relax and trust yourself.
What I’m going to share with you here in this blog post are some ideas and strategies that will help you increase your profit margin within this 5% of discounted sales, AND create more deals by expanding your playing field from 5% to 7% to 8% of all houses sold… and even more! Some are obvious, some not-so-obvious and others downright “ninja.”
- Automate your lead generation. “What? I thought this was about negotiating!” Automating your lead generation has everything to do with your negotiating, and here’s why… once you are afraid to walk away from a deal, you’ve lost. When you know you have plenty of more opportunity [leads] lined up behind your current deal, you won’t be afraid to walk away. Losing one isn’t life or death. It’s better to miss a good one than it is to buy a bad one.
- Be clear about what you want. Know your minimum deal standards before ever talking to a lead. Set standards for the bare minimum equity/profit you’re willing to accept for “flips,” and set a standard for the bare minimum cash-on-cash return you’re willing to accept for “holds.” Don’t compromise. You have plenty of opportunity lined up right behind this one to get what you want.
- Everything is Negotiable. Everything.
- Align yourself with the Seller. As an investor, you don’t dictate the price and terms you can pay for a property. The market does. So, align yourself with the Seller and take on the market together. Make the market the bad guy. Frequently, when a Seller shares their asking price with me I reply with something to the effect, “Mr. Seller. I would love to give you that price. In fact, I’ll do everything I can to get it for you as long as the market allows for it.”
- Know your value. The reason any property owner would sell their house at a discount is because there is some sort of distress in place. That could be personal distress, financial distress or property distress. In a nutshell, the Seller has a problem… and by selling their property quickly, and even at a discount, they believe their problem will disappear, or at least mitigated. Don’t underestimate your value in solving their problem. Sellers will exchange equity (and sometimes very large amounts of it) for peace-of-mind.
- Play dumb. An entire book, in my opinion, could be written on this idea alone. Many new investors get all excited, armed with blind faith and ambition and get deals done inside of 30 days of embarking on their real estate investing journey. I see it happen inside of the Epic Pro Academy all the time. They stumble through every step of a deal, ask for help when they get stuck, proceed to take the next step and keep stepping until the transaction is closed. Then, with a deal or two under their belt, they get “smart” and start inserting their newly found knowledge and expertise into negotiations only to find Sellers not as receptive or flexible. Again, there’s so much I could write on this idea alone, but it’s an email. I’ll save it for a later date. In fact, one of the best in the biz that I’ve ever seen at “playing dumb” to win negotiations will be a guest trainer at the next Epic Intensive. If you’d like to come, there are some seats still available (but not many), go to EpicIntensive.com
- Questions are the Answer. This could be one of the more powerful negotiating tips on this list because so many investors opt for the less-effective “tell” approach vs. the “ask” approach. Treat your negotiations like an interview. Meaning… The Seller has a problem and you need to interview (ask questions of) the Seller to know whether or not you can help them. Maybe you can, maybe you can’t. Just because the Seller is willing to sell you their house doesn’t mean you should buy it. Interview the Seller so that their problem doesn’t become yours.
- Find out what they want. Don’t assume that a Seller always wants market value for their property, or money even. The only way you know for sure is to ask. One of my favorite questions to a Seller is, “So, what would you like to have happen?” Don’t assume.
- Make it their idea. Once you have completed your interview and it’s time discuss price an terms, phrase it in a way that the price and terms is their idea. For example… “Mr. Seller, the current market conditions have your property’s value right around $100K, and based off what you’ve shared with me about the repairs needed… and then making room for a small profit for myself… you’re saying we’re right around $65K, is that right?”
- Ask for more than what you need. To move a negotiation forward, at some point (likely multiple points), you’re going to have to make some concessions. By asking for more than what you need up front, you can use these non-essentials to make concessions in order to keep what you actually do need.
- Embrace silence. When asking your questions during the interview or presenting your offer of price and terms, remain silent after you have. Be patient. Wait for the answer. Don’t bid against yourself! One of the more difficult negotiating tips here to adhere to when under pressure.
- Keep 2 balls in play, at least 2. When a negotiation comes down to the final term, such as price, someone has to give in. There’s going to be a loser, and there’s going to be a winner. Or, there will be no deal. However, if you keep “2 balls in play,” such as price AND closing date (and/or earnest money, lease back, contingencies, etc…), it’s easier to create a win/win outcome.
- “Is that your bottom line?” This is a question that has made me thousands and thousands of dollars over the years. Before putting pen to paper, pause for a second… and with a look of uncertainty on your face [and of course every situation will be a little different]… ask, “Mr. Seller, ya know? This is treading very closely to my risk tolerance and I really want to help you out of this situation… is this your bottom line?” It doesn’t work for getting an extra concession or discount every time for sure, but it works often enough to be worth asking EVERY time.
So, there you go! 13 Ninja Negotiating Tips for Buying Houses.
They will only work, however, if you use them.
To get you started, I’ll help you out with #1 (because you won’t get anywhere if you’re clinging onto every lead).
Getting a large pool of leads is easy when they’re flowing in 24/7. Of course, that’s only possible with automation… and to do that, we use something called a Lead Machine. You can learn all about it in our new eBook, downloadable for free here.
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