Property Negotiating Tips – Part 2

OK, so we’ve covered part one. If you haven’t read part one already, read it here first then lets look at the 2nd part of negotiating

Finding what the other party wants

Firstly, we’ve acquired knowledge of what we think the other party wants. This is vitally important because if we don’t satisfy this need, we won’t get a good resolution to our negotiation.

At this point, we need to consider whether we understand the other party’s “currency”. To explain this concept, consider going to a foreign country where you don’t speak the language, and then try buying something with your Australian money that the locals have never seen before. They would refuse (after all, our money looks rather weird). If the other party’s reason for entering the transaction doesn’t match the solution you are offering, they won’t be comfortable with the transaction.

For example, you really want to buy a property from the vendor so you offer the asking price, but can’t settle for 3 months, and require extended terms. If the vendor needs to sell immediately (eg he’ll go bankrupt if doesn’t sell in 30 days) then he won’t agree. And he won’t necessarily tell you this is the case, unless you ask. So be sure to know what is important to the other party – what “currency” are they wanting to trade with – and it may not be money (ie it may be time, or some other headache they wish to get rid of).

Finding the need behind the need

Another way of looking at this acquiring of knowledge of the other party is determining the “need behind the need”.

For example – We know they want to sell the house. We know they want a certain price. We know they want to sell as soon as possible. We know they want to move to Adelaide. We’re getting there. If we are talking directly to vendor it’s easier than through an agent to get all the information. The easiest approach is to tell them things about you (truthfully) and often people will just open up. Don’t be afraid to ask questions (nicely) but if they demonstrate that they don’t want to share, don’t push.

By establishing the need behind the need, we can then affirm how we can help them achieve this goal – therefore helping ensure that they agree with our offer and move quickly forward.

Formulating your offer

Now to the offer itself. Remember the shape of the offer will depend on the needs of the other party.

Some vendors will want an uncomplicated, straightforward offer. If they have indicated this, indulge them and don’t put too many restrictions or you may scare them off. Sometimes it can be useful to ask initially for more than you need, so you can concede a less-necessary request, in exchange for something more important.

People often ask should you show all your cards at once? The answer is maybe – if the vendor has indicated that they want to make a quick, no-fuss decision, then perhaps. Others prefer to go through the whole “barter” process to settle at a middle number. What is important is to play the game they way the other party wants to.

The whole time, carefully monitor the negotiation process – watch the transaction unfold, this is the most enjoyable part. Pay attention to the other party’s language, how long it takes them to respond to your counter-offers, etc… all these things have meanings and will help you get what you want from the transaction.

There are many more details we can cover, and will touch on in a future blog.

A few words of caution to finish up.

It is important to remember that the negotiation is not truly over until the deal settles. One reason to leave something in the deal for the other party is that you never know when you might need to ask for something else from them – and if you’ve screwed the deal down to the last cent already, then they may not be willing to give anything in return.

For example, for no fault of your own, you might not be able to settle on time – often the banks are the reason for this, but the investor still takes responsibility. In the unfortunate event that you are in default of your contract because of a bank’s errors, would you rather a vendor who sees you as a friend, or a disgruntled party looking for any reason to sue you after a poorly perceived negotiation?

It’s also important to consider the impact of your negotiation on future deals. If you get a reputation as a hard negotiator, you may not get referrals for future deals – so you may limit your potential for further profits.

And lastly, always be polite in a negotiation – people generally won’t sell to someone they don’t like (or in reverse, won’t buy either). More than once I’ve seen a deal close after a hard negotiation, only to fall over later, because one party was unhappy with the process. And have fun!

Share your negotiation stories by sending us an email.

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