Negotiation Strategies in Real Estate

[Michael Pazirandeh]

Hello all! I'm currently reading one of the suggested business books in the podcast titled "Trump Style Negotiation" by George H. Ross. The author says you need to understand the other side and its needs. Here's an excerpt from the book:

"For example, let's say...the other side must feel they are "winning" the negotiation. A smart way for me to get them to trust me, develop rapport, and gain a sense of satisfaction, is for me to make lots of small concessions. Let them win everything that's unimportant but nothing that is critical to your position."

My question is when you are negotiating a new deal which items do you consider to be "small concessions?" I know in other podcasts, an investor who is doing seller financing might negotiate a higher purchase price as long as the monthly payment is low enough to generate cash flow. What other items do you negotiate, and which items do you don't mind conceding to the seller. Thanks! 

[Andrew Johnson]

@Michael Pazirandeh Most of it, for me, would revolve around time.  Can you remove your contingencies in 7 days or 3 weeks?  Will you inspection be done in 48 hours or 2 weeks?  Basically, arrive at a way to de-risk the deal closing for the seller.  In my view it's a win-win because I will want a deal to close fast as well.  It might be a little bit of a pain with the title company, blah blah blah but it works out.  

But really at the end of the day I always have to determine if I'm negotiating against myself.  If you have a property that's been on the market for 90 days then something is off.  Either the asking price is too high, another offer has fallen through, or there just aren't interested investors.  So at that point I'm basically negotiating against myself and the motivations of the seller.  

If a seller is cash-flowing and will just take an opportunistic exit, it's not the same dynamic as @Matt K.'s example of death.  Side note, that actually happened to me when a partner of an investor had a heart attack and he wanted to settle things with the estate.  There was material value to him for the deal to close before the end of the year.  That had economic value to him so I did a cash-deal with a quick-close at a reduced price.  I would have rather done the financing route (which I did after the fact) but it wouldn't have served the seller's interests.

The net of this is, in many cases you can find a win-win and in a lot of cases (especially with income properties that are cash-flowing) you just have to decide if you're willing to go to the threshold of the seller.  If you aren't, move on.  It's no accident that you see some income properties that are on the market for 12 months.  Or, even worse, properties that are listed at the same asking price year-after-year for a few months until the listing is removed.  In these cases I don't think it's a matter of "letting the seller win on a lot of little things".

Anyway, I'm rambling now...