The Art of Negotiation

Did you see the story about the TikToker who traded up from a bobby pin, making deals and orchestrating swaps until she was the proud recipient of a house? Taking a one-cent item and parlaying it into $80,000 requires some savvy negotiation skills and strong interpersonal communication indeed.

Negotiations are a constant in real estate investing (in life, really). Some of us are natural-born hagglers and deal-sealers; others have to cultivate this skill set. If you’re working to build your negotiation chops, these strategies can help you get started.

Prepare, then prepare some more.

The more details you know, the more you can leverage that information as you try to seal the deal. For example, if you’re trying to close on a real estate asset, come to the table with:

Specific information about the property/properties

Data about comparable properties in the area

A thorough market analysis, including forecasts and trends

Information on the people you’ll be going up against in the deal

Gathering all that information can be a challenge, especially as most real estate professionals like to keep the data close to the vest for their own negotiations. However, working with knowledgeable real estate investment partners can make this step easier.

Know your end goal.

When you head into a negotiation, predetermine your ceiling and floor. It’s important to have a fully developed range of numbers that you’re comfortable with, one that’s based on reliable data (see strategy above). It’s even more important you stick to that range.

But if you really want this investment, you may be afraid to draw a line in the sand. If you don’t get the exact number or terms you want during negotiations, there may still be room to make a good deal. This scenario is precisely why having a target range is so important. It doesn’t feel like a zero-sum situation if you can find a meeting point within a range instead of at a specific set of terms.

Consider the relationship.

It’s a small world. Within the business community, it’s even smaller. Always consider the person on the other side of the table and how your negotiating tactics might affect your relationship with them.

For example, if you’re buying real estate in another city, you may not be as concerned with pleasantries. You may, in fact, feel more inclined to be firm—even aggressive—in getting the terms you want.

On the other hand, if you’re making a deal within your own community or social network, a little flexibility and generosity can go a long way. See these interactions not only as potential business deals but potential networking opportunities too.

Be willing to give, but also get what you want.

Harvard’s Program on Negotiation has specifically called out the challenges of trying to make a deal while using extreme hardball tactics. These tactics can actually make it more likely that you’ll either lose the deal or that you’ll sour a promising relationship.

In order to hammer out a deal, you have to be willing to offer some value. Make a plan that includes some concessions you’d accept to get everyone on board. Would you be flexible on the overall price if you paid a smaller down payment? Or, would the other party be more amenable to a deal if you allowed them to be flexible on the closing date?

Final Thoughts

There’s a fine art to negotiating. To do it well, you need to be able to step into the other person’s shoes. When you can gain insight into what matters to them, you’ll be able to bring a compelling narrative to the negotiation table.