A Real Estate Negotiating Technique

Fix And Flip Course

The following real estate negotiating technique is based on one of the most common elements of any negotiation: The compromise. Normally both sides expect to compromise on many points. It's an easy way to resolve differences, and it's a part of our culture of business, so it happens a lot. One side or the other will say something like, "Look, we're only $8000 apart now. You're offering $204,000, and I've come down to $212,000. Why don't we split the difference and make it $208,000?"

A compromise like this sounds fair, so whether or not is is agreed upon, nobody gets offended. However, what if you were the seller and you had only dropped to $218,000 before the compromise, while the buyer was offering $204,000? In that case, "splitting the difference" would mean a price of $211,000. If the buyer agrees, you made $3,000 more. It's important what you do before you reach a compromise.

Real Estate Negotiating Technique - Far Away and Little Steps

The obvious lesson in the above example is to try more extreme initial positions (as long as this doesn't offend the other side and blow the whole deal). If you are selling, you start at a higher initial price or counter-offer, and you act as if you don't intend to go much lower. Of course, if you're the buyer, you make a low offer and suggest that there are reasons for it being low.

However, starting out farther away from the other's position is only half of this technique. You also have to move in smaller increments than the other side. This is how you arrive at a final compromise that is closer to your goal.

Suppose you are buying a house, for example, and the seller is asking $189,000. You are willing to pay up to $184,000. You can't know it, but let's assume the seller is set on $182,000 as his lowest price. You offer $169,000, and he comes down to $185,000. You come back with a new offer of $171,000, and mention some of the repairs that the house needs. The seller counters with $182,000. You make another offer of $172,500, and the seller counters with $179,000, suggesting that this is his final offer.

Notice that you let the seller move in increments of $4,000, $3,000 and $3,000, while you moved up in increments of $2,000 and $1,500. At this point you already have gotten the seller down several thousand dollars from what he thought would be his minimum. He has invested time with you, and wants to sell, so you suggest that since you're only $6,500 apart, you roughly split the difference and settle on $176,000. Even if you just get him down another $1,000 to $178,000, you have bought the house for $6,000 less than you were willing to pay.

To make this technique less obvious, ask for other things, to have something to "throw back in the pot" later. For example, your offer might demand that the seller's favorite chandelier stay with the house, just so when he hesitates over a proposed compromise, you can say, "Look, how about you keep the chandelier, and we sign this right now. Does that sound fair?"

Go ahead and compromise in your real estate negotiating, but do it the right way.

Steve

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Tips For Flipping A House | A Real Estate Negotiating Technique