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Investing Strategies

How to Negotiate with Motivated Sellers

quizPop quiz, kids.

What do Nelson Mandela, Henry Kissinger, and Mahatma Ghandi all have in common?

Drum roll please…

(Drrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr….)

The answer?

They were all kicka** negotiators – which leads me to today’s awesome lesson about How to Negotiate with Motivated Sellers.

Top Characteristics of a Kicka** Negotiator

Here’s the thing. If you’re going to negotiate with motivated sellers, you’ve got to walk tall. You can’t go into a negotiation discussion doubting yourself.  You’ve got to feel confident and show confidence, no matter what.  And the best way to do that is to know your sh—stuff.

Know your market (average prices, trends, etc).

Know your seller (and what he’s selling).

Know in advance what you want your bottom line to look like (at least a ballpark estimate).

Get your mind right before you start negotiating, in order to make the process as smooth and painless as possible for everyone involved.

Start with a Solid Foundation: Build Rapport

So where do you start?

Easy.  Start with building a solid foundation of good rapport with your seller.  The second you receive his call, it’s “game on”.

Get to know him, his property-related concerns, and why he is looking to sell.

Find out what his needs are.  Maybe he needs money for some big business venture. Or perhaps he needs some quick cash to get out of debt.  Do some digging, and ask some serious questions, but maintain (and demonstrate) a genuine interest in helping this guy.

rapportWhen you start building that solid foundation of trustworthy rapport, you are establishing a vital connection with your seller – whether he realizes it or not.

And really, at the end of the day, the key ingredient for building rapport is two words: SHUT UP.  (I know, I know… It’s not a “nice” thing to say… But neither of us is 8 years old anymore, so it’s fine.)

Ask your questions, and then simply listen to the seller’s responses.  Let him take as much time as he needs to educate you about exactly what he’s trying to do – and exactly how he’s feeling about the whole thing.

Also, if you are genuinely interested in this guy (which you should be), don’t hesitate to demonstrate your interest with sincere facial expressions and body language as you listen.  Remember, this is not a poker game – it’s a relationship!

Understand the Difference between Pain & Pleasure

If your seller doesn’t voluntarily disclose his painful pressure point(s), then gently and graciously inquire about what sort(s) of pressure he is feeling in connection with the deal at hand.  (Then listen some more!)

It’s natural to focus on pleasant and pleasurable topics when meeting someone new, but it’s especially easy to do so when you’re trying to sell a house.

 “Wouldn’t it be great to sell and eliminate this huge mortgage?”

“I would love to be free of maintenance issues forever!”

Pleasure. That’s what I’m hearing here.  But people make decisions based on emotions not facts, and pain can be motivate a person’s dealmaking needs just as powerfully as pleasure – so you need to delicately explore both your seller’s pleasure and his pain.

One good way to accomplish this goal is by explaining to your seller that you desire to help him move closer to his ideal “Point B” (a stress-free future full of relief and freedom)…

…but in order for you to assist with the seller’s transition from today’s “Point A” to tomorrow’s “Point B”,  it will be best for you to understand as much as possible about the current status quo – including both the pleasurable aspects and the painful aspects.

pointsTo maximize your seller’s comfort during these sensitive discussions, I recommend doing everything in your power to keep the other party in control of how much information they divulge.

Don’t be a conversational bully.  Instead, use the word “if”.  Let them know that these would be some helpful questions to answer “if” they choose to move forward in their discussions with you.

Conversely, you may quickly perceive that the seller is currently suffering through a world of very obvious pain – in which case you may want to cut right to the chase.  (After all, who’s to say you’ll still be waiting around to ask “how high?” when they finally decide to say “jump”?)

Know How to Present the Numbers to Your Advantage

In theory, whoever submits the first preferred value for a negotiated deal is the loser.  In reality, however, this doesn’t have to be the case.

If you can get first dibs, awesome.  Just take the opportunity to ask, “What’s the best you can do?” And if your seller presents a number, don’t go for it.  Instead, remind your seller of his pain, and remind him about how you can get him to his more pleasurable “Point B”.  Chances are high that he will come back to you with a better number.

If necessary, just keep asking, “Is that really the best you can do?” until you reach a number you’re both comfortable with.

And if your seller beats you to the punch by asking you what your best number is, it may not be an ideal position for you, but you should still proceed with that “game on” attitude.  Here’s the key: low ball it!  If the seller balks at your number, don’t hesitate to retort by politely asking, “Where do you need to be?” and “What’s the best you can do?”

Then you’re right back in the ideal driver’s seat.  Keep negotiating in this fashion until you reach a number you’re both comfortable with.

smileyDon’t Be a Jerk

Bottom line here is this:  Use sound relational judgment. Don’t beat your sellers up!  Work with them as best you can, and make fair offers that make sense for both of you.

You’re not in the real estate investment game to screw people out of money. You’re in it to earn honest paychecks by helping people get what they need – whether its unloading an unwanted property or simply keeping a safe roof over their heads.

Use your powers for good, not evil.

 

Do It To It! Immediate Action Steps

Do Your Homework – Before ever entering a negotiation, know your market, your seller and your ideal financial outcome.

Build Rapport – As you enter a negotiation, create a firm relational foundation by building as much rapport as possible with the guy across the table (or on the phone).

Understand – Understand both the seller’s pleasurable and painful motivating factors.

Stay On Guard When Negotiating Numbers – Familiarize yourself with this lesson’s tactics for remaining in the ideal seat of power when negotiating specific numbers.

Don’t Be A Jerk – Remember, you’re not in the real estate investment game to screw people out of money. You’re in it to earn honest paychecks by helping people get what they need – whether its unloading an unwanted property or simply keeping a safe roof over their heads.

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