Sell Your Position and Negotiate

People ask me all the time what it takes to be a successful real estate investor. The truth is real estate investing is just like anything else. The skills, the knowledge, the how-to’s, the what ifs – they can all be learned. I don’t believe any single ground breaking, wallet filling, super unknown secret exists. It’s a mixture of several ingredients. In this article, I want to share one of the most important components to getting what you want out of your real estate investments – negotiations. I’m betting that if you took a moment to reflect back on some of your experiences with salespeople throughout your life, you’d say some were good and some were bad. At times you likely felt as though you were being treated fairly and at other times you did not. Maybe you’ve had some sleazy character try to take advantage of you. Maybe they took a stab at ripping you off. Perhaps you met them when you were shopping for a new car, furniture or cell phone. Maybe the last insurance salesperson came to your house and wouldn’t leave. Maybe it was the worst service you’ve ever received in a restaurant, electronics store – or whatever and wherever it was. Can you think of someone? Most of us can.



That’s a classic example of what not to do. Many salespeople approach the negotiation process as a fight to the death. Somebody has to win and somebody has to lose. That’s why many describe salespeople as slimy, pushy, overly aggressive, unethical and greedy. Most salespeople think they need to overwhelm us with enthusiasm and excitement and talk and talk and talk. They just can’t shut up. That’s not sales. Just because somebody is a good communicator – meaning they can talk to just about anybody – doesn’t mean they’re a good salesperson. Many are consumed with “closing the sale” and they’ll often use poor tactics to get you to do something you might not otherwise do. I’m hoping you turn tail and run if you bump into that type of salesperson.



Why am I telling you this? Well a negotiation is essentially the same thing as a sale. Some are good, and some are bad. Some are fair, and some are not. I’m going to be very careful with what I say and do in this article because I don’t want you to think you need to become a sales professional to excel as a successful negotiator. You see, if I were to attempt to convince some people they needed to become sales professionals to get what they want, they’d stop reading this article right now. They’d throw in the towel and just give up. Sales can be very scary for some people. They’d rather jump off a bridge than become a salesperson. And with the reputation of the profession, who can blame them?



So why are we talking about the sales profession? The reason is because there is one common ingredient in every negotiation – and that’s people – and the same thing is true in sales. The problem is people lie. They’ll even lie about it. Their theory is this: If at first you don’t succeed, lie, lie again. What you need to understand when negotiating is that people will not always lie to hurt you, but, rather, to keep information from you that might hurt them. Basically they’re trying to help themselves. They’re afraid you’re going to use what they say and do against them, and with good reason. As a result, most people won’t offer to tell you the truth unless it strengthens their position. That means you need to get creative and persistent in how and when you ask questions – and that’s sales.



If you think about it, I’m sure you’d agree. After all, how often have you said something to your spouse, kids, boss or coworkers that really wasn’t what you wanted? Have you ever walked in the office and said, “Man gas is getting expensive”? Or perhaps you said, “My wife and I would like to move, but we can’t afford it.” Now you might say something like that in passing without a hidden agenda, but what if you were thinking about asking for a raise? You’d say something like that, wouldn’t you? We all have at some point. It’s just an item we used, primarily, to serve another purpose.



It’s called positioning – and we all do it – a lot. In fact, sometimes we do it without even realizing it. The same basic idea can be used in the negotiation. Sellers do it too. They’ll say things like, “Well, maybe you’re not the right buyer.” You could take that to mean that they’re not motivated. But they’ll say things like that with a completely different agenda in mind. Maybe they’re working to position you so you think twice about negotiating. Maybe they’re building a smoke screen so they don’t appear motivated. But inside – if the seller is truly motivated – they’re hoping you don’t change your mind and walk away – yet they’ll still say, “Well, maybe you’re not the right buyer.”



You see there are no rules in a negotiation. You can cheat. You can lie. And whether you think it’s right or wrong; it’s reality. People do it all the time. Don’t get me wrong – I’m not telling you to be unethical. Just understand its how the real world operates. You have to proceed cautiously if you want to get ahead.



Let’s start by understanding what a negotiation is not. It is not an event. Too often I see investors wait until the very last possible second of due diligence to start haggling on some specific issue, which is usually price. That’s not what negotiation is. It’s not a one time, two minute event. (Although there are times you might find that’s all it takes.) It doesn’t normally work like that in real estate, especially commercial real estate. It’s a process.



A negotiation is not an exact science either. Negotiations involve at least two key elements that are extremely unpredictable – people. You’re on one side and somebody else is on the other. You can’t take a scientific approach to dealing with people. It doesn’t work. We’re all different. We all communicate in different ways and different things are important in varying degrees to all of us. That’s one of my favorite parts of the negotiation process. You just never know what’s in store.



Finally, a negotiation is not a competition. It’s not about you winning and your counterpart losing. More often than not salespeople are on the “losing” end of most transactions, and that’s what causes them to turn into win-lose negotiators. People waste their time and lie to them all day long. They feel like they’re on the losing end of the negotiation over and over again. And so the cycle continues. The problem is, those who approach negotiations like that rarely get what they want.



So what is a negotiation? What is it really? It’s a compromise. It’s a communication process where two or more parties bargain resources (in our case property and money) and seek an agreement for mutual benefit. It’s a process of assessing motivation – that is, what your counterpart wants – and matching it up against what you want. It’s leaving a transaction satisfied with the outcome, not regretting it later. It’s about two parties – both coming away satisfied. Both parties won – neither lost.



Sound like a fairy tale? It’s not.



We all share a few common goals when we negotiate. Most people immediately think of price (especially buyers) and understandably so. Price is, of course, very important. But there are other things that impact a negotiation, and it’s all much deeper than just the price of the product or service. What are these common goals?



1. Profit – We all want to make a decision when buying or selling coming away from the transaction as though we made money or that we’re going to make money. But profit comes in other forms too. It’s not just price. Investors are sometimes quick to walk away from a transaction because they didn’t get a few thousand dollars off the asking price. That’s short sighted if you’re going to make 10, 50, or 100 times that by investing in the asset.

2. Assess Motivation – We’re going to talk about seller motivation (or buyer motivation if you’re on the other side) in just a minute. Ultimately you need to know why the seller is selling. Find out as much about your counterpart as possible as early in the process as you can. You can search the internet, talk to other agents, previous buyers who have worked with the seller before, etc. Research. The more you know about them and their behavioral tendencies, the better. Find out everything you can about their personality. This is critical information you need to know to react, respond, and communicate with your counterpart.

3. Assess Your Position – Who is on your side? What do you need out of the transaction to make it work? Are there other moving parts or other people who have an interest? Are there others who you need to further negotiate with to make the transaction work?

4. Assess Value – What is the property worth? What will it be worth? Why? What would you buy it for? What would you like to buy it for?

5. Assess Other Variables and Limitations – What are some of the variables surrounding the transaction? Does your counterpart have the ability to make the decision? Who, other than your counterpart, is needed to make the decision? Are there any time constraints that might impact the transaction?



Whether you realize it or not, you’re negotiating all the time – everyone is. It might be with your spouse about what to watch on television. Maybe you’re trying to get your kids to do their chores around the house. You might even be negotiating your current salary where you work. In one way or another, we’re all negotiating – all the time, about something.



And that’s essentially sales. If you interact with people in any way, you’re selling something. Everyone is. But for some reason one of the biggest hurdles salespeople face – and when I say salespeople I’m talking about everyone – including you and me – is their projected desire for their counterpart to see things in such a way that they don’t benefit, we do. That’s why many consumers prefer not to work with salespeople. They simply don’t want to come away from any transaction feeling like they’ve lost. Some people think the salesperson will talk them into doing something they really don’t want to do. Does that happen? All the time!



The main reason some investors prefer not to work with real estate professionals is the agent’s implied ability to control situations and people. That’s sales, to a certain extent. But nobody likes to be controlled. Nobody likes to give all of their decision making power to someone else. Certainly they don’t want the feeling of being manipulated into making a decision, yet millions of people do it everyday.



One of the most important principles of negotiating the purchase of a lifetime over and over again is to learn and understand seller motivation. They generally fall into one of four categories:



 They need to solve a problem. (Management headaches, divorce, bankruptcy, death, illness, lawsuit, needs cash, dispute with partner)

 Their circumstances are changing. (Retirement, moving, job transfer, increase in taxes)

 They have other opportunities. (Exchange, business, stock)

 They’re price motivated. (If they get their price, they’ll sell. If not, they won’t.)



Let me pause here and ask you a question. If you’re buying an investment property and you hope to make a lot of money, what is likely driving your decision making process based upon the above four categories?



I’m betting you said price.



If you want to make a lot of money, you can’t work with sellers who have the same motivation as you do. One of the biggest mistakes investors make is to assume they know what the other side wants. We’re all different. We all want different things for different reasons. If you negotiate with sellers who are price motivated, you won’t get what you want and you’ll likely make a poor investment decision. It’s your job as the investor to figure out what’s driving the selling decision and then focus on solving whatever issue your counterpart is facing – but you don’t want to solve it by paying too much for the property. When you speak to their needs and help them solve problems or overcome obstacles, your needs stand a better chance at being heard and met. Always remember to involve yourself in negotiations built with these simple principles in mind:



1. Both buyer and seller want to reach an agreement.

2. Neither party expects to get everything they ask for.

3. Both buyer and seller want to negotiate the best they possibly can



If the seller is not motivated by something other than money, arriving at an agreement and getting what you want is very difficult. That’s why seller motivation is so important – and the only one who places as much value on it as you, is YOU. In most cases the seller isn’t going to tell you their true motivation without persistent, careful and methodical questions from you. Your agent won’t either – that would make their job harder and they’re not in the business to find great properties for you – they’re in the business to close transactions and make money. I’m sorry, but that’s the way it is. If you don’t believe me, ask them to find a great property for you without getting paid or commit to purchasing a property you know is overpriced. You’ll see what’s most important very quickly.



The bottom line is this: I can’t talk about all of the different skills, tactics and techniques in this article. In fact, no one can. There are hundreds upon hundreds of books, seminars and CDs written or recorded year after year after year about sales and negotiating. Not a single one can tell you everything you want to know. But they will give you ideas. They will teach you concept and give you examples of how to handle certain situations. When you learn who, what, when, where, why and how to ask questions, you position yourself to get what you want. That’s how real estate will make you wealthier than most people even dream about. I hope you become one of them.