There are several things that we do all the time without trying to understand and master them. One of the regular and unconscious practices that we engage in is negotiation. Every time you bargain with a product seller or a service provider or you present a proposal to others with the aim of gaining support and approval you are actually negotiating. Children and parents do it all the time. The only missing link is that we often do it without a plan and a strategy. However, if you intend to engage in real estate negotiation you ought to understand the basic principles.
First, to negotiate successfully you need to approach it with the right attitude. You must be convinced that practically everything is negotiable. Every party that comes to the negotiating table has primary concerns and interests that are often hidden. Your ability to identify them and look for creative ways of addressing those concerns may be all that you need to create a win-win situation for both of you.
Second, the more information and time that you have, the stronger you are when it comes to negotiation. The party that is under the greatest time pressure is the weakest in any negotiation. You do not need to become a private investigator in order to be a good negotiator. If you ask the right questions and keep your eyes open for clues you will possess more information about the transaction.
One of the simple questions to try to ask and get an answer to is the reason why a seller wants to sell his or her property. The need for money to meet specific deadlines is often a good indication of a time pressure. For instance, a property that is under mortgage and is in danger of foreclosure will definitely put the owner under pressure to sell .The closer to the deadline for foreclosure the more willing and flexible the seller will become.
This time pressure also sometimes applies to buyers as well. Many indecisive buyers are motivated to make a decision when they discover that they are about to be edged out of a deal by someone else. They suddenly become more willing to pay more. While this may be true at times there are also times when some unscrupulous agents have adopted that as a tactic in order to hasten the decision cycle.
Third, know what you want but be very flexible. Of course, if you do not know what you want you are not even in the game to begin with and if you are inflexible you are likely to offend the other party and lose the transaction entirely. Your aim should be to come up with a mutually beneficial solution that would be attractive to the seller and will also address your own concerns as well.
Fourth, understand and apply simple negotiating tactics suitable to each situation. Remember when you went to the market with your mother and she was negotiating to buy an item from a seller? After pushing for several discounts at a stage she would turn round and walk away from the transaction. More often than not the seller would call her back and strike a good deal with her. In real estate, if you are willing to walk away from a transaction you have more power.
In addition, you can never tell upfront how low a seller can go and how high a buyer will go in real estate transactions. Of course, there is a general tipping point at which a seller will rather not sell than go beyond and there is a price that could scare possible buyers away. The wisdom of knowing where to draw the line in a transaction is essential. Do not over stretch your luck to the point of appearing to insult the intelligence of the seller but at the same time there is no law against making a request. The worst case is a ‘No’ and then you can step up your offer.
This is one of the reasons why the vise technique is so effective in negotiation. The vise technique is a tactic used to get a better deal in negotiation by simply asking the other side to do a little better than whatever they have offered you and then wait for their response. Most people will feel obliged to do something by increasing their offer. The request should be followed by a pause or silence. It has been used by several power negotiators successfully.
This is a skill that is worth acquiring and developing due to its multiple applications to situations outside of real estate investment. But there is no gainsaying the fact that you will benefit financially from understanding how to apply this skill to your real estate investment venture.
SOURCE: PUNCH NEWSPAPER.