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How To Prepare Yourself To Negotiate From A Position Of Strength
Knowledge is power. But since there is every likelihood that a seller will withhold information which could compromise their negotiating position, you don’t always get critical information from them. This is especially so when sellers are trained by their real estate agents beforehand. This means that the only control you have over information are those that belong to you. How much you know about your own position with certainty and conviction will determine your negotiating position. Even when you are making a lowball offer.
This sounds so simple. But would you believe it that the majority of property buyers have no clear picture of what kind of a position they are in? Hard to believe isn’t it. If you have a clear goal and drawn up specific parameters to work within, you will become a tough nut to crack. And you will have no emotional attachment in walking away from deals as well.
If you are a master seducer and able to get a seller to talk openly, there are 2 most important answers you want to obtain. These 2 pieces of information is why they are selling and the lowest price they are willing to go. The first information will reveal how motivated they are to sell. And the second information will show what is required to satisfy that motivation. It does not happen often, but you are bound to run into these sellers who reveal everything or give you a glimpse if you try frequent enough.
To negotiate from a position of strength, here are the things you need to understand about yourself. When a seller manages to dig out these information from your head, they put themselves in a strong position instead. Some despicable sellers can even accept your offer and run rings around you before closing once they find out about your positions.
- Know why you want to buy that particular property. Is it undervalued? Is it a house that is primed for appreciation? Is a huge international school being planned in the neighbourhood? It cannot be a case where you just “feel” lucky. There must be a logical reason for your hard interest in it. If for example, your plan is to flip it, then you must know about the estimated costs to fix it up. Only then will you know what you are willing to compromise or not compromise on the negotiating table.
- Know how you are financing the purchase. There are many avenues for you to obtain the financing to buy a property. If your only source of funds is the bank, then you jolly well have to get an approval in principle loan in place before even you start looking at real estate. Even so, you must have a backup plan or 2 in place in case something goes wrong. There can be instances where you obtain a pre-approved loan, but get rejected or obtain a hugely reduced quantum after you make the purchase.
- Learn about the real estate data for the location. Are apartments selling above or below their values in recent months? How long does it take for a home to be sold? Is the property type in huge abundance in the area? Sellers and their agents will forever be hyping up the value of their properties. This is even when they know that the reality is the exact opposite. If the market is not as rosy as they want you to believe, having these details will bring your negotiating opponents back down to earth and communicate that you are not a newbie waiting to be preyed upon.
- Keep track of your exit strategy. Things can change very fast in the real estate market. A sound plan can be rendered unthinkable quickly. If for example, a seller find out that you have commercial tenants who are promised the property, the seller will know about your desperation to deliver on your promises to your prospective tenants. This can turn the situation on it’s head. This is why a smart property player should have many alternatives and exit plans for the assets they purchase.
- Know your maximum price. A lot of buyers end up paying for a house at a price they never thought they would agree on in the first place. This often happens as sellers inch slowly upwards on the selling price. Once you start accepting these minor increments, the seller will ask for more. And since you have already gone so far, you are more receptive to go above your limits to bring closure to the negotiations. When you have a clear number on your mind, be sure to say no when the time arrives.
- Be aware that you can walk away from any deal. This is actually a mindset that will give you an edge. By having the mindset of abundance, you put up a defence barrier that sellers will find difficult to break down. Once a motivated seller realises that you will not budge, they may stop making an effort to advance on you altogether.
Always remember that negotiation is about continuity and advancement. Every step you take and every play you make should have the objective of continuing or advancing negotiations.