6 Basic Don’ts Of Real Estate Negotiation Tactics

By on July 11, 2014

Negotiation is more of an art. The best negotiators in the world have a gift of quickly assessing situations and instinctively know how to capitalise on opportunities. Some call it calibration, or even a hunch. It is about being well informed, knowing the goals and weaknesses of others, a lot of preparation, and much more. The good thing with property investing is that you do not need to be a high level negotiator to be successful. Because the game of home buyer and seller haggling has been around for centuries, proven strategies and tactics have been documented for all who are interested in the subject. If you are clueless of what is being referred to here, these are 6 of the classic things NOT to do in real estate negotiations.

Making the first offer

Under what grounds do you have to make that first offer? You do not even know what is your opponent’s position yet. This is a very classic negotiation mistake that people make everyday. Unless you are a buyer and the seller absolutely have to sell today or the apocalypse will tear his house down to shreds (or something equivalent), there is absolutely no way your first bargain offer will be accepted immediately. Making your bid will actually reveal your position and allow him to adjust his to exploit yours.

There is no way you can win here unless you are more than prepared to offer way over what the house is worth. And we have pledged not to do that in investing 101 classes. If you go high, it can entice a seller to go higher since you have shown that you value the property. And if you go low, it will only encourage the seller to negotiate harder to soften you up. And if by any chance that you make an offer mirroring the price on his mind, he is still going to try to get the most out of you. The best way forward is to reverse this situation and let your opponent reveal his position so that you can adjust accordingly.

Being a bad guy

Some people go in hard with every negotiation they get into. It might work with a lot of situations in life. But when we are talking about intelligent opponents across the table, being a tough bad guy can be a quick turn off. It tells everyone in the room that you are only concerned with your goals. It might even frame you as an immature person. And being an amateur does not do wonders on how much respect an opponent has for you. In a worst case scenario, people might even refuse to talk to you and demand someone else for any talks to go on.

negotiation tactic handshakeAccept an offer quickly

In some cases, people might pressure you to accept an offer and deal immediately. They might even add that their offers will no longer be valid once they walk away. Don’t worry about losing such a deal. Hold back and take some time to think over it. Also use that time to collate and evaluate more offers on the table. If someone uses such a tactic on you, it must be that you are holding onto an asset that is of considerable value anyway. When that is so, these people will still be interested in what you have should you give them a call back a day or 2 later. A classic method to buy more time is to say that you need to discuss their offers with a partner or your spouse. No one can fault you for that.

Worry about the ghost buyer

It seems that these days, whatever properties you are dealing with will have a host of buyers and sellers that agents will call if you walk away. It is such an overused tactic that it is hard to imagine anyone believing it anymore. But when you are in the heat of the moment, it can sometimes be difficult to make a cultured decision. Don’t let the presence of a competing buyer (whether it’s genuine or not) affect your decision. These are just mind games that are being played by experienced agents or crafty sellers. If you fall for this one, you are opening yourself up to more such tactics being used on you when closing approaches.

Discuss your limitations

Sometimes we talk without thinking about what we are revealing to a trained listener. It usually happens when we somehow thought that an opponent actually cares for us as a human being. So we share our problems looking for some empathy. This is suicidal in negotiation. The only person you should discuss problems with is your partner, spouse, or someone you can trust. Even your real estate agents cannot be fully trusted as they sometimes can reveal your positions to others in an effort to give them the ammunition required to get you to deal. Never show your weaknesses or reveal more information that is necessary. Examples, include your cash on hand, the maximum amount of mortgage you are able to obtain, why you want to sell, how you are going to use the house, etc.

Participate in a bidding war

The only reason why you would get into a bidding war is when you are buying land and going up against other developers to acquire it for development. As profits from developing land into condominiums or townhouses can mean a tidy profit, you can increase your capital in view of the major gains expected. Let’s not be funny by putting auction houses into the picture. In any other circumstances, you want to give bidding battles a miss when acquiring your assets.

As an investing buyer, your objective is to find bargain houses with motivated sellers. Bidding wars can quickly get you emotionally involved with winning over a deal. This makes you more prone to making mistakes that you will regret later. By the time you come to your sense, it might already be too late to reverse your decision before incurring some kind of losses.



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