Getting into the real estate business can be a daunting thought. Not becasue you dont have the passion or mindset to be great...it's mostly due to lack of experience (especially when negotiating deals). That is one of the main reasons that Turnkey real estate investing became so popular.
There aren’t that many people out there that can say that they truly, genuinely enjoy the process of a real estate negotiation. It’s tedious, there are all these concessions to make, back-and-forth, and it might not even pay off.
For the inexperienced real estate investor, negotiating your first deal can seem particulary intimidating.
After all, you’ve never done it before. Anything you know about negotiation is theory and conjecture and things you’ve picked up from reruns of 30 Rock.
Whether the idea of negotiating excites you (because it means you’re on your way to landing your first deal) or terrifies you (because it means you’re on your way to losing your first deal), there’s something to be said for preparing yourself for all the eventualities. Just know that like most things in life, negotiating is something you learn by doing.
You’ll probably make mistakes. You’ll likely lose deals. But with time, you will get better at it and grow more confident.
Here are 5 things new real estate investors worry about most when it comes to negotiating...and what you should do about it.
Handling the 5 Biggest Real Estate Negotiation Anxieties
Scenario #1: My offer was rejected!
A rejected offer isn’t the end of the world. You haven’t failed as a real estate investor if you get rejected! It happens to all of us. What you have to do is start learning why your offer was rejected. It could be as simple as your offer did not satisfy the expectations of the seller (it was too low for them, regardless of it being fair for the property).
You can always come back with a higher offer if you get rejected, but don’t get so hung up on winning a specific property from a specific seller than you overspend on a property that isn’t worth it. Keep perspective on how much it’s actually worth and what the numbers really are. The seller might just be being unreasonable.
And maybe you can just turn it around and do better next time. How could you have made your offer more clearly advantageous to the seller?
Scenario #2: They came back with a counter offer!
A counter offer means negotiations are in full swing! This is when things really get cooking. It’s no time to panic, but to calculate your moves. What you always want to keep at top-of-mind when dealing with a counter offer are your numbers. Remember that whatever counter offer they proposed is going to eat away at your projected cash flow.
It might not even seem like a lot, but it might be worth fighting for if it’s the difference between being a great cash flow property and a mediocre one.
You should already know you numbers and be prepared to stick by them. What are your reasons for them? Can you accurately (but respectfully) explain to the seller why you offered what you did? Be prepared to walk them step-by-step through your deal and your reasoning—that this or that needed repairs, you saw issues with x, y, or z, and because of that, your offer was just what it was.
Scenario #3: They are being way too quiet and I’m getting anxious…
From the get-go, you want to buy from sellers who are motivated. One of the first things you need to ask a seller is why they’re selling the property. It helps you identify whether or not there is urgency in the situation. When there’s a time crunch on the seller, you will always fare better as a negotiator. The buyer can’t afford to bide their time and let you sit and wait. They want to move, they want to sell, and they need to get back to you.
So from the get-go, look for motivated sellers.
If you do find yourself stuck in limbo, not hearing from a seller, don’t panic. Wait. They might be dealing with other offers, but don’t panic-raise yours. Wait. You’re the one offering them something they want: remember that. You still hold the power of the offer in the situation.
Scenario #4: I don’t know what I’m doing!
For first-time negotiators, yes. You probably don’t totally know what you’re doing. There’s a balancing act you need to strike between faking it until you make it and admitting that you don’t know. If you find yourself asked questions that you don’t know the answer to, the best thing you can do is admit it. Say, “you know, I’m not sure, but I would be happen to look into it and find out for you.”
Go that step. Don’t pretend you know. Don’t talk around it. Just admit it and offer to look into it.
It also helps to know what you should know. Familiarize yourself with the negotiation process and what is and isn’t expected of you as the buyer, and the same of the seller. It will help tremendously if you know what you’re supposed to be doing.
Scenario #5: I offended the seller / put my foot in my mouth / made a big mistake.
We all say stupid things sometimes, don’t we? Here’s the thing: that does for the seller too. Chances are, they’re nervous about this whole negotiation thing as much as you are. Go into this with a relational mindset. Don’t focus too much on winning. If you mess something up, have a conversation about it. If you offend the seller or say the wrong thing, apologize for it and make amends the best you can.
Then move on. Don’t dwell on it. If it means you lose the offer, oh well. You’ll try harder next time. Mistakes are made, and things don’t always go as planned.