Buying Direct From Sellers: The Negotiation Game
Buying Direct from Sellers: The Negotiation Game
Buyer: "Mr. Seller, what's the least amount you'd take if I were to pay you cash and close quickly?" Seller: "I would like $1,000,000 for my property"
Buyer: "Ok, so are you telling me that If I can't get you $1,000,000, we can't do business?" Seller: "No, I didn't say that; I could probably take $950,000"
Buyer: "So, let me as ask you a question: If a realtor came in and offered you $950,000, you are telling me that you would take $950,000 today. Is that correct?" Seller: Yes, I'd take $950,000 if a realtor came in and offered that.
Buyer: "Ok, so [take out my phone calculator] $950,000 x .05 = $47,500 [Commissionectomy Technique] (show $47,500 realtor commission to the seller); $950,000-$47,500 = $902,500 <~~show them, that's what they'd net.
Buyer: "I don't know if I could convince my business partner, but If I could convince him to take that, what I'm hearing is you are telling me that you would take something in the $875,000-$900,000 range?"[range technique] Seller: "Yes, I would"
Buyer: "Ok, let me see if I can convince my partner to get you the $875,000 you're looking for."
Negotiation dialogue should be initiated AFTER the initial rapport-building stage.
Sometimes I would take as long as an hour to get to know the sellers and their situation and for them to get comfortable with me. People do business with people they like.
Sometimes these techniques work, and sometimes they don't.
The point is a bit of verbal negotiating jiu-jitsu is worth learning. Negotiating is one of the highest ROI skills someone can learn when buying properties directly from sellers.
I recommend listening to some old-school audio tapes of Herb Cohen to understand how negotiation is supposed to sound and then digging into specific negotiating tips for real estate investors. When dealing directly with sellers, my favorite go-to phrase is:
"What's the LEAST amount you'd take and still be happy?"
"What's the LEAST amount you'd take if we were to pay cash and close quickly?"
Don’t actually emphasize the word LEAST, but it primes the seller’s brain to think of the lowest amt vs. the highest amt. that they would like.
Note: If you're getting a good deal, don't kill it by trying to make the deal too much better. Sometimes it's better to let them win, but don't make it too easy because they think they could have gotten more from you and might have seller’s remorse. You want everyone to leave happy.
Also, do you generally estimate 5% as the cost of sale? I've generally seen 6-8%.
Great stuff, thanks!
I like this! But do you find varying success with this technique based on RE sophistication? I could imagine a savvier player feeling this technique was a little too cute. But, perhaps that just means you need to be better at the delivery!