Step up to the Plate, Learn to Negotiate

The number one way real estate investors make money is through negotiation, period. Or did you forget that? If negotiations skills aren’t somewhere near the top of your list of things to learn in order to become successful in this business . . . then you need to start on a new list.

If negotiation skills are number one, then what’s number two? There isn’t a number two–remember, it’s a very short list, and nothing else ranks a close second.So you tell me, who’s negotiating your transactions today? Think about it for a minute. Truthfully now, who wrote up your last offer? If you answered, “my agent,” go to the back of the classroom (and see me after class).

If you’re not writing your offers or are relying on an agent to do so for you, you’ve surrendered the pen, and that’s a huge mistake.

Learn to negotiate

I looked at a house last week. A very nice older couple called on my ad, and I hustled right over. They’d recently taken the property back from a young family they’d sold to a few years earlier. At that time the house had new carpets and drapes and looked perfect.

Today, it looked (and smelled) considerably less than perfect, and it soon became clear the wife was less than thrilled with the prospect of having to clean up someone else’s mess, dispose of the piles of junk, and redo all the work they’d done just a few short years ago.

I’m listening now, looking for something I can take a swing at, and then she lobs me this fat one, right down the middle of the plate.“Don’t worry about this mess,” she says, less than enthusiastically, “I’ll have it all cleaned up if you decide to buy.”

I’m ready for it and take my best swing, “Oh, that’s okay. I buy houses all the time that have a lot more junk in them than this. You don’t have to clean it up at all. This is just the sort of thing I’m looking for, and I’ll have it all cleaned up in no time. You won’t even recognize this place when I’m done.”

Step up to the plate

Whack! Knocked the cover off the ball! I’ve said the right thing at just the right moment and negotiations from here on out are little more than going through the motions–that property is as good as mine.

Do you think my agent would have stepped up to the plate and said something similar or even close at that particular moment? Not in a million years of Roger Clemens fast balls!

I agreed to pay way less than market value, less than $1,000 down including all closing costs, and make payments at 8% interest until the thing is paid off in ten years or so. Those were their terms, and I was happy to say “yes,” “yes,” and “that will work,” to get it signed off. Whatever they said that “worked,” I immediately accepted and, interestingly enough, whatever I suggested to them was acceptable almost without hesitation.

Do you see why?They wanted this place out of their hair for good, and because of my nifty reply to her comment about cleaning the place up, they’d already concluded I was just the guy who could do that for them.

Extra innings

A couple days later their attorney calls (grrr…) and guess what, extra innings.Their attorney pointed out that our agreement wasn’t particularly advantageous for the sellers. They were too old to have to wait ten years to get paid, he said, and now they needed “all cash” or they wouldn’t sell. Oh, but they would discount $1,000 just to make things “fair.” Gee, thanks.

Their stopper, Mr. Dealkiller…nice to meet you.I knew he’d met with the sellers and told them he had a better idea of what was best for them, and that didn’t include accepting my monthly payments for the next decade, or so. I resisted the temptation to “thank” the guy for screwing up our deal, even though I really, really wanted to. Instead, I did the next best thing… continued negotiating.

Again on the phone with the sellers, they confirm they’ve had a change of heart. I’ve got no problem with that. When I was younger and dumber, I would have threatened to sue, and, if they didn’t comply, I would have sued. Today, I understand better and know that there are far easier ways to make money than in civil court.

The game ain’t over yet

Still, I know my team is down, but the game’s not over yet, and I’m in there swinging, just looking for something I can hit…listening to their every word, when she says, “There’s just no way we can go ten years. My husband will be in his 90s by then.” I hear the husband in the background saying, “Tell him to go to his bank and get a loan, so he can pay us cash.”

I take another big rip at it.“Okay,” I say, “I don’t need ten years. I understand ten years is just way too long. The problem with banks though, is they won’t lend on properties that need lots of work. They only make loans once the property has been completely fixed up. But it’s not going to take me ten years to get the place finished. If you can go just one year, that will give me plenty of time to get it fixed up and get that new loan to pay you off in full.”

The winning hit

Whack! Good bye, Mr. Spawlding, out of the park and this time, the game really is over. Their attorney faxed me the new agreement a few days later.

So what’s the outcome?I’ve sent my wholesale buyers over to take a look and have a $5,000 payday locked up. For the next couple weeks I’ll retail it, looking for a fix-up buyer who can net me two or three times that. And that money was made how?

One hundred percent of that profit was earned through negotiation.Which means, if you aren’t negotiating or even worse, are letting someone else take your cuts for you, you’re not making the sort of money you should be making. Step up to the plate, take a few swings, and see if you can make your way around the bases. A strike out or two early on won’t hurt, and one day, when it really matters, you’ll be up at the plate with the big game on the line and, who knows, maybe even drive one out of the park for the win. Believe me, that will be one for the record books.

By CREOnline Contributor

A content contributor to the original