Negotiating the key to closing the deal

Negotiation, the Key to Closing the Deal.

Once you begin to find the deals, the key to actually closing them is
the ability to negotiate. It all starts by making offers. If the
sellers are really motivated to sell, you need to understand their
motivation. In most cases, these sellers are moving the property to
solve a problem. Your job is to help them solve that problem, and
tailor your offer accordingly. I have bought several properties by
keying into what the seller really wants, like money to move or a
flexible move date. If you can help them solve their problem, they will
be grateful to you and may concede on a term or price that you thought
unattainable. You buy at steep discounts and the seller is happy about
it. That is what creative real estate investing is all about. Many
sellers, particularly distressed sellers, have other 'hot buttons'
besides top dollar for their property.

1. Don't Feel Guilty! This is
especially true if you are negotiating with a financial institution.
Remember, you are helping them solve a problem. Whether that problem is
financial or otherwise, you are offering a solution that will benefit
the seller. You are not taking advantage of them or their situation.
You are trying to make it better in a way that will benefit both of
you. If it won't benefit the seller, or if they don't want to do it,
they won't accept your offer. If they do accept your offer, it is
because they wanted to. That's all there is to it.

2. Be Confident and Know Your Position
If you feel confident about your offer, it puts you in a position of
strength. Collect the critical information you need to formulate an
offer (See my other guides on cold calling). By collecting this
information up-front, you can create two or three possible buying
scenarios before you even meet with the seller for the first time. On
the other hand, if you are unsure, and you let it show, it puts the
seller in a position of strength. If you are strong and sure of
yourself, they are more likely to offer concessions in order to make
the deal work. After all, you are the expert and you are hitting their
need. At the same time, know your limits. Establish your breaking point
beforehand so you know when it is time to walk away. And don't be
afraid to do so!

Know before-hand what you can pay for a property. Dont second guess
yourself. I cant tell you how many times I walked away from a deal,
only to have the seller call back a week or even a month later and
offer me a better price then what I originally walked from. Remember
all deals are fluid. The sellers situation is constantly changing.
Follow up is critical here since the majority of deals are done through
follow up. Also, know what concessions you want and what you are
willing to give. If you can be flexible in some areas, it may encourage
the seller to be flexible as well. But again, know your limits. Walk
into a negotiation asking for something that you are willing to give
away. If you get it, great but be willing to concede it. For example,
ask for the appliances but give them to the seller if they move the
close date for you. You get the picture. This is where creativity can
really pay off. I got a beautiful antique piano one time, just because
I asked for it. It turned out the seller was worried about moving it
and I ended up with a nice piano for my kids. You never know the answer
until you ask the question.

3. Know the Market. This rule
is critical. If you don't know the market in that area, how can you
tell if you are really getting a good deal? If you are buying a rental
property, know the rental rates for other properties of that type in
that area. Are the rents below market value? Are they above? Those
numbers make a difference in the potential resale price as well as the
price you are willing to pay. Remember, you make your money when you
buy, so take the time to buy right. If you are using a CMA from the
selling agent to figure your exit value, get another opinion. You may
be better served to get a broker's opinion of value (BPO) or a CMA from
an agent not connected to the transaction.

4. The Asking Price is Always Too High.
No matter what they are asking, this is a fixed negotiating rule. The
first price is always too high, just as your first offer will always be
too low for them. Enough said.

5. Close the Deal Now. Be ready
to conclude the deal, write the offer, and pay the terms now, not in
four or six weeks. Secure private capital so you can make all cash
offers or go into a deal with an approval letter in hand from your
lender. It shows them you are serious. By the same token, be willing to
walk away now if the terms do not meet your criteria. I like to make
all cash offers that close quickly as soon as title work is done with a
short three-day inspection period. But you need to know your seller.
Banks love all cash and fast. They want the property off the books. By
contrast, a large family may panic and refuse the offer because they
cant move that fast. Know your seller's hot buttons. However, if you
close the deal, be sure to have a 'weasel clause' in the contract (no
more than one is necessary, in our opinion). These clauses are the ones
that will let you out of the deal at a later date if you decide that
something is wrong, or your inspection turns up something you didn't
expect. Here are some sample clauses:

Contingent upon attorney approval
Contingent upon partner approval
Contingent upon spouse approval
Contingent upon the closing of another property
Contingent upon a property inspection
Contingent upon a roof inspection
Contingent upon a furnace inspection