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The magic of getting the other one to agree
John looked out across the room. "We so often think about negotiation only in terms of buying a property and selling a property, as if the only real negotiating going on in real estate happens when we buy or sell. But the reality is that there are dozens of other situations that you'll face as an investor where your negotiation skills will mean the difference between hundreds, thousands, or even hundreds of thousands of dollars in profits-or losses." John paused for a moment. "Remember this: Any one real estate business can be broken down into hundreds of smaller, ‘micro' negotiations. Each of these micro negotiations has a huge cumulative impact on the overall profitability of your investing business. That makes mastering the skill of negotiation a huge profit leverage point. The time and effort you invest to master this skill gets rewarded hundreds of times in any business, resulting in magnified profits. When you learn this skill, it's easy to increase your profits in a business by USD5,000 to USD50,000 to USD500,000 or more! For example, I remember a Mentorship student of ours who used a simple negotiating method he had learned at the Advanced Negotiating Workshop during a negotiation for a small apartment complex he was buying. That one method got the vendor to reduce the price by USD85,000! And it took less than five minutes to use the method. I don't know what that skill paid him on an hourly basis, but I'm pretty sure it was a wealthy person's wage! "We are going to take the rest of the afternoon to focus on the core skill of negotiation. First I'll go through the foundational negotiating methods. Finally, you'll get the chance to ask your most challenging negotiating questions so that you'll be able to tie all this information together. In the end, it's not about knowing methods just to impress your friends at parties. It's about knowing how to apply all these lessons so you will be more successful in your investing. "So let's start with the foundational negotiating skills. For most of you this will be a review, but for some of you it will be new."
Action One: Build Rapport
One of the most important requirements in any negotiation is to build an emotional connection with the other side. People like to do business with people they like. And what's more, when you're working with a motivated vendor, you need to help them feel comfortable opening up and sharing their emotional reasons for selling and their emotional needs for any solution you offer. This means you need to build and maintain a high level of trust and rapport with the vendor. The time to do this is both at the start of your meeting with a vendor, and also throughout the entire duration of your negotiation. Look for common bonds and build bridges of connection with the vendor wherever you can.
Action Two: Set an Up-Front Agreement
An up-front agreement is simply an agreement between you and the vendor where you each agree to make a decision at the end of your time together. In essence, you both agree that, in fairness to both of you, you will each clearly let the other know where you stand so that you both know what, if any, next action is most appropriate. Using the up-front agreement language pattern will save you from hearing the vendor tell you, "I'll think about it and get back with you."
Action Three: Build the vendor's Motivation
As a person who invests, you create value in the business by helping to solve a vendor's problem. If you can't get the vendor to tell you about the real problems they are facing, then this is almost impossible. That's why uncovering a vendor's true motivation and helping the vendor to feel that motivation is the key action to getting a great deal. Most motivated vendors live in denial. It's your responsibility to help them break through that denial and face the tough choices they are going to have to make.
Action Four: Talk about the funds
After you have worked with the vendor to build their motivation, it's time for you to talk through the funds. What were they asking for the property? What did they realistically think they would get? What are the details of the underlying financing on the property? As an investor it's critical that you master the funds action because it's here that you prenegotiate the funds in a business so that later, when you "officially" talk about funds, you've already got some or all of the discounts you need to make the business work for you.
Action Five: Make Your "What If" Offer
I recommend that you never make a formal offer to a vendor. When you make a formal offer you are giving all the power over to the vendor. They can either accept or reject or, what's worse, ignore your offer. Instead, make them a "what if" offer and get them to accept it before you ever formally make that offer. Say something like, "Here's a crazy idea, Mr. Vendor, but what if I were to get you a chunk of cash up front, and then pay you the balance down the road. Is that something we should even talk about, or probably not?" Only if the seller says yes to your generalized "what if" offer should you move by degrees to pin that general offer down in concrete terms and numbers. By doing it this way you stay in control.