Three principles to remember when negotiating real estate deals

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Investing in real estate is all about dealing with people - so developing your people skills is a critical and often overlooked component of investing.  With all of thet talk about cap rates, foreclosures, flipping and mortgage options there's a real dearth of material out there about negotiating. 

 Good negotiators are students of human nature, and they learn from every interaction.  I've mentioned in previous entreis that I'm a fan of the book Getting to Yes, the most famous product of the Harvard Negotiation Project.  As I've negotiated various deals - both in real estate and in other fields - I've found it to be a useful practice to make a conscious note of how the guy on the other side of the table reacts to various situations.  In the end, a key to being a successful negotiator is initiative, backed by a fearless, transparent honesty. 

But this only works if you can manage to put yourself in the other guy's shoes and understand what's really motivating.  Not the surface stuff...what's really underneath. 

In my experience there are a few constants that tend to run through any negotiation.  This tends to form my starting assumptions when I'm trying to reach an agreement. 

  1. People are motivated primarily by fear.  Greed plays a role, as does ego - but fear is the thing that really drives peoples decisions and actions.
  2. While price is important, it's usually not the most important thing.  More times than not the guy on the other side of the table can live with 10% more or less on the price - what he's really terrified abou tis looking foolish or being taken advantage of. 
  3. The guy on the other side of the table isn't evil or dumb.  And he's not out to get you.  If you find yourself thinking that he's evil or dumb then you need to look under the surface and figure out what's really driving his behavior.  Get into his head and use this to your advantage. 

The devil is in the details, though:  I've also written about some specific real estate negotiating examples

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Grant Howell
Alex Lowery Real Estate - Frisco, TX
Broker/Owner 214-234-6901
Thanks for the info. I am checking out your links right now.
Jul 09, 2007 10:15 AM #1
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