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Title: The Art of Negotiating: DoYou Have The Winning Edge?
Let’s conduct a simple experiment: afree word association. What are the top three things that enter your mind when you see the word “negotiate”? 1 – 2 – 3. What word, feeling or first impression entered your mind? Was it a positive or negative association? Do you engage in this activity rarely or frequently? Most of us tend to have negative associations ranging from tense uneasy feelings to pictures of being haggled out of any profit. Why? Watching too much television perhaps?
Negotiating is not about getting the best deal at the expense of the other party. Negotiating is
about coming to a fair and equitable agreement that is satisfying and profitable for all parties involved. Let’s reframe these associations and understand that negotiating is communicating effectively so that everybody wins.
The underlying principle of negotiating is based on reaching common ground. You accomplish this through communicating: simply, succinctly and compassionately. How do you communicate effectively? It is through education and mentoring. In real estate acquisitions, it is just as important to educate the vendor as it is the investors. Buying investment property is a business and the valuation is based on the income generating capacity of the business. It is a mistake to assume the vendor understands the value of their property. Keep open lines of communication in your dialogue so there no confusion or misunderstanding. Ask clarifying questions. This is an essential part of your dialogue.
Never be in a hurry to buy or sell. Pressure, whether real or perceived, can add unnecessary stress and strain relationships. Keep a cool head and know your bottom line. When you have rock solid numbers, your bottom line is very clear. It takes serious intention and above all, patience, to negotiate a fair price. That being said, negotiations are affected by the opportunity clock. Is the real estate cycle in an uptrend or a downtrend? Uptrending areas foster shorter negotiating cycles because there are more buyers than sellers. Currently, the real estate
market in Edmonton, Alberta is so hot that multiple buyers are bidding on property with unconditional offers. This requires extensive due diligence on your part if you are willing to purchase a property with no subject clauses. Downtrending areas promote flexible negotiating
cycles because there are fewer buyers than sellers. A good deal can still be reached when you set your intention to become a problem solver.
In real estate, negotiating does not end until the deal is complete. Even after an agreement has
been reached in the preliminary round, there may be new information that impacts the value of the deal. This information and its ramifications must be shared and explained to the vendor in order to reach a compromise. At this stage, you must be prepared to walk away from the deal if you\’re terms are not met or be prepared to accept it as is. This is why the single most important condition that goes into all my offers is “subject to purchaser’s lawyer’s approval” and is the last subject clause to be removed. And depending on the length of time involved in the negotiation process (for example, apartment buildings take several months to close), there are intangibles such as vendor fatigue that work to your advantage. Time is also an investment. People in general do not like to waste time or money. Yes, emotions do get involved. We are human. The distinction is to not let your emotions dictate the parameters of the deal and let the numbers do the talking. This is how you may effectively reframe your communication skills so that everybody wins.
Dave Dubeau, author, entrepreneur, and successful Canadian creative real estate investor, shares with you his rules of Canadian Real Estate Investing, Real Estate Investing Education and Training, and how Canadians can invest in Real Estate profitably.