In a scorching real estate market with sky-high property prices, how can you compete against other investors?
Just landing any acceptable rental property can seem impossible, let alone scoring a stellar deal. But you can propel yourself to the top of a long line of buyers by learning how to negotiate real estate deals like a boss.
In super-heated markets, it’s often the best negotiator who walks away with the prize. And when margins are tight, shaving dollars off the sales price and eking out concessions protects your passive income.
Blow away the competition with these tried and tested real estate negotiation tips, which are part of any good strategy for how to find good deals on investment properties.
What’s Your Bottom Line?
When you negotiate real estate, emotion often gets in the way.
You get hot under the collar, nervous that the property you’re hankering for is slipping between your fingers. You suddenly find yourself making an offer, just to walk away and bitterly regret it later.
Before you get started, one of the most critical real estate negotiation tips is to have your top figure in mind. Don’t just think about the opening bid. Figure out the absolute ceiling that you are willing to pay before you even make your first offer.
Why? Because having this absolute number in mind will stop you from accepting a bad deal rather than no deal. Remember that you negotiate real estate based on cash-on-cash returns and rental cash flow, hard numbers you ran through a rental income calculator. It’s better to walk away from a mediocre deal so you can invest your limited cash on a better one elsewhere.
Another way to ensure you stick to your guns is to share that top number with friends and family. Imagine how you’d feel to admit you went over that number? Put the power of social pressure to use for yourself for a change!
Do Your Research
So, you know it’s important to have a top number in mind before you even open negotiations. But how do you get to that amount?
You must always back your figures up with cold, hard data by doing thorough market research. Remember, you’re in the passive income business — the smallest saving can compound over years. So, reduce your risks and maximize your income by double-checking your numbers.
Get ready to negotiate real estate by analyzing comparative units that were bought in the past 12 months. Then, analyze the differences between this property and the others. Look out for zoning rights, finishings, or amenities that are a turn on or turn off for local tenants.
With this information in hand, you can back up an offer that’s less than the asking price. And you’ll help keep your head in the game and not let your heart rule the negotiations.
Tell a Story
When you negotiate real estate deals, it’s not enough to just have your financials worked out. Like it or not, we all respond to stories. Giving a compelling reason why you’re buying means that you’re humanizing the offer.
We’ve all heard of sellers picking buyers with young families because they themselves raised children in their property. Obviously, it’s more difficult to compete with that strong emotional connection when you’re a real estate investor. But it’s not impossible.
Negotiate a home price by humanizing yourself as much as possible to the seller. As a landlord, you might say that you want to give the property a new life for another family. And mention that you already have the perfect tenants in mind.
Meet Sellers in Person
One of the best real estate negotiation tips is to meet the sellers in person whenever possible. In a hot market where sellers receive many similar offers, your face attached to an offer might be the difference that tips the scales.
It’s human nature to prefer to do business with people we know and trust. That doesn’t just go for private sellers, but also fellow investors too. And just meeting people face-to-face and swapping small talk can give you an edge over the competition.
Also, the more a seller meets and talks with you, the more time and effort they invest. People don’t like to feel they’ve wasted their time. So, the more time you spend together, the more sellers will want to make a deal.
And don’t just meet at open houses either. Sellers are notoriously distracted at these events, with 20-odd people parading through their property. So, make sure to meet them when you have their full attention.
Learn Their Needs
When learning how to negotiate real estate deals, it’s common to just think about the bottom line. But price isn’t the only factor that affect sellers.
To negotiate real estate well, you need to know what’s motivating a seller beyond money. Most sellers crave a fast sale as well, since they have to keep paying the mortgage while the home sits on the market. But urgency often goes beyond carrying costs, to include reasons like:
- Their relative is sick and they want to move closer by
- They are pregnant and need to upsize
- They want to move because of a work transfer
- They are going through a divorce.
In these cases, a seller might take a lower offer because the buyer can close in a matter of days or weeks. Even though there was a higher offer on the table, it didn’t solve their most urgent problem.
Or perhaps the seller has the opposite problem, and needs flexibility in staying in the home longer because they haven’t found a new place yet. As a real estate investor, you can offer them to stay on as a tenant until they’ve found a home. That’s a win-win!
This is why meeting sellers in person is a top real estate negotiation tip. You can ask open-ended questions during small talk to learn more about their motivations. Listen carefully to their answers, resist the temptation to fill awkward pauses and read their body language.
Another example of an “invisible” motivation is certainty – or lack thereof. Many sellers have been burned in the past by buyers walking away and collapsing the deal. In this case, you could offer concessions like removing a contingency clause.
Negotiate Real Estate Deals Live
Messaging and emailing plays such a major part in the way we communicate with each other. So much so that we’ve forgotten the power of negotiating real estate deals live.
Negotiating real estate through the back and forth of a live conversation beats email and text hands down. It’s more likely to uncover any issues or concerns that can be fixed straight away. And if you’re face-to-face (even through a video link), you can read non-verbal cues like body language and timing.
So, when you negotiate real estate deals, make sure to always make offers directly to the sellers. That can either be in person, or by video or phone call. This also deepens the connection between you and the seller.
Avoid Full-Price Offers (Even When the Numbers Work)
Ever had your first offer accepted on the spot, only to feel immediate seller’s remorse? You can’t quiet the nagging thought that you got the bad end of the deal. You may even decide to back out and try again with a higher price.
That’s why inexperienced negotiators often fall at the first hurdle — because they just offer what they think the seller will take.
What’s the best way to negotiate real estate deals where both parties walk away satisfied? Always make an offer below the seller’s asking price. This means you leave some room to go up, or to make concessions.
This helps solidify the deal at the end, as both parties feel they’ve fought the good fight. And the seller is less likely to second guess the final number.
Make a Cash Offer
As a real estate investor, you’re well-positioned to make an offer that can blow all others out of the water — in cold, hard cash.
It’s not hard to know why sellers love cash offers. It means you’re a serious buyer that can move quickly. You also don’t need to apply for a rental property loan, with a risk of the financing falling through.
This means that you can negotiate real estate deals for less money too. Many sellers will accept a cash offer that’s less than a higher financed offer, for the greater speed and certainty of closing.
Lean into Those Awkward Pauses
When you negotiate real estate deals, make sure to stay quiet during awkward pauses. Painful and cringy as these breaks in conversation may be, resist the urge to fill these silences. This is the time to keep your mouth shut and just listen.
That’s because if you’re feeling uncomfortable, so’s the seller. And they are more likely to make a concession to fill that silence. So, if a seller makes you an offer, just say nothing. A few seconds of awkward silence could net you a better passive income in the long run.
Don’t be the one to blink first!
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How to Negotiate Real Estate with Affirming Language
You might think that the best way to negotiate a real estate deal is with hard-sale language. But this can backfire when a seller feels intimidated and pushes back. After all, no-one likes to feel they’re being backed into a corner when negotiating.
Instead, a proven real estate negotiation tip is to use the “but you are free” (BYAF) technique when making offers. In this situation, you’re letting the seller know it’s a two-way conversation with room to move.
Learn how to negotiate real estate by practicing phrases that let the seller know they are free to refuse your offer, like:
- While I can’t make a full-price offer, I can offer $200,000… but you are free to refuse of course.
- We’re interested and can offer $200,000, but we’d like you to repair the floor in the kitchen. Of course, it’s your call, but will you consider it?
Don’t Be Desperate
Even if the property is in a prime renter’s location, and the market is sizzling hot, don’t be desperate. If you come on too strong, you’ll lose the chance to negotiate a real estate deal that’s best for you.
So, don’t show your hand to the seller. Instead, get your poker face on, start bluffing and imply you have plenty of other options.
Don’t be overt about it, just mention that:
- You’ve seen a lot of properties, but this one really stayed with you
- It’s one of the better-rehabbed homes you’ve seen this week
- The unit is the same size as other’s you’ve seen, but clever decor makes it seem much roomier and lighter.
How to Negotiate Real Estate Deals with Flattery
When you negotiate real estate deals, a little flattery goes a long way. This circles back to that all-important feeling of trust and familiarity when negotiating a home price. But don’t spread it on too thick — just highlight a few things about the property they’ve done themselves.
If the seller is a real estate investor, you might mention the attractive kitchen they rehabbed on a tight budget. Or you could congratulate an owner-occupier on what they’ve done with the space.
You’d be surprised how a bit of ego stroking can grease the wheels when you negotiate real estate. If the seller has three identical offers on the table, they might just pick yours because of the connection you’ve cultivated.
Don’t Make it Too Easy
I’ve touched on this earlier in the article, but it’s so essential when you negotiate real estate that I’ll state it again. If you accept a seller’s first offer, no matter how good it is, sellers often second-guess themselves. It’s why negotiations made without compromise or concessions are more likely to fall apart.
For both parties to feel they got a good deal, there needs to be friction and resistance. If you capitulate too early, the seller will think they sold at too low a price. So, make them work hard by starting below their asking price and pushing for concessions.
Always Get the Last Word
Always getting the last word might doom a romantic relationship. But always getting the last concession when you negotiate real estate is actively encouraged!
If you always have the last concession, it helps solidify the thought in the seller’s mind that they fought the good fight. So, make sure to always have a concession in mind to tie up a real estate negotiation, even if they’re minor.
Insisting on having the last word also trains the seller to stop asking for extras once they’ve reached their ideal price. If you make sure to counter their requests with your own concessions, they’ll learn to stop asking.
Over to You
In a highly competitive market, learning how to negotiate real estate deals can land you the hottest of properties. Inexperienced buyers often think money is the most important factor in real estate negotiation. But many sellers have their heads turned by a lower offer that’s in cash or quickly settled.
Never negotiate real estate deals without deciding on a top price first. It’s easy to let emotion get the better of you in the bidding process. But remember, it’s better to walk away than risking your passive income.
And don’t underestimate the importance of putting in face-to-face time with the sellers. Nothing beats live conversation when you negotiate real estate deals. If you can’t meet in person, pick up the phone or better yet, set up a video call.
Do you have any real estate negotiation tips to share? What’s the best real estate deal you’ve ever made? Let us know in the comments!
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About the Author
Yvonne Reilly is a landlord, property investor and solopreneur, passionate about helping people become financially independent and realizing their FIRE dreams. As a freelance writer, editor and digital marketer, she also helps small businesses connect with their audience and build traction. You can find out more about Yvonne on her website.