Real Estate Investment Negotiation Tips: Your Go-To Guide

The Big Picture On Real Estate Investment Negotiation:

• • Building personal connections with sellers and addressing their non-financial needs can give you an edge in real estate negotiations.
  • Cash offers often win over higher financed bids in hot markets due to their speed and certainty.
  • Balancing flattery with firm negotiation can create a positive atmosphere where both parties feel satisfied with the deal.

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, the best negotiator often 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 strategy for finding 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. Then, 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 you are willing to pay before making 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. With this in mind, it’s better to walk away from a mediocre deal to invest your limited cash in 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, 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 the 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, 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.

Additional Research Factors For A Real Estate Negotiation

For a better picture, here are some more useful research factors you can consider to secure that golden real estate deal.

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 to buy means that you’re humanizing the offer.

We’ve all heard of sellers picking buyers with young families because they themselves raised children on their property. Obviously, it’s more difficult to compete with that strong emotional connection when you’re a real estate investor. However, despite this challenge, 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 do business with people we know and trust. That doesn’t just go for private sellers but for fellow investors as well. 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 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.

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Learn Their Needs

When learning how to negotiate real estate deals, it’s common to think about the bottom line. But price isn’t the only factor that affects sellers.

To negotiate real estate well, you need to know what’s motivating a seller beyond money. Most sellers also crave a quicker sale 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
• His wife is pregnant and needs to upsize their home
• Some of them may want to move because of a work transfer
• Perhaps they are going through a divorce.

A seller might accept a lower offer in these cases because the buyer can close in days or weeks. Even though a higher offer was on the table, it didn’t solve their most urgent problem.

On the other hand, the seller may have the opposite problem and need 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 as tenants until they find 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 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 play such a major part in our communication 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 immediately. 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 negotiating real estate deals, always make offers directly to the sellers. This can be in person, via video, or phone, and deepens the connection between you and the seller.

What Can You Potentially Negotiate When Buying a House?

Speaking of which, there are quite a few factors you can consider as “negotiable,” and it’s important to use them to your advantage. 

The price: Of course, it is the first step in every real estate transaction and negotiation. Sellers aim high, while buyers start low, eventually meeting in the middle through negotiation. This is also why jumping on the seller’s initial price offer is not wise — more on that later.

Closing Costs: It’s generally agreed that buyers must pay a prepaid closing cost for their mortgage, typically held in escrow. However, you can request the seller contribute a small amount (1-3%) towards these costs.

Closing Date: Sellers aim to sell quickly to minimize listing costs and maximize returns. As the buyer, consider closing early in the month to skip the next mortgage payment and improve monthly cash flow.

Repairs: Remember that you have the advantage in repair negotiations. You can hire an inspector for a pre-inspection walkthrough to identify future repair costs. And you can include these in your negotiations.

Note: Some sellers list the property “as is” to avoid repair negotiations.

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? Consequently, you can’t quiet the nagging thought that you got the bad end of the deal. In some cases, 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 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.

It 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 who can move quickly. You also don’t need to apply for a rental property loan, with the risk of the financing falling through.

This means you can also negotiate real estate deals for less money. 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 is 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 hard-sale language is the best way to negotiate a real estate deal. However, this approach 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?

Try Not To 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 the best real estate deal for you.

So, don’t show your hand to the seller. Instead, put on your poker face, start bluffing, and suggest you have plenty of other options.

Don’t be overt about it, mention that:

• You’ve seen a lot of properties, but this one stayed with you
• It’s one of the better-rehabbed homes you’ve seen this week
• The unit is the same size as others you’ve seen, but clever decor makes it seem much roomier and lighter.

Withdraw From Unfavorable Situations

Your willingness to walk away can significantly strengthen your position at the bargaining table. However, you must first research multiple properties so that you REALLY have viable alternatives if negotiations stall; otherwise, you’re only playing hard to get.

Communicate these options to the other party and subtly convey that a deal isn’t guaranteed. As talks progress, you might even consider physically leaving discussions to underscore your readiness to abandon talks — in case of unfavorable situations.

But don’t be too aggressive in this approach, just stay patient and detached. And if it goes according to plan, sellers usually reconsider their stance and offer you better terms — again, don’t do this if you don’t have better alternatives in the pipeline.

How to Negotiate Real Estate Deals with Flattery

A little flattery goes a long way when you negotiate real estate deals. 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 some ego-stroking can grease the wheels when you negotiate real estate. If the seller has three identical offers on the table, they might 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, sellers often second-guess themselves, no matter how good it is. It’s why negotiations made without compromise or concessions are more likely to fall apart.

There needs to be friction and resistance for both parties to feel they got a good deal. 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.

You Must Have The Last Word

Getting the last word might doom a romantic relationship, but always getting the last concession when negotiating 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 reach their ideal price. If you counter their requests with your own concessions, they’ll learn to stop asking.

Build A Network Of Experts As You Go

Sure, negotiation skills can help you walk away with the prize. However, you can score even higher if you have a solid connection with experts in different fields in the real estate market. 

How can you pull this off? It’s simple: connect with industry professionals like real estate agents, property managers, financing specialists, etc. — they’ll be your go-to team for anything beyond your knowledge. 

However, don’t forget about contractors and home inspectors, as they can spot hidden issues that can tilt the negotiation scale on your side. In addition, a real estate attorney is your best bet when it comes to contracts and regulations — extremely prevalent in the real estate market.

In my experience, building these relationships allowed me to have a better view of my prospective real estate properties, which also helped me polish my negotiating skills.

Although it may not be exactly a “negotiation tip,” it will help you later on. So, make it a priority to build these connections!

Over to You

In a highly competitive market, negotiating real estate deals can land you the hottest of properties. Inexperienced buyers often think money is the most critical factor in real estate negotiation. But many sellers have their heads turned by a lower offer that’s in cash or quickly settled.

Only negotiate real estate deals after deciding on a top price first. It’s easy to let emotion get the better of you in the bidding process. But remember, walking away is better than risking your passive income.

Don’t underestimate the importance of spending 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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