Let’s face it. We’re all after “a deal”, whether it be in property, buying a new car, buying a holiday … we want to know that we have bought something BMV – below market value.
It gives us a warm fuzzy feeling to think we have saved a few £££’s and been a bit smart.
Smart negotiation creates a win/win situation for both parties, so always aim for this outcome and don’t be greedy.
In property, it’s absolutely vital to develop your negotiation skills and constantly hone them.
First of all, when you purchase a property BMV, you are locking in equity from Day One, which is a a safety buffer for the future. You’ll also increase your cashflow, because you borrowed less.
Then there’s all the Landlord’s hundreds of expenses … furniture, blinds, maintenance, compliance, insurance, repairs … the list goes on. If we negotiate a small discount on every expense, whether it is large or small, the net effect on our cashflow could be very significant. Sometimes you will be the seller, sometimes you will be the buyer.
So it’s definitely worth negotiating at every turn.
One important point though: Don’t even think about negotiating unless you can deliver.
Negotiate when the sale is conditionally agreed, and no sooner (buyers tend to try to negotiate before giving you any commitment – don’t let them)
Or, put another way, don’t get drawn into negotiating until you’ve got agreement in principle to do business.
If you start to negotiate before receiving this commitment you’ll concede ground and the customer will attain a better starting point. This would put pressure on you to find more concessions later, and ensure a better finishing point for the customer.
If you are not sure that the customer is conditionally committed to the sale, then ask (a conditional closing question), eg “If we can agree the details will you go ahead?”
If you’re buying, then the opposite applies: start to negotiate for concessions before agreeing you want to buy (try this when you next buy something – you’ll be amazed at what you can secure without giving any commitment in return).
Here are my top 10 tips for successful negotiation:
1. Prepare for the negotiation. Be clear what you want before you enter into it. If you a purchasing a property, you should have done a huge amount of due diligence and know the price you want to pay as a result. Have your reasons for this standing by and stick to them.
2. Be sensitive to timing. In every negotiation, there are times when you can push forwards and times when you have to be patient. Understand this and act accordingly. For instance, developers have their “end of year” when they may need to make some quick sales to reach their sales targets. You are more likely to get a deal if you approach them at these times. Similarly, if a house has only been on the market for one week, the vendor is unlikely to offer you a deep discount!
3. Don’t mention a price first. Let the other person come up with their offer. Many times, I have found that the person was willing to offer a greater discount than I had in mind. If I had mentioned the price first, I would never have known!
4. Encourage the other side to talk first … and be a good listener. Throughout the course of the conversation, the other party may well reveal things that help your position. Ask questions and listen carefully to the answers. They may reveal a lot.
5. Use the “7 magic words” … “Is that the best you can do?”. This is a non-confrontational way of asking them to “help” you towards a better deal. Say it with a smile and then let them think about it.
6. Know your bottom line/highest offer in advance. Explain clearly why this is your offer. Don’t give ultimatums. Put the offer on the table and give them space to think about it.
7. Offer and expect commitment. The glue that keeps deals from unraveling is an unshakable commitment to deliver. You should offer this comfort level to others. Likewise, avoid deals where the other side does not demonstrate commitment.
8. Trade concessions – don’t give them away. Never give away a concession without getting something in return (buyers tend to resist giving any concessions at all). This is a matter of discipline and control. It’s simple. Never give anything away without getting something in return. If you do you are not negotiating you are simply conceding.
A commitment from the other person can be a suitable concession to get in return for something of relatively low value. The simplest and most elegant concession to secure is agreement to proceed with the deal now – use it to close.
9. Leave your ego at home. I try and build rapport with someone first, before even starting the negotiation. Some buyer’s think that being a buyer gives them some sense of superiority and that the seller should kow-tow to them. I don’t describe myself as a “property investor”. I describe myself as a “professional Landlady looking to expand my portfolio in the area … ” or “looking for a new furniture pack”. Develop the talent to end the negotiation with the other side thinking that it was all their idea! Let them take credit for it, and thank them for it.
10. Put everything in writing and leave the door open. Not every negotiation comes to fruition on the day. Always put your offer into writing with your reasons for the offer being at this level. As an investor, you are not in a chain, you can complete quickly etc. These are all sweeteners to someone giving you the deal. Your offer may not suit them at the time, but that could change further down the line. I once had a developer come back to me six months later to agree on a deal I had put forward. The developer said “I came back to you because you were the only person who put the offer in writing and I kept it on my desk. When I was able to finally give the deal you wanted, I was able to contact you immediately and let you know”.
Using a tool like Yulpa can help you create successful outcomes for your negotiations. You can create a profile of the property you are negotiating on, and store all the data on that profile. You can invite professionals into the profile, such as your broker and your mentor, who can comment and leave notes to help you come up with your negotiation strategy. The more data and due diligence you can collect for any negotiation, the better placed you will be to see it through to conclusion. Yulpa helps organise you, and with organisation comes efficiency and success.
If you are interested in hearing other Landlord’s negotiation tips, join the discussion on Property Tribes >>> here.
Follow me on Twitter: @4_walls
Vanessa Warwick is a former TV presenter, turned professional Landlady, consultant, and speaker. Along with her husband Nick Tadd, she founded Property Tribes, which is now the U.K.’s busiest on-line Landlord and investor community. Nick and Vanessa have just launched their new tech product, Yulpa, an on-line “property office/filo-fax” that helps you organise and manage your entire property life in one place. It comes with an iPhone app that does auto due diligence on any property being considered for purchase. They also created Property Tribes Trading Post as a place where property people can trade and list products and services for the Landlord community.
Vanessa and Nick advocate the use of technology and digital and social communications in property, and speak at events all over the U.K. as well as consulting for the BBC on property. They invest mainly in flats London and family houses in the South East and are also big advocates of holiday lets, having two upmarket holiday lets on the South Coast that achieve above-average occupancy thanks to the couple’s web efforts and vertical marketing strategies.
Yulpa can help take some of the strain and pain away from being a Landlord, and support you in running a professional and systemised business. We offer a free 14 day trial to get you on your way.