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Crucial Information

Section 3 - Chapter 10 (continuation)

Crucial Information

Whether you get them before or during negotiations, there are some crucial pieces of information that will give you the most negotiating power. Below are some of the most important, with some tips on how to get the information, and how you can use it.

Deadlines

The easiest way to get this information, is to ask. Not all sellers or real estate agents are wise enough to withhold this. At least try a question like,"When were you hoping to get this sale done?" and then follow up with other questions, to see if it is a real deadline or just a hopeful thought.

Talk to other people. The seller may not reveal her deadline, but perhaps you can get a clue from her husband or a neighbor. Use any ethical means you can to learn the deadlines. For example, mention possible closing dates, just to gage her reaction.

To put your information on deadlines to best use, re-read the chapter "Time." Basically, you want to put important issues in the negotiation towards the end, so the time pressure will be motivating the other side to make concessions.

Motivations

Try to learn the seller's motivations for every aspect of the process. In other words, if it is a sale, learn not just why he wants to sell, but also why he wants to sell a particular way, why he wants the price he is asking, what's important to him when making decisions, and more.

Watch for personal motivators, too. Is the seller more motivated by what she reads or by what she hears? Is she more motivated by the promise of a fast sale, or a high price? Listen for clues. A seller who continually says, "I see" is probably more visually oriented and motivated. "I just don't want any problems," indicates she is motivated to avoid stress more than by positive goals.

Decide how to use this information, and make a plan. I had a friend who liked to see himself as a shrewd negotiator. Letting him "win" a lot of small concessions was a sure way to get what you needed most. Use a seller's own motivators, and even their own words. If they say "I understand" a lot, then start a statement with "I think you understand why..."

It is even easier to use the specific motivations involved. If you learn that a buyer of your house wants to be able to tell his friends what a great price he got, push hard on every other area. Get the terms you want, have him pay all the closing costs, etc. Take the attitude that if he'll give you what you want, he'll get what he wants.

A little more sophistication is called for most of the time, of course. You can't just say "Oh, you want that? Then give me this." Negotiate hard in all areas, but let him "win" the concessions he wants from you, and downplay what you have won. You'll both be happier in the end.

Price

There are many elements that determine the price. I once offered an investor a small rental I owned for two different prices. One was 15% higher than the other. He bought it at the higher price. Why? Because I sold it with just $1,000 down, and on terms that allowed him to have cash flow from day one. The other price was for cash. I knew he wanted to conserve his cash, and I wanted the interest.

The point is to be sure you look at all the factors that go into valuing a home. Learn the market value, of course, but also find out what loans the seller will have to pay off, if he psychologically needs a high price more than a high return, and anything else relevant. A home bought at $150,000 with 5% seller financing will cost you much less in 15 years than one bought at $145,000 at 8%

Effective negotiation doesn't mean always trying for the lowest price possible. A $150,000 loan, paid to the seller over 15 years with 5% interest, will cost you $36,000 less than a $150,000 15-year bank mortgage at 8%. Actually, in the first scenario, you'd be further ahead after the first two years, so why not give the seller his price if that is what is important to him?

Personal Information

Why personal information? Because almost all information can be used. First, it can be used to establish rapport. Ask about the family, if that is important to him. Talk about the bottom line if that is what matters. Mention you just played golf that morning, if he is a golfer. Bring him a gift of his favorite author's newest book.

Such information can be used in the actual negotiations too. If you are trying to negotiate an in-house mortgage loan from a banker, use what you know about her. For example, say "I was impressed with what you did for that Habitat For Humanity project. I was hoping you could work that creatively on this loan too." She'll be impressed that you know of her charity work, and more likely to listen to what you are suggesting.

Throughout the negotiations you can learn more about the other person, and use what you learn. If he loves to fish, you could slip in "I think if we settle these few points, we can wrap this up. Then we can both be out fishing this weekend instead of at this table." The thought of getting out fishing might just motivate him to concede a few points.

Competition

Establish who the competition is, and what they are doing. Are other buyers making offers they can't complete because their loans fall through? Are they making their offers contingent on the sale of their existing homes? Use this information to make your offer and your negotiations stand out. A seller who has had a deal fall through will look more seriously at your offer if you are pre-approved, for example, and not just prequalified (and you should let him know).

Key Players

You need to know who has what decision making power. It is common to hear "I'll have to run that by my wife." If you know that's true, you should probably be talking to the wife too. If it is a ploy being used against you, and you know it, you can counter with "Maybe I should wait until I can talk to both of you then?"

Be careful not to offend with such comments. He may not be the key decision maker, but still have influence. On the other hand, if you are pretty sure he can make the decision himself, the comment can have him "proving" to you that he's the one to talk to, which of course means making the decision now.

The point here is that you need to know who does what. Some people involved have all the decision making authority. Others may have limited authority, while still others have no authority (like a real estate agent), but perhaps a lot of influence. Identify the key players and their roles.

Get those with influence on your side - at least to the point where they can say "He seems like a decent guy." Get those with limited authority to prove their authority by making decisions beneficial to you. Then you are ready to face the big issues with whoever the real decision makers are.

Get at that crucial information!

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