Tips and Traps When Negotiating Real Estate: Listen Carefully

Learn to Act: Listen Carefully

Most of us listen more to how a person talks than what he or she says. If the person is loud and speaking in an angry voice, their anger, frustration, and perhaps fear come through. If a person speaks very softly, we may suspect that he or she is very calculating and maybe even dishonest. Someone talking in a normal tone may lull us to sleep as we lose our concentration. And a person speaking with obvious conviction may convince us of their forthrightness.

The point here, however, is that no matter what the delivery is, it’s often the words that count. Many times you can reenergize a deal or get negotiations moving simply by understanding what’s really meant. Here are some examples:

“Here’s our first offer.”

This always implies that a second, third, or other better offer is to come. When I hear this phrase, I automatically feel the energy flowing because I know that if I reject it, the second offer will be forth­ coming.

“This is our initial bid.”

Again, better things to come later; sec above.

“Here’s something to get negotiations back on track.”

This is a concession. Why would the other party offer up a con­ cession without receiving something in return, unless he is more desperate to get the deal than I am? I will accept the concession and then see what happens next.

“Let’s get things out on the table.”

This implies to me that I’m only going to see the negotiating position, not the final offer. The other side is presenting what he wants me to see. Now I’ll show him what I want him to see. Then we’ll get to it.

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“This is our first and final offer.” Maybe, but only a fool issues an ultimatum at the start of negotiations. Is the other party really that stupid? Or is she trying to stampede me into giving concessions? Now is when I should get her to invest time in the deal. “This is the best offer we can make.”

Come on now, everyone can always do better. This comment is usually made by real estate agents about their clients. What it usually means is that this is the offer the agent got without a lot of hassle. It’s often a prelude to real concessions and negotiations.

“Take it or leave it!”

This statement is usually issued after lengthy negotiations. Unless it’s a ploy to force action on my part, it usually means the other side is frustrated and has decided it’s better to give up the deal than continue trying to come up with something mutually acceptable. If I take it, I usually lose. If I leave it, we both usually lose. The better course is to ask for a short break, then come back and note areas of agreement, identify those of disagreement, and find a spot where some negotiation seems possible.

I think you get the idea. The words the other party says are very revealing, if only you listen to them.

TIP

Beware of delivery, listen closely to content. Sometimes it’s not just the specific words themselves, but their sum total. For example, how should you respond to the following situation in negotiating?

You’re a buyer asking a seller to carry back a second mortgage on the property. You must have this second mortgage to make the deal.

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However, the seller offers questions such as:

“Is the interest rate high enough?”

“What if you lose your job and can’t make the payments?”

“During the last recession there were a lot of defaults on second mortgages, weren’t there?”

“I hear that sellers are often cheated by creative financing.”

What is this seller saying? For one thing, she’s not saying that she doesn’t want a second mortgage. If she didn’t want a second mort­ gage, she would say, “No.” Instead, in each statement she’s saying, “Yes, but . . . ” It’s the “but” that we need to address.

If we simply answer the questions without listening to what’s actually being said, we might respond in this fashion: “The interest rate is as high as the market will bear; I’ve been on my job for five years and prospects look good; yes, there were a lot of defaults, but the recession is over; creative financing isn’t always bad—sometimes it’s a good way to make a deal.”

Have we responded in a way that will get the seller to go along? I suspect not. If we listen more closely to what the seller is saying, we might perceive that she is really concerned that she will lose a lot of money or be cheated by taking a second mortgage. When she asks if the interest rate is high “enough,” she’s not asking about market rates, but whether it’s enough to warrant the personal risk to her. When she asks what happens if I “can’t make” the payments, she doesn’t want to hear about my job. She wants to know that I’ll make the payments no matter what. When she asks about “defaults,” she wants to know what’s going to happen to her if I don’t pay. And “cheated” suggests she doesn’t trust anything that I’m saying about this subject.

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The words reveal the true problem. What the seller really needs is to be reassured. What will reassure her? One sure thing is if I increase my credibility as a borrower. For example, perhaps I could get someone financially well established (such as my parents, a wealthy relative, even the broker) to cosign. Or I could increase credibility if I’m able to put more money down.

Once I’ve done something like this to reassure the seller of my credibility, the arguments (in the form of questions) that she’s raised melt away. She might even be willing to give me a lower than market interest rate and be sufficiently unconcerned about pay­ments, defaults, or cheating to make concessions elsewhere.

What I have to do is listen to the words and discover the true concerns they reveal. Once I address these concerns, the superficial problems will dissolve.

Listen to the words. They will usually tell you what the other party really wants.

The Bottom Line

Learn to act.

Disarm a psychological attack by drawing attention to it.

Be irrational occasionally.

Strive to be innocent.

Always ask “Why?”

Question authority.

Challenge the written word.

Listen carefully.