How to Negotiate a Real Estate Deal

There are very few things that we can count on in life – taxes and death are about it, as they say.  But, there is another undeniable truth in life and it is expressed in the following axiom:

The Answer is Always NO –

UNLESS YOU ASK THE QUESTION!

In telling you this I don’t mean to insinuate that any time you ask that you will necessarily receive, and you know this intuitively – don’t you.  I mean you’ve heard NO many a time.  Let me ask you – have you ever taken the time to analyze why it is that sometimes you get what you want and sometimes you don’t?  Or, have you tried to understand why some people seem to hear more Yes’s than you?

Here’s how to negotiate a real estate deal.

Negotiation in Real Estate

Yes indeed, accomplishing things in life comes down to knowing how to negotiate; you must ask for things in order to receive, and there most definitely is an art and a science behind asking questions. There are folks out there who study negotiation formally; not me.  I do not profess to be a learned scholar in this area by any stretch of the imagination; just a guy who over the past 8 years of learning and practice has developed a few thoughts on the subject, some of which I’d like to share with you here.

In order to begin to do justice to this conversation I’d have to start with 20,000 words – start with that…  This is not possible in the context of an article – brevity is a virtue and time is money.  I dedicated a good chunk of space to this material in the Cash Flow Freedom University which I encourage you to consider if you are indeed interested in learning in-depth my perspective on negotiation.  But today – just a few observations starting with this one:

Questions to Ask in Negotiation

I covered in the opening of this article the notion that you must ask questions – this is a given.  The more you ask, the more the possibility of you hearing YES, and it’ll take a lot of Yes’s for you to succeed in life and real estate investing.

But having said this, the objective is not to simply hear a yes.  That would be easy, but unfortunately most of the time it wouldn’t move your business in the right direction.  No – the true objective is to hear the kind of Yes which represents you getting what you want or need!  Most people are not able to make the simple distinction that we will discuss in a minute, and aside for being afraid to even ask, the biggest reason people do not achieve level of success that they want is because they ask the wrong kind of questions.

Two Question Types in Negotiation

If you think about this, it’s very simple indeed.  All questions can be split into two categories:

  1. Questions that cause action.
  2. Questions that do not cause action.

Yep – when someone answers Yes to a question you pose, it will either cause them to take action or it will not, depending on what type of question you asked.

ACTIONABLE QUESTIONquestion that contains a proposition, therefore when answered in the affirmative it causes action.

Now, Actionable Questions do not necessarily have to be answered in the affirmative, in which case there will be no action to follow, but more on this in a bit…

FOR EXAMPLE

“Isn’t the weather grand today?” – This is an example of a question which does not cause action; there is no proposition in this.

Do you like my new car?” – Also not likely to cause action.

Can I borrow $50?” – Now there is a question which is built on a proposition and most definitely has the capacity to cause action.  This is an Actionable Question.

So far this is rather simple stuff – right?  I submit to you that if you ask enough Actionable Questions sooner or later someone will say Yes, and when they do it will cause them to take action which is what you are after.

Cause Action in Negotiations

This is the second idea we need to discuss as part of this conversation, and this is where the 20,000 words would need to happen in order to even begin to define the subject.  We would need to discuss the great Greek philosophers Aristotle, Socrates, and others in order to truly gain perspective on how to negotiate effectively.  For now, let me just say that simply asking Actionable Questions is not enough –you need to ask those questions the right way!

WHAT DOES IT MEAN TO ASK QUESTIONS THE RIGHT WAY?

This has 3 separate elements that need to be addressed, and they are:

  1. You have to ask the right people
  2. You have to ask reasonable questions
  3. You have to place your proposition within proper context

Talking to the Right People in Negotiations

For example, if you were to ask me whether you can borrow $50, you’d have a pretty good chance of getting it.  Why – because I have fifty dollars to give, and while I don’t know you very well, I also don’t specifically dislike you, and as such you have a reasonable chance with me.

If, however, you were to ask a homeless person on the corner or someone who can’t stand your guts…see what I’m saying?  There is no way you would get the money.  While you can not know in advance whether a person would respond in the affirmative, you can reasonably know if a person has the capacity to do so.  Use your brain – asking the wrong kind of people will never bring you the desired action, and this is the first part of it.

Ask Reasonable Questions in Negotiation

The second part is that the question itself must represent a REASONABLE proposition.  In other words, while asking me to borrow $50 may work indeed, asking me for $500 will not – guarantee!  Why not?  Because while I have the money and I don’t specifically have a reason not to give it to you, nonetheless my threshold for taking action of that magnitude is much higher than that which you’ve achieved.

In short, you would need to work much harder on developing a relationship with me and establishing for me a good reason to say – Yes.

So, does this mean that you should hold off on asking me for money until you can reasonably ask for $5,000, or should you go for $50?  You have to decide…

Place Your Proposition in Context

Lastly, what is the context in which you pose the proposition?  For example, while asking me to lend $50 today may work, had you asked me the same in the year 1935 would not have worked.  Why?  Because in terms of buying power accounted for inflation $50 in 1935 would have been worth roughly the same thing as $600-$650 today – this is a guess, but I bet I am close.  And if so, there is no way I would hand over $650 worth of buying power without a darn good reason…

Research Prior to Negotiation

If having read thus far you are under the impression that a little bit of research is called for prior to asking any Actionable Question then I’ve done the job I set out to do.  Understand – skilled negotiators walk into the room knowing more about their counterpart and all macro and micro elements of pertinence better than the other side.

This takes preparation and time, which explains why most people are not that good at getting a Yes when it counts – they don’t want to spend the time to prepare!

Conclusion on Actionable Questions in Real Estate Negotiation

Ok – on one hand my presentation of the argument in this article has been extremely over-simplified.  On the other hand, may be that’s a good thing. All of the above in my opinion is very reasonable stuff; not rocket science.  And yet, I am privy to folks in the real estate investment industry placing offers (asking Actionable Questions) which have no reasonable chance of a positive response.

You need to be more rational than most, and realize that your job as a real estate entrepreneur is to ask lots of Actionable Questions, which represent a reasonable proposition relative to who you ask and the context in which you ask.  Ask lots of those kind of questions and you will cause enough action to drive your success.  Simple – you can do it!

Please feel free to share your thoughts below 🙂

Photo Credit: NetMinder IG via Compfight cc

4 Comments

  • Jason Conferido Reply

    Great Article Ben

    Learning to negotiate is a fundamental element of real estate whether you are a seller or a buyer it is important that you know how to negotiate deals.
    It is important to receive a fair amount of share of what you want whenever you are negotiating. Again thank you for this information.

    Jason

    • Ben Reply

      Thanks so much, Jason!

  • Guy Granlund Reply

    Thanks ben.
    I am new to real estate investing and I’ve enjoyed all of your articles videos and podcasts that I’ve had the chance to read and watch on BP and justaskbenwhy.com I always learn something new.

    • Ben Reply

      Guy, it’s my pleasure to help!

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