Posted in Investing in Real Estate, Negotiation

The First Question You Should Ask – When Negotiating the Purchase of Real Estate

RJ Palano here from  First a little background.  I’ve been involved in the acquisition of real estate since 1977 when I bought my first house.  Since that time, I’ve owned and sold thousands of houses, a couple office buildings and apartments.  The houses I’ve been involved in span over 50 cities and 12 states.  I’ve made more than my share of mistakes and failed forward to where I am today – a full cycle turnkey operator in Atlanta, GA.

I’ve attained this level of personal and financial development due to four things:

  1. My never-quit attitude which is encompassed by a phrase I’ve claimed as my own “Anything worth doing is worth doing to excellence.”
  2. The information and knowledge I’ve obtained through serious study and more importantly “hand on” experience.
  3. The courage of my convictions to not just take action, but take massive action.
  4. My learned ability to negotiate with homeowners.

It’s the latter which I feel is so important and now becoming a factor in today’s real estate market in 2014.  You see, negotiation is the highest paid skill in every business and is critical to make a profit in real estate.

The key to negotiation is to only negotiate with the decision maker of the property you are trying to buy.  So, the first question prior to negotiation should be: “Are you the decision maker with a follow up question of who is the owner?”

In the last six years we’ve played the “highest and best” games with sellers as most of the sellers were lenders that foreclosed.  We all know the game: They would list the house below market value to attract as many offers as possible and then ask for the highest and best.  It’s still going on but rapidly coming to an end.  There were no negotiation skills required as we were all dealing with MLS listings and going through agents, brokers, asset managers, etc.

Today I can see the change coming as we attack the acquisition side of our business, targeting homeowners.

Regardless of where or who you are buying through, you need to know how the person controlling the property fits into the picture.  This is the beginning of your negotiation.  If it’s a realtor, enough said as most couldn’t negotiate a cup of coffee at Starbucks.  If it’s a promoter, which in most cases acts as nothing more than a realtor, ask them what their markup is.  I’m sure most readers realize that the benchmark commissions in the U.S. for real estate are 3% listing fee and a 3% selling fee.

Wouldn’t it make sense to ask someone what they are charging you for their service?  Isn’t everything in life negotiable?  Think about that.  We’re all in sales and constantly trying to sell, impress, win over people all our lives.  This is a human relation skill applied to everyone we have contact with: think about what you said or did to attract your girlfriend or wife.  What about when you applied for a job, bought a car, hired a house painter or bought a house.  If you don’t have the courage to ask, you’ll pay retail or above retail for everything.  Whenever possible, negotiate with the person that makes the decisions.  You need to know their needs and be able to provide a solution to their needs in order to be successful.  Never pay retail for anything.

-Robert Palano