How to Negotiate Real Estate Deals
Follow these steps to feel confident heading into your next commercial real estate deal.
There isn’t some mystical secret to commercial real estate negotiation and you certainly don’t need to pick up Trump’s “The Art of the Deal” in order to arrive at civil agreements. Sure, it can be intimidating knowing a simple conversation could cost you big money, but if you prepare yourself and follow a few simple guidelines you can save yourself money, time, and a whole lot of stress.
Set your limit
The negotiation process is daunting for most because the common belief is one party will always try to take advantage of the other. The best tactic you can employ—whether you’re buying a station wagon or a strip mall—is to run the numbers and stick to your reservation price (or “walk away price”). As long as you don’t exceed that number as your ceiling price, you can’t mess your deal up too badly. In fact, as we all know, when some sellers are confronted with the fact you’ll walk from a deal the price suddenly lowers to meet your upper limit—weird! Like any wise gambler would say, “always walk into a casino with a maximum amount of money you’re willing to spend—and then walk away.”
Have a positive mindset
If you enter the negotiation process thinking one of the parties involved will be exploited—you’ve already lost. Think positively and know that both parties should come out of the deal happy and with their goals met. Try being transparent with the seller and tell them exactly what you’re looking to gain from the deal. With any luck, a dialog will be opened and the seller will tell you their goals, as well. An encouraging, inclusive attitude throws the doors open on the myth that all negotiations need to be full of dishonesty and mindgames.
While this tip may be counter-intuitive to the commercial real estate market, it’s important to take your time with your research. Along with researching the property—try to get to know the person on the other side of the table and see if you can understand their motivation. A little due diligence and transparency can open up a variety of options, or even valid concerns, worth noting before making an offer.