Presenting Offers and Negotiating Techniques For the Real Estate Investor


For the Real Estate Investor that has purchased or sold an outstanding investment opportunity, nothing can bring on more excitement than to know you did a great job with negotiating the price and terms of the deal. Although there may be instances when you will be “handed” or “give-away” a fantastic opportunity based upon extreme motivational factors like a divorce, foreclosures, illness, etc. The majority of deals will require some level of give and take effort from both sides. Although all negotiations should have an objective of a win/win strategy and outcome, it is usually the side that has prepared the most effectively that may come away from the table with a bigger piece of the pie.

This guideline has been written to provide an overview of basic negotiation techniques that you may want to apply. The following text is broken down into sections starting with some background information and leading into the three stages of the negotiation cycle.

Section I Background Information

Practicing Negotiations by Role Playing

All successful negotiators have established their own style of approaching a negotiation. During your training as a negotiator, it will be critical for you to work on your approach and modify it as you see how things work out. One popular training method that will help you to establishing more confidence in your negotiations is to do role playing. Role playing will allow you to experiment with your approach and to develop more confidence without the fear of losing a deal. If possible, conduct the role playing session with someone who has experience in negotiating so they could provide constructive feedback on the session.

One technique that will provide you with great input as you conduct your role playing sessions is to record them or even better, do a video recording. Having the ability to review these sessions will be extremely beneficial in your development of your negotiation skills. By having recordings, you can “see” the progress you are making over time.

Reasons for Rejection

There are many reasons why your offers may not be considered or you can’t even get them to agree to meet with you. During your real estate investing career you will come across many people who are in difficult, sometimes life changing situations. The successful negotiator will try to embrace the possible reasons for rejection and adjust their approach based upon the particular situation with that person. The following section will highlight the most common reasons for rejection and will provide recommendations on how you may alter your approach to counter their pushback.

Illustrate Why This Deal Is Good For the Other Side

As part of your negotiating strategy, you should include a discussion on how the offer you are making will benefit them. In many situations, the other side may be very familiar and knowledgeable with their potential benefits. However, you will come across opportunities when that will not be the case. As an example, let’s say you are trying to convince a property owner to hold a mortgage and they are inexperienced in this area. If you provide an overview of the anticipated principal and interest payment verses them taking a lump sum at closing, you may be able to convince them that this option may be better than counting on typical investment instruments like CD’s, mutual funds, etc.

Educate “The Other Side”

As part of your negotiation strategy, you may need to provide some education to the people on the other side of the table. Throwing out an improperly staged offer that in the eyes of the other parties is a ridiculous offer will only make them push back even further or perhaps discount the deal and maybe you completely. However, if you know that the other side’s position is perhaps based on inaccurate data, than you should take advantage of the opportunity and offer any data that may be helpful to them seeing things accurately. Of course in their eyes you may have a direct benefit and they feel they must ignore your data. However, it can certainly be worth your while to give it a try. An example of this could be let’s say they are providing a Pro forma that is indicating a proposed vacancy rate and you know it is understated, perhaps if you were to compile data from the local property management company’s stating the actual vacancy rates of similar buildings, you could be in a position to further negotiate. One way to establish credibility on this type of situation is for you to disclose the source of your data and suggest that they confirm the information you have provided to them using a third party.

Find a Connection with the Other Side

It can really be beneficial to break the ice on a new relationship or negotiation by discussing non-business and non-confrontational topics. Using this technique, you can gently ease into the discussions of conducting business. In addition, these social discussions can provide some clues to you on who you are dealing with and if you potentially need to modify your approach.

An example of this technique occurred during one of my meetings with a homeowner to discuss purchasing their home. Based on the horrible conditions of the property that existed for many years, I did not know what to expect during our meeting. My first goal was to spend some time with them so we can get to know each other. As I’m approaching their door on the day of my appointment I’m thinking what on earth will I discuss to break the ice with these people who are being portrayed as the slobs of the neighborhood. As I entered the home and introduced myself, I quickly observed that the entire living room was filled with fishing poles. I thought to myself Bingo! I struck gold because I was an avid fisherman. After spending the next half hour discussing the local fishing scene, we got down to discussing business.

Other examples of creating ice breakers based on your initial observations could include the following:

o Family pictures displayed

o Interesting d├ęcor of the home

o Art and trophies displayed

o Collector car in the driveway

o A mutual acquaintance

Section II Preparing For the Negotiation Session

Creating the Package

Depending upon the type of negotiations you will be involved with, you may want to give your offer some punch by creating a professionally looking package you can give out at the meeting. This package can include various pieces of information that will help you drive your offer to a close and can include the following highlights:

o An overview of your background

o Your company overview

o Highlights of your offer

o Background data to support your offer

o Expected benefits the other side will realize

The use of charts, graphs, and pictures will make the presentation more interesting and convincing. The only concern I have with this approach is that once you hand out your package, it could be difficult to keep all of the players on the same page (literally); it will be a natural tendency for them to browse the document while you are talking.

Creating a Visual Presentation

Another option in presenting your offer is to utilize a computer presentation; this option will allow you to control the information the group is seeing and at what time during the negotiation. This will prevent them “looking ahead”. You can always present them with a hard copy when you have completed your presentation.

Know Your Limits

As you construct your negotiating plan, it will be extremely important for you to pre-determine the boundaries of the deal. You should have limits on the significant aspects of the deal. When these limits are exceeded, it will raise a red flag that perhaps you are done negotiating and need to walk away. These limits may include the following:

o Sales price

o Closing date

o Mortgage terms

o Repair credits

Although during the negotiations you may have to make some concessions or decisions on the fly, without having these pre-determined limits can make you very vulnerable during the excitement of the negotiation process.

The level of persistence with holding your ground on your offer and terms can be altered based upon the desired future relationship with the other side. If you are trying to establish a long-term relationship with them, you may be more open to give up more. If you know this is a one-shot deal with these people, it could mean you will stick to your guns and not make any further concessions.

Submitting a Sealed Bid

When it comes to submitting a sealed bid, depending upon the situation, many of the negotiation techniques mentioned in this guideline may not apply because you may not be provided with the opportunity to negotiate at all. This situation can be found when there is a third party involved who has been assigned the responsibility to liquidate real and personal property. An example of this is a bankruptcy or estate sale. On the day when the sealed bids are opened, the highest offer submitted will typically be in a position to purchase the property. If you are faced with this dilemma, your only recourse is to submit the best offer that still makes business sense.

Don’t Go In With Your Best Shot

As you develop your negotiating strategy, it will be critical for you to hold back on disclosing your best offer right out of the gate. If you start with something less than your best possible offer, it will give you the room to negotiate towards the other side’s position. Think about what would go through their minds if you just came out and said “this is the best I can do and it’s not negotiable.” Perhaps they would just cave and accept your offer or realize that you are not interested in “allowing the deal to evolve” and spook them off to another deal.

Ask For Things You Really Don’t Need

A classic negotiation technique is to ask for things or terms that are not really required or desired with the strategic objective to give them back to the other side as a way to demonstrate your desire to “work the deal”. An example of this technique is selling a property and requiring a 30-day closing date even though you are perfectly happy with a 60 or 90 day closing date. By allowing the buyer to have “extra time” could provide the leverage for other side to shift their position on other terms that are more critical to you.

Use Deadlines to Your Advantage

As a way to add additional leverage to your offer and negotiating approach, you should try to understand if there are any critical deadlines that are approaching that could help your position. If for example, you know that a seller is having a balloon payment due in 30 days, it can be assumed that generally they will become more motivated as that date approaches. Therefore, when possible, try to schedule your negotiations at the latest time possible.

Performing Your Due Diligence

As you are preparing for the negotiation session and developing your strategy, you should use this opportunity to perform as much due diligence as possible. This due diligence will help support your position as well as help to validate any information provided to you from the other side.

Learn How to Anticipate

A successful negotiator will always spend time thinking about the deal they are trying to “sell” from the mindset of the other people in the negotiations. As you construct your deal, you need to identify all questions and concerns that would logically be raised and come up with a response to those issues in advance of your meeting. One method that will help you identify these issues is to imagine you are negotiating this deal being on the other side. Using this technique, you will minimize the possibility of getting hit broadside with an issue you did not consider. Nothing instills more confidence in the person you are negotiating with than you providing logical solutions to all possible questions and scenarios.

Having a Script

Depending upon the type of negotiations that you are typically involved with, it could be beneficial for you to have a memorized script that you can use in each of your negotiation sessions. Having a “canned” approach can help when you are working repeatedly on a specific business model and will help to ensure you are maintain consistency from session to session. This script will develop over time and should be modified based on the lessons learned from prior negotiating sessions.

The Letter of Intent

At some point during the offer development and the negotiation process you may need to develop a document called the Letter of Intent (LOI). The LOI is not the official contract. However, it may identify the terms and conditions that are being offered. In addition, the LOI can serve as a foundation in the creation of a Sales Agreement or Contract. When face-to-face or phone negotiations are not appropriate or allowable, the LOI may be the only vehicle to present the deal.

Present More Than One Option

In order to maximize your chances for your deal to fly, you may want to consider providing multiple solutions or offers that are equally beneficial to you. This situation will allow the other side to observe your flexibility and set the stage for more deals to close.

Protecting the Deal

There may be instances the topics or material that will be discussed during an offering and negotiations are confidential and should not be disclosed to anyone outside of the deal. This type of situation is very common on bigger deals or if the terms are disclosed to the general public could cause some concerns. An example of this could be an owner who is selling a shopping center and does not want the Tenants to know. When this type of situation is necessary, usually a Non-Disclosure Agreement (NDA) is executed. The NDA is a legally binding document that will indicate that any details of this deal or offering will not be shared with anyone outside of the transaction. In addition, it will spell out your intensions with receiving this confidential information. If any information is shared inappropriately, this could result in a legal action.

Section III Conducting the Negotiations

You’re Appearance

When you are preparing for your negotiation meeting, it is critical to look appropriate based on whom you are meeting with and what the situation is. If for example you are meeting with very successful business people for dinner, you want to dress to impress and should include business formal attire. As a contrast to this, if you are meeting with a homeowner who is about to lose their home, you do not want to dress too flashy. Coming in with your custom-designed suit may impact this negotiation based on their implied conclusions that you are doing very well financially so why should they give up more. In addition, under-dressing in this situation could also send incorrect messages.

Negotiate With Everyone There

When presenting or negotiating an offer, you should always make sure all parties responsible for making a decision are present. Nothing can undermine your well planned negotiating more than critical people not present. If you rely solely on the person who you met with to relay the details of your offer, you may be at a disadvantage. There may be circumstances that may prevent everyone from being there but it is a desired goal you should strive for.

Always Negotiate and Present Offers Directly to the Decision Makers When Possible

You may come across situations where you are negotiating and presenting offers to someone who is working officially on behalf of the decision makers. This relationship is very common with traditional Seller/Broker listing contracts. Normally a buyer will present their offer in writing and it may go through one or several real estate professionals before it ultimately gets to the seller for consideration. If the seller does not accept the offer and perhaps presents a counter-offer, it will have to return to the buyer through the same communication chain. Although this situation is tolerable on a “straight and clean” deal, it could be an extreme disadvantage when creative offers are being presented that requires a higher level of dialogue.

The Setting of the Negotiations

All of your preparation time and well-planned negotiating strategies may not provide the desired results if you are not given the appropriate time in the appropriate setting to adequately discuss and negotiate the deal. You need to be mindful when planning on meeting with the other parties that it is conducive to your negotiation success. The following will highlight situations you should avoid when scheduling a meeting:

o Noisy meeting location

o Restaurants

o Cocktail lounges

o Work sites

o Having young children around distracting from the discussion

o Meeting with them when you know a party has a time constraint less than what you need.

Other Communication Options

Negotiate Over the Phone

When phone negotiations cannot be avoided, it is suggested that any reference material that would be beneficial to have at the time of the negotiations be exchanged with all critical parties. This information should not include data that could compromise your negotiating position.

Some things to keep in mind using the phone techniques:

o Have a pre-arranged time slot when everyone is available.

o You may not know if anyone else may be listening in on the conversation. It is suggested that you request to know who is present.

o They could be recording the discussion

o Discourage cell phone discussions because of the possibility of dropped calls and poor connections.


Another method you may want to consider to present your offer is to have a webinar. A webinar combines the use of the phone to have verbal communications while using a computer to display the presentation material. There are services available that will provide these capabilities.

Try To Be In Their Face

If you are fortunate enough to be able to present an offer or negotiate directly with the decision makers is a great advantage. To take this advantage to the next level, it is strongly recommended that you do your negotiations face to face. Other methods of presenting your offer including over the phone or through the mail should be used on an exception basis only. There may be a situation that will prevent you from meeting them face to face. An example of this would be an out of town owner or buyer.

Walking Away From a Deal

Despite all feudal negotiation efforts from both sides, there may be times you just have to walk away from the deal because critical issues and terms could not be worked out. It is important to leave the negotiations respectfully and on good terms. When all parties do this, it could set the stage for either future business together or perhaps a reconsideration of the original deal at a later point in time.

Once you have determined that this deal is not right for you, it could be a great opportunity for you to indicate that you may have other investor associates that may be interested in this project. This could turn an otherwise wasted effort into a potential referral fee or help to establish a new relationship.

Some Don’ts to Keep In Mind during the Negotiations

o Don’t admit or display any signs of weakness. Watch out for any tips your body language can give away. For the experienced negotiator on the other side, this will be a great opportunity to benefit from these weaknesses.

o Don’t insult anyone or try to make point more convincing by making them look stupid. These tactics will only put the other side on the defensive and perhaps make the gap between the sides even wider. Always carry yourself as a professional and be respectful.

o Don’t boast about your past wins; it is OK to use past success stories as a way to exhibit that you can get deals done, but be careful on how you present it

o Don’t be so concerned about selling your position that you do all of the talking. Be a good listener. By doing this, you will be able to absorb the other side’s point of view.

o Don’t think that every moment should be filled with talking. Allow time for your comments to sink in. Remember the saying, “silence can be deafening!”

How to Play a Stale Mate

During the negotiations you may find that you cannot come to any agreement on a particular point. If this occurs, it is suggested that you park this issue temporarily and move on to other aspects of the negotiations and go back to this issue later on; perhaps one of the parties may make a move off their prior position and break the deadlock.

Change You Style on the Fly

As the negotiation discussions begin, it will be critical to assess the personalities you are dealing with and adjust the tone of the meeting accordingly. For example, you may find that the other side is really a serious stone faced negotiator and may not appreciate your humor or kidding around approach.

Bring In Your Team

Although most common negotiations are conducted one-on-one, there may be instances where it would be to your advantage to bring in other members of your team to participate in specific areas of the negotiations. An example of this could be if you are evaluating financial data, you may want to have your Accountant involved during this area of the negotiations. In addition to knowing the strengths and weakness of the other side, it will be critical for you to know the same information of your team. You never want to put yourself in a position where you don’t know how your team will approach the negotiations or what their limitations are. To re-iterate a prior point, role playing can also be effective to help develop an overall team negotiation strategy.

Don’t Retrade

Once you have completed the negotiations and have a meeting of the minds on both sides, avoid re-starting the negotiations by bringing up very minor issues and expect further concessions. Although there may be instances where re-negotiations are necessary (like when your due diligence discovered additional significant repair expenses). Don’t let the small stuff stand in the way of this deal happening. The last thing you want is the other side to get upset with you and perhaps even pull back their prior acceptance of the offer. When you attempt to work the negotiations, when everyone else thinks they are over is called Re-trading. Re-trading can cause frustration among the other side and perhaps any Brokers involved. Avoid trying to squeeze out every dollar from a deal, in the end it could have an impact on any future business relationships you are trying to develop.

What to Do When the Negotiations Are Over

Lessons Learned

During the development of your negotiation skills, it will be very important to capture what is working and what is not working with your approach and compile a guideline on all of the lessons you have learned. Although it is true that in most situations you will learn more from the things that went bad than the things that went well, you need to use all of these lessons to fine-tune your methods in preparation for your next negotiation challenge. Upon completion of a negotiating session you should reflect on what went well and what did not and add them to your lessons learned database.

Tracking the Status of the Negotiations

You may have situations where the negotiations are not completed during the first session. When this occurs, it is important for you to document the status of the negotiations. With complex deals, there may be many separate aspects and concessions that have to be agreed to. You should leave the negotiations knowing where both sides stand on all of the issues on the table so they become the point of discussion during the next session.

Formalize the Deal

Once all of the negotiations have been completed and agreed upon, it is now time to formalize this deal legally. Normally, the agreed upon terms and conditions will be handed over to the legal team so they could generate the appropriate documents and could include the following:

o Note or mortgage

o Purchase and sale agreement (P&S)

o Other types of contracts