The first negotiation of my career happened when I was as an intern at AT&T. I had interned in IT with the company one year prior, working for $20 per hour. When AT&T hired me as a network engineer intern my second year, the team offered $15 per hour. I said: “Hey, I did this other program last year for $20 an hour. Can you beat that?” The manager quickly increased my pay — I couldn’t believe it was that easy.
As a real estate investor, negotiations are part of my day-to-day. I used to think successful negotiators had a special skill. I viewed negotiations as a win-lose activity, and the implied pressure stressed me out. Over the years, my stance has shifted. I now go in thinking, “Unless we both win, we’re not going to play at all.” It’s so much easier to work with someone rather than against him or her.
Learning How to Negotiate
When Walt Disney negotiated with George Lucas for the rights to “Star Wars,” the company went out of its way to build trust with Lucas — including ensuring the filmmaker would stay on as a consultant. After more than a year of negotiations, this foundation of trust made the deal a success for all parties involved.
To ease the process of negotiating and building trust, use these four techniques to ensure you’re forming a mutually beneficial relationship:
1. Get curious. Ask why the seller is selling — or why the buyer is buying — to determine why the two of you are negotiating in the first place. Uncover the real problem by asking, “Why do you need to sell?” Note: You might have to ask this question several times to find the root cause.
I once bought a house that was still in disarray months after a falling tree had damaged it. I spoke with Sharon, the owner at the time, and noticed she sounded stressed. I learned that she didn’t have the money to repair the house; she was losing money thanks to the damage, taxes, and utilities. Sharon desperately needed to sell her house, and that meant I was in a position to solve her problem.
2. Come prepared with specifics. Know how much investors are paying for similar properties, products, or services. Provide examples that support your offer or your ask. When you’ve done your homework and present supporting evidence, you can be confident that your offer is fair and reasonable — and you won’t offend someone.
I showed Sharon why I offered $65,000 even though her house was worth $160,000 in perfect condition, where it stood in comparison to other houses, and how much profit I planned to make. An honest explanation of what it would cost me in time and materials to get her house market-ready helped her accept my offer.
3. Build your confidence with small negotiations. Here’s a step you can practice right now. Go to NerdWallet and find credit cards with lower interest rates than one of your existing cards. Call your bank and ask to lower your rate. Tell your bank that you know its customer acquisition cost is probably north of $2,000 per customer, noting that you would appreciate a lower interest rate so that you can remain a customer.
Despite the relatively low stakes, most people still find this sort of negotiation intimidating. Even if your bank doesn’t lower your interest rate (it probably will), this practice will make it feel more comfortable the next time you have to play hardball.
4. Increase your options. Spend time building your prospect list. Once you receive one offer, you can then shop multiple offers to ensure you’re getting the best deal. Depending on a lone buyer is a bad idea — ask Starbucks, which eventually turned to arbitration as a result of limiting its negotiations to only one company.
Take the age-old example of negotiating for a raise at work. Imagine you ask your boss for a $10,000 raise. She admits that you deserve the raise, but she says “no” because she cannot afford it. Now what? Interview for similar positions at different companies. One might offer you $20,000 more than your current salary. You can now take this offer back to your boss.
Negotiating doesn’t need to be intimidating. You don’t need a special skill, and you don’t have to treat it as a battle. As long as you’re able to conquer any fear of the act of negotiating, you’ll be equipped to close deals at any time.
David Lecko is the CEO of DealMachine, an app that helps real estate investors contact property owners of off-market properties through direct mail, email and phone by simply taking a picture of any house.
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