In the last post we were considering how, in the context of negotiating, communication and active listening is essential to understand what is important to the other party when we are negotiating to buy a property investment or buy to let property.
How do we know what someone really means? How do we know what the sub-text is? In other words, how do we translate their words into language? More than that, how do we know whether their words actually reflect what they are trying to say to us?
Quite often it simply comes down to asking the right questions. In the context of being a successful property investor, a lot of the questions we need to be asking seem obvious. For example, “why are you selling?” The answer might be “to raise cash” or “to release capital” and we might take that at face value.
Less experienced investors might stop there, but active listening is like peeling away the layers of an onion. By asking more and more questions, and going deeper each time, we can uncover what is really being communicated.
A few questions and an interested attitude and suddenly the perspective has changed; rather than just being another potential purchaser you are in a position to be able to solve this persons problems and help their dreams come true. And in return, perhaps you can negotiate a bargain price for a guaranteed quick sale.
Often it is a mistake to assume that all the vendor is interested in is price. We’ve already seen that vendors in financial trouble may be more interested in selling quickly than holding out for the last penny.
And where the vendor has positive reasons for selling, that can also overshadow purely price. For example, I negotiated the purchase of a flat for a friend where it was clear that the vendor’s main motivation was to sell as quickly as possible because she wanted to move in with her boyfriend, and she was more interested in this than price. I say that, but I mean to a degree. At some point price will become an issue but often not at the level we think.
That’s why an essential part of any negotiation is to find out why the vendor is selling, and what they are trying to achieve.
When you know that, you’ll be better placed to put forward an offer that is attractive to them as an overall package, rather than just concentrating on price.
But, as I said, negotiating is a win-win process, so as well as being aware of what the vendor needs to achieve, you need to be aware of what you want to achieve.
Before you go into a negotiation you need to know what your objective is. This may be to:
- obtain a better price, or
- obtain better terms, or
- a combination of the two.
When I talk to other investors, especially inexperienced investors, I am often surprised at how little thought goes into what they want and how they are going to get it from their negotiation.
Before I start negotiating I know exactly what I want to achieve – whether it be the maximum price I will pay and whether it includes other terms. And I’ll try and have an idea of what the vendor is trying to achieve. With our different needs in mind I will have a plan as to how to proceed in negotiations to achieve that, if you like, a plan of what I will offer at each stage of the negotiation. Of course, I can’t always be sure how the other party will react so I have to be prepared to be flexible.
In the next post we’ll think about price. This is one of those areas where many investors make problems for themselves for no reason.
Here’s to successful property investing.
Peter Jones B.Sc FRICS
Chartered Surveyor, Author & Property Investor