Top Two Negotiation Tips For the Commercial Real Estate Investor
Commercial real estate allows for all sorts of terms to be discussed. There is the obvious price factor, but then there are down payments, taking back seconds, taking over existing debt and mortgages, short term and long term owner financing, conditional clauses and a myriad of other factors that can make negotiations quite involved, and interesting.
Some deals are easy as both parties can agree on the terms very quickly and see the deal eye to eye. Or, the terms are so simply negotiated that each party is willing to give a little for the well being of both parties.
Then there are the deals that are hard, long, and difficult to negotiate. When two parties simply don't see eye to eye, you can bet that tough negotiations can ensue. There may be factors that a party will not be willing to budge. These are known as bottom lines- they are not willing to go any lower or negotiate further on an issue. If the commercial real estate investor is tough, they will be willing to walk away with the deal on the table. You cannot involve personal emotions or interest in many commercial real estate deals because it causes for messy negotiations with unclear thinking and motives. You can bet your decisions will not be backed by solid evidence and supported justifications when personal emotions are involved. There will always be another commercial real estate deal around the corner.
With negotiations being such an important aspect of the commercial real estate investor's livelihood and success, it is highly suggested that no one else does the negotiations. The person making the deal should be the one negotiating. You may have your lawyer or accountant there for consultation or support, but always do negotiations yourself. It will be far more effective.
There are absolutely two things you must do when headed into a negotiations situation- regardless if you think negotiations are going to be simple or challenging. The first is to always be prepared through homework and research. The other is to take your time. These two points seem rather obvious and simple at first glance, don't you think? I wonder then WHY so many people refuse to do these two things before negotiating a commercial real estate deal, or any deal at all. For example, would you go to purchase a car without knowing what it is that you want, what price you are willing to pay, and what the average purchase price was for the car that you wanted? I would hope not.
Coming prepared may require extra work on you and your team, but it is absolutely worth it when you want to make a deal happen. Understand what the other side wants and what they are going to do with the results. Did they have prior problems or have future goals? How does this deal pertain to those factors and what can you do to either help or hinder their operations?
Perhaps you can sweeten the deal with something they need or play hard ball by bringing up a topic that will force them to sway in your favor.
How would you handle their predicament any other way? You must know what you want and know their situation even better than they do. If they do not come as prepared as you, you will definitely have the upper hand. By understanding their situation you know how to maneuver around them and get what you really want- no matter what.
The second tip is to take your time. Many people go in and want to get the negotiations over and done with quickly. This is not to your advantage. You want to think of all avenues, have time to think and the other party thinks of any ramifications the deal might have. If you need to pull a factor in your favor, the longer you take and more time you spend negotiating, the more the other party realizes that you are going to get what you want, or no deal.
When you better understand the urgency, the true urgency of the other party (by coming prepared) you can better judge how to react to their demands. Always take your time, take it one point at a time and don't rush it. Top negotiators would say this is your best approach.
How successful are you in your commercial real estate negotiations? Do you find yourself not being prepared and rushing through? Or do you take the time to perform pre-negotiation research and go into the negotiations calm, cool and ready to take things slow.
Try these negotiation tips and see how you can improve the outcome of your deals. Sell yourself and your needs and understand the other parties needs even better than your own and most likely you will come to a fine agreement- or at least one that falls in your favor.
Related Tags: real estate, commercial real estate, commercial real estate industry, commercial real estate market
Tony Seruga, Yolanda Seruga and Yolanda Bishop of http://www.maverickrei.com specialize in commercial and investment real estate. As of May, 2006, they and their partners are managing over $600 million dollars worth of new projects.
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