getting and negotiating the deals · tips. 20 •high volume and established mortgage brokers are...

GETTING AND NEGOTIATING THE DEALS

OVER THE NEXT 90 DAYS, WE WILL COVER THE FOLLOWING

MODULE 1

Drafting your Vision

MODULE 2

Identifying the Gap

MODULE 3

Identifying your Obstacles

MODULE 4

Mastering your Money Mindset

MODULE 5

Joint Ventures

MODULE 6

How to Make Big Money with Small Apartments

2

MODULE 7Getting and Negotiating The

DealsMODULE 8

Talking to a Potential Investor or Joint Venture Partner

MODULE 9Drafting your Story into a

PresentationMODULE 10

Positioning yourself to Attract Joint Venture Partners

MODULE 11Getting Online

MODULE 12Systematizing the Process

WELCOME

Change your perception of success while building $5,000/month passive income through real estate investing.

3

GETTING THE DEALS

4

5

-HOWARD STEVENSON, HARVARD PROFESSOR

ENTREPRENEURSHIP

IS THE PURSUIT OF

OPPORTUNITY BEYOND

THE RESOURCES YOU

CURRENTLY CONTROL.

CHOOSING YOUR MARKET

6

When choosing

your market - It

is important to

be crystal clear

on the kind of

property or

project you

want, including

the exact price

range and

neighbourhoods.

7

Real Estate Investing is a

business.

It is important that you

understand your market

better than anyone else.

8

When selecting your

market, you want to

consider communities

with:

• Increasing

population

• Diversified

employment

• Transportati

on and

infrastructure

projects 9

Resources with

accurate data:

Statistics Canada’s

Census Report and

your local City

Planning and

Economic

Development

Departments.

It is free and offers

current population

and demographic

data. 10

In order to jump on

the good deals

quickly, you want

to do your research

beforehand so you

are able to focus

your attention

where it belongs…

negotiation.

11

COMMON MISTAKES WHEN ANALYZING

DEALS

12

Analyzing the wrong thing:

• You want to identify the numbers you truly

need for your analysis and hunt those numbers

down.

13

Gathering analysis from only one source:

• Investors risk ROI by looking to just one

source for information. If there is any kind of

error, your analysis will not be accurate.

14

Ignoring Context:

• Become an expert on the context you are

investing in and trust that above everything else.

15

Impatience

• Establish criteria that your deals need to

meet and do not let your impatience lead to

irrational decisions.

16

Getting locked into one-way thinking

Your analysis should inspire you to consider other

alternative strategies.

17

-DON CAMPBELL

“REAL ESTATE

SHOULD BE

BORING.

THE RESULTS OF

THE INVESTING

ARE WHAT

CREATES THE

MEANS FOR

EXCITEMENT.”

18

LOCATING MOTIVATED VENDORS

19

•You will find more success in building solid

broker relationships than chasing random

tips.

20

•High volume and established mortgage

brokers are your point of leverage in locating

desperate vendors.

21

•Your goal is to build a business relationship

with the 20% of brokers who do 80% of the

business. When they come across desperate

vendors, you want them to think of you.

22

Other points of leverage include:

• Realtors

• Local Bank Managers

• Real Estate Lawyers

• Property Managers

23

Your goal is to

make sure you

stay up-to-date

on what is

happening in

your preferred

area.

24

ENTREPRENEURIAL INVESTORS

25

Are inspired by a larger vision.

26

Understand that being too

optimistic or too realistic

is dangerous.

A balance of the two is

perfect.

•Understand that not every action will be

correct but they take action anyway.

28

•Are pro-active

about

exercising their

due diligence

because

investing is

their business.

29

•Understan

d the value

of a good

team.

30

•Welcome

acceptable risks

because on a

scale, the

rewards are

greater.

•Are long-term

thinkers.

31

•Are driven.

•Embrace challenges and thrive on creating

solutions.

32

Are professional networkers who understand that who you know is more important than what you know.

33

SELLING YOURSELF TO AN INVESTOR

34

•You need the BIG THINK: The ability to convey a future vision of the world and then help investors believe that vision of the world is possible.

35

You need to demonstrate:

•What you are doing is important

•That you are not going to waste their money

•That you have a strong moral background

36

Morality should not be taken lightly:

•You need to be reasonably forthright about your risks and opportunities.

•Your credibility comes when you say: I have thought about the risks and here is the way I will overcome them.

37

LOCATING MOTIVATED VENDORS

38

•You want to

look for

properties that

have been on

the market for

a long time. You

may find the

vendors are

more willing to

negotiate the

sale.39

Do your homework on the mortgage programs available to you

(EXAMPLE: CMHC).

40

•Use your local knowledge to your advantage:

41

• Keep an eye

out for vacant

properties

• Take the

time to tour

streets that

you aren’t

normally on.

You may find a

hidden

treasure. 42

•Foreclosure lists:

• The key to getting the lowest rate is offering a quick

close.

• Because most investors focus on these lists, the

negotiations can become competitive. It is important to

know your limits before you begin.43

Spread the word:

Use free sites to let people know you are willing to buy quickly.

44

BUILDING A BROKER RELATIONSHIP

45

•It is important to keep in mind that high

volume brokers are often inundated with

investors wanting to work with them.

•You do not want to call or email brokers then

plan for them to remember you.

46

Your goal is to figure out ways to

stand out from the crowd.

47

EXAMPLE: Send a package with goodies to

accompany an introduction letter.

Your introduction letter can explain why you can

act quickly if a motivated vendor comes along.

48

THE NEGOTIATOR

49

WHAT HOLDS YOU BACK?

50

• Cultural constraints

• Low self-esteem

• Fear of hurting the other’s feelings

• No experience in negotiation

• Low expectations

51

• Lack of discipline

• No system for negotiating

• Poor record keeping

• Poor preparation

• Inability to stack value or sell

• Failure belief or fear of poverty52

THE EMOTIONAL NEGOTIATOR

53

It is important to understand how emotions can effect a negotiation.

54

Regulating our emotions by using specific strategies can help us to improve our technique.

55

Common emotions are:

•Anger, sadness, disappointment,

anxiety, envy, excitement and regret

56

THE ANXIOUS NEGOTIATOR

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DO ANXIOUS NEGOTIATORS DEVELOP LOW ASPIRATIONS AND

EXPECTATIONS?

YES!

58

•You could end up making a timid first offer (which will not benefit you)

•You are more likely to respond faster than necessary.

59

60

• You are more likely to exit the negotiation sooner.

• Expressing your anxiety (intentionally or unintentionally) will make you more vulnerable to your opponent.

61

ANXIETY & NEGOTIATION

Anxious people are:

•Less confident.

•More likely to consult others before making a decision.

•Less able to discriminate between good and bad advice.

•More likely to be taken advantage of during a negotiation.

62

HOW TO CONTROL YOUR ANXIETY AND PUT IT TO WORK FOR YOU

63

The more comfortable you are, the less likely you will be anxious.

64

You want to keep your negotiation skills sharp

through:

•Training (learn strategies and increase your

skills)

•Practice

•Rehearsing65

•Some

negotiators

will try to

make their

opponent

anxious on

purpose.

66

THE ANGRY NEGOTIATOR

67

BRINGING ANGER INTO A NEGOTIATION IS LIKE THROWING A BOMB INTO THE PROCESS, IT’S APT

TO HAVE AN EFFECT ON THE OUTCOME.

68

69

ANGER & NEGOTIATION

•Anger can harm the negotiation process by

escalating conflict, alter perceptions and make

challenges more likely.

70

•Many people believe anger can be a productive

emotion that will help them win.

•This perception means that you see negotiation as

a competition rather than a collaboration.

71

•Anger reduces

joint gains,

decreases

cooperation,

intensifies

competitive

behaviour and

increases

rejection.

72

•Inexperienced negotiators assume negotiation is a

game where their interests conflict directly with

their opponent.

73

ANGER & NEGOTIATION

74

• Experienced

negotiators

look for ways

to expand the

deal through

collaboration.

75

•Angry negotiators are also less accurate in judging and interpreting the situations.

•Showing anger during a negotiation could damage the long-term relationship between the parties.

76

•It can also reduce trust and result in people walking away from the table.

•If tensions do flare up, ask for a break so you can calm down and regroup.

77

JUST AS YOU PREPARE YOUR TACTICAL AND STRATEGIC MOVES

BEFORE A NEGOTIATION, YOU SHOULD INVEST EFFORT IN

PREPARING YOUR EMOTIONAL APPROACH.

78

-ALISON WOOD BROOKS

79

MANAGING YOUR OPPONENT’S EMOTIONS

A critical component of emotional intelligence is to be observant.

80

Tune in during

your negotiation:

• Body

language,

tone of voice

and choice

of words

81

•Do your best to

understand their

perspective as

this will make it

harder for your

opponent to

deceive to you

(most people

prefer to deceive

through

omission).

82

•If your opponent

seems anxious or

angry, lighten the

mood to put them

at ease.

•If your opponent

seems overly

confident or

pushy, expressing

well placed anger

can inspire a

healthy dose of

fear.83

•If you display an emotion that your opponent

picks up on, you will shape his/her interpretation

of it.

•Building a rapport before, during and after a

negotiation will go a long way.84

NEGOTIATING WITH SOMEONE MORE POWERFUL

85

• This can be daunting and the approach can affect your chance for success.

• It is important to remember that there is often strength in weakness.

86

• Listen well and ask questions this builds trust and encourages the other party to take you seriously.

• Keep your side of the negotiation focused on the results – no matter what the more experienced party brings to the table.

87

NEGOTIATING WITH SOMEONE MORE POWERFUL

88

HAVING POWER TYPICALLY REDUCES A PERSON’S ABILITY TO UNDERSTAND HOW OTHERS THINK, SEE AND

FEEL.

THIS MEANS BEING IN THE LESS POWERFUL POSITION ACTUALLY GIVES YOU THE STRONGER VANTAGE TO

ASSESS THE SITUATION.

89

ONCE YOU DO YOUR HOMEWORK, YOU MAY FIND YOU HAVE UNDERESTIMATED YOUR POWER AND

OVERESTIMATED THEIRS.

90

•Be OVERLY Prepared

91

Brainstorm in

advance for

solutions that

will work for

everyone.

92

• Make sure you have accurate data at your

disposal.

• Preparation gives you the information you

need to get more of what you want.

93

• Being properly prepared

when dealing with a

more experienced

negotiator will provide

you with the necessary

confidence to be

successful.

94

Understand

your goals and

theirs

Make a list of

what you want

and why

This will help you

to build your

strategy within

acceptable terms.

95

• Studying your opposition’s motivations,

obstacles and goals will assist you in framing

your strategy to include solutions to their

problems.

96

NEGOTIATION

SOMETIMES

THE BEST

BARGAIN IS

THE ONE YOU

CREATE FOR

YOURSELF.

97

EXAMPLE:

5% OFF A 400k PROPERTY IS $20,000.00 IN SAVINGS!

98

RULES FOR SUCCEEDING

AT NEGOTIATION

99

Look like a million bucks.

100

•Write up your intentions for how the negotiation will go.

•Anticipate challenging questions and write up draft responses.

•Be gracious and grateful no matter the outcome.

10

1

•Deals have a greater chance of success if they affirm:

• Appreciation

• Affiliation

• Autonomy

• Status

• Fulfilling a Role

10

2

NEGOTIATION

103

•In order to be successful, you must do more than find a good deal, you must be persuasive.

10

4

Negotiation is about strategy and tactics:

• Identify and consider alternatives

• Use leverage

• Execute the choreography of offers and counter-offers

10

5

Negotiation requires:

• Strategic focus

• Imagination to see the alternatives

• Knack for assessing, reading people and bluffing

10

6

•Goal is to get the most money or profit from the process.

•Use open-ended questions to gauge vendor motivation.

10

7

Stay flexible – Don’t limit yourself to one strategy

108

The best negotiators have prepared enough that

they understand the whole terrain instead of a

single path.

109

Negotiations:

Put yourself in their shoes while remembering your own value.

110

•Frame your negotiation as a problem-solving challenge.

•Stress on the areas on which you both agree.

•Do not cave on issues because you think you will win.

11

1

•Do not mistake impact for intent. The other side may have their own unique pressures that restrict their ability to maneuver.

•Don’t be afraid to ask your opponent what they want and why they want it.

11

2

NEGOTIATION

• Never give something without getting something.

• Be up front and quick to respond to people. Don’t lead anyone on.

• Have thick skin and remember: If you aren’t embarrassed by the price you are offering, you are not going low enough.

• Stay skeptical – don’t allow yourself to get so comfortable or excited that you become over confident. This could lead to an escalation of commitment or insufficient information.

• Be considerate of your opponent and don’t let your excitement make them think they lost.

• The best negotiations end with each side having achieved some of its goals and not others – a mix of wins and losses.

113

INVESTING IN REAL ESTATE IS FOR ANYONE WILLING TO

LEARN AND DO THE NECESSARY INVESTIGATIVE WORK.

114

BEFORE YOU BEGIN YOU WANT TO PREPARE

115

Get as much

information on

the vendor’s

situation as

possible.

A good place to

start are with

public records

and land titles.

116

•Timing is

important. If you

can offer

something

others cannot,

you could win

yourself a price

reduction.

• EXAMPLE:

Does the

vendor need to

sell quickly or

need a specific

date? 117

Preparation is the most important part of the process

You need to determine:

• What you actually want

• What you will give up

• What you will not give up

11

8

●Research your opponent

●Research the deal

119

Keep a negotiation log with records and notes

• Notes should include: three scenarios foryour negotiation (best, realistic and worst),potential offers and numbers & stats

12

0

HE WHO IS MOST PREPARED

USUALLY WINS.

REMEMBER:

Just because someone contacts you and sounds desperate, does not mean it is a good deal.

Have a Property Score Card ready when you take the call.

It will remove emotion and help you figure out if you have located a good deal.

122

3CS OF NEGOTIATION

Collect

Clutter

Close

123

COLLECT - QUESTIONING

124

•The one asking questions is in control

•Determine the personality style of everyoneinvolved and communicate with them

•DISC – Dominance, influence, submission,compliance

12

5

•Give nothing and take everything

•Have a pleasing personality

•What they want is not what you want

12

6

•Find their hot buttons

•Find their motivation

•Ask the same question in multiple angles toreveal their lies or half truths

•Better questions make better answers

12

7

FOUR TYPES OF PERSONALITIES

128

TYPE DESCRIPTION

DOMINANT Independent, persistent, direct• Energetic, busy, fearless• Focus on their own goals rather than

people

INFLUENTIAL Social, persuasive, friendly• Energetic, busy, optimistic, distractible• Imaginative, focus on the new and the

future• Poor time managers• Focus on people rather than tasks

STEADY Consistent, stable• Accommodating, peace seeking• Like helping and supporting others• Good listeners and counsellors• Close relationships with a few friends

CONSCIENTIOUS Slow and critical thinker – perfectionist• Logical, fact based, organized, follows

rules• Doesn’t show feelings• Private

129

THE MORE TIME YOU SPEND COLLECTING INFORMATION, THE HIGHER YOUR CHANCES ARE OF VICTORY.

DO NOT MAKE AN OFFER UNTIL YOU HAVE ALL OF THE NECESSARY DATA AND POSITIONS.

13

0

CLUTTER – THE OFFER

131

•Deception is power

•Buyers and sellers are both liars

•What the opposing side wants is not whatyou want

13

2

•Most people are afraid to “clutter”

•Create extra “clutter” by raising issues

•Items will be traded, challenged and phasedout: the person with the most items usuallywins

13

3

•Wants and needs are two different things soknow what you want and what you need

•Ask for everything

•Charge for concessions

13

4

135

CHALLENGE EVERYTHING

TO FIND REAL VALUE.

CLOSE – TRADING & CONCESSIONS

136

•Make trades for what you want

•Give away low value items and take awayhigh value items

•Go for what you want and give them whatthey ACTUALLY need

•Positions will change throughout thenegotiation process

13

7

IF YOU FOLLOW THE 3CS IN THE RIGHT ORDER, YOU WILL:

138

• Get what you want

• You won’t have to give up everything

• The negotiation will flow

• Know where you are in the process

• Maintain maximum leverage

WHAT CAUSES FAILURE?

139

•Skipping preparation

•Rushing the collection period

14

0

•Forget to clutter

•Building zero value

•Trading poorly

14

1

•Speak to the wrong style of DISC

•Try to close too early (longer the negotiation the higher the chance of closing)

•Try to complete the steps out of order

14

2

GAMBITS

143

GAMBITS

• Gambit is a chess term meaning “to trip” where white sacrifices a pawn in the hope of achieving a resulting advantageous position

• Gambits are offered to the other side and are “accepted” or “declined”

• Create a time advantage or positioning advantage

144

GAMBITS & STRATEGY

145

The nibble

• Move: After the major decisions have been established, come back and ask for something more

• Countermove: Make them feel cheap

14

6

Not my problem

• Move: Someone is trying to give you their problem

• Countermove: Test for validity, avoid taking other people’s problems OR give your problems to the other side

14

7

Displace Authority

• Move: Always displace your authority onto someone else

• Countermove: Remove their authority before you start negotiating

14

8

3 Step Counter to Displaced Authority

• Appeal to their ego

• Get their commitment

• “Subject To” Close

14

9

MORE GAMBITS & STRATEGY

150

The Set Aside Technique

• Move: Other side is forceful and won’t budge on one item

• Countermove: Let’s set this issue aside and talk about other moves

15

1

The Neutral Third Party

• Move: Negotiation is frozen in a deadlock

• Countermove: Bring in a third party that benefits you, not them

15

2

Good Cop / Bad Cop

• Move: Negotiating with two parties, one mean and one nice, both are on the same side

• Countermove: Call them out

15

3

Counters to Good Cop / Bad Cop

• Identify the tactic

• Go over their heads to their higher authority

• Turn them both into bad cops

15

4

155

Never Take the First Offer

• Move: Always reject the first offer to avoid buyer’s remorse

• Countermove: Always challenge their offers and counter offers for validity

Always Agree “feel, felt, found”

• Move: Always agree to diffuse their spirit

• Countermove: Agree with them and challenge the issue or find a trade

15

6

Dumb is Smart and Smart is Dumb

• Move: Appear to be stupid in the negotiation

• Countermove: Call them out on playing dumb

15

7

Diminished Value of Services

• Move: Services diminish in value rapidly after they are rendered, whenever you give a concession, take something right away

• Countermove: Negotiate your fees and services up front

15

8

GAMBITS & STRATEGY

159

• Walk Away Power

• Move: Always be prepared to walk away from the negotiation. The one who wants it less has all the power

• Countermove: Have multiple negotiations and multiple options open at all times

• Showing Pain

• Move: Visually or audibly react any time a proposal is made to you

• Countermove: Ignore their flinch, re-propose or just wait in silence

• Trade off Principle

• Move: When they ask for something, ask for something in return

• Countermove: Make a big deal about their trades and trade in unequal value. Give things that are cheap to you but perceived high in value

MORE GAMBITS & STRATEGY

160

You’ll have to do Better than that

• Move: They make a proposal to you and you reply, “You’ll have to do better than that” or “You’re close but I know you can do better”

• Countermove: How much better?

16

1

Power of the Written Word

• Move: People believe that written words are true

• Countermove: Change the written word

16

2

The Withdrawn Offer

• Move: Other side is arm-wrestling you but you know they want to do business

• Countermove: Take the best offer or walk away and call their bluff.

16

3

Positioning is Easy for Acceptance

• Move: Make them feel good about giving in to you

• Countermove: Ignore the easy concessions and focus on the main issues

16

4

TROUBLESHOOTING GAMBITS

165

Always be the one to Write the Contract

• Move: The one who controls the writing controls the details

• Countermove: Cross out and initial small details you do not agree on

16

6

The Done for you Technique

• Move: Send a fully finished contract, filled out, with a cheque attached and just needing their signature

• Countermove: Cross out and initial small points you do not like or accept the contract as is

16

7

Funny Money

• Move: Manipulating money into nonsense terms

• Countermove: Think of money in REAL terms, do not accept their funny money

16

8

169

The Decoy

• Move: Take the other sides’ mind off the ball by using nonsense decoy items

• Countermove: Challenge all of their nonsense items and find the real ones

Put them in the Driver’s Seat

• Move: Get them emotionally involved in the decision

• Countermove: Focus on the real issues, don’t get emotionally wrapped up in the feelings

17

0

Ask for the Moon

• Move: Ask for more than you know you will get

• Countermove: Challenge and counter all points

17

1

The Apathetic Buyer

• Move: Approach the other side with reluctance instead of enthusiasm

• Countermove: Know that the pressure is on them just as much as you. Typically you aren’t talking unless they want something

17

2

173

The Low and Flexible Offer

• Move: Make your first offer very low but indicate that you are flexible

• Countermove: Counter high and flexible, challenge all points and find the real issues

Splitting the Difference

• Move: Never split the difference yourself but encourage them to split the difference in your favour

• Countermove: Always make the difference in your favour

17

4

Keep your Eye on the Ball

• Move: Keep focused on the one item you want in the negotiation and avoid the emotions and clutter

• Countermove: Make them emotional about the small points in the negotiation and make them pay for their “hot buttons”

17

5

Maintain Perspective

• Move: Avoid getting sucked into the small points. Look at the big picture and ask, “How will this look one year from now?”

• Countermove: Get them fixated on whatever suits you (big or small picture)

17

6

WHAT IS STOPPING YOU FROM BECOMING

A MASTER NEGOTIATOR TODAY?

177

QUESTIONS

178

NEXT WEEK

TALKING TO AN INVESTOR OR POTENTIAL JV PARTNER

Learn what it takes to get an Investor to believe in you. You will be surprised to learn that most of the time, it is not

about you – it is about the deal.

179

CONNECT WITH EDNA

180

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3drealestate@sasktel.net

306-536-6266