Webster’s Dictionary defines “negotiation” as “to obtain or bring about by discussion”. That’s one way to describe it, as a frank discussion between buyer and seller in which they give their opinions on value and search for an appropriate middle ground. But there is also a strategy involved by the buyer that helps to make that successful ending possible.
Start low but be realistic
Negotiation is a one-way street when you’re the buyer. No matter what price you throw out, the seller wants more. As a result, you have to start low so you have plenty of room to go up. For example, if you want to buy a storage property for $800,000, then you might initially offer $700,000 – even if the property is worth every bit of $800,000. That’s because you can never make an offer based on what you really want to pay. You will always end up higher than your initial offer.
You failed if you don’t get a counter
But you can also start too low. If your offer is so low that the seller will not counter then you’ve accomplished nothing. So a good negotiator realizes that the initial offer has to be high enough to get the seller’s attention. In general, that would mean that a starting offer of 10% to 20% less than asking is appropriate, but 50% is not.
How negotiation works – don’t fight the system
You need to understand, from the onset, that negotiation is simply a game. Whether you like it or not, you have to play the game in order to succeed. Sellers like to feel that they have done their job in getting the best price, and that includes some form of haggling. Don’t try to be a pioneer that refuses to negotiate. Instead, embrace the concept.
Letting the seller feel like they won
A happy seller is one that believes they drove a hard bargain. So don’t stand in their way! With every counter proposal feign great personal pain, as they want to believe that you have been stretched to the limit (even if you’d happily pay far more). Watch a few episodes of American Pickers or Pawn Stars and you will see this in action in every episode.
One of the most important aspects of negotiation involves something that has nothing to do with haggling. This concept is “bonding” and it simply means making the seller like you. It’s a basic fact that a seller that likes you will be easy to forge a deal with. So how can you “bond” with the seller? You need to spend time with them either by phone or in person. Our favorite question to start a conversation is “so how did you come to own this storage property?”. The answer will go on for a long time and get you off on the right foot.
Negotiation is not a complicated process. But there are certain tricks to make it go more smoothly. These tips will get you off to a good start.