Negotiation is what separates a good investor from a great one, yet many leave money on the table simply because they haven’t mastered the art. The good news? You don’t need to be a smooth talker or have years of experience to negotiate like a pro—just a few key secrets can make all the difference.
In this video, we’ll explore:
- The importance of seller motivations—what they are, how to uncover them, and how they can turn an average deal into an exceptional one.
- The power of silence—a technique that can make sellers uncomfortable and lead them to concede in your favor.
- Knowing when to walk away—how stepping back from a deal can actually help you secure a better opportunity down the road.
Secret #1: Know the Seller’s Motivation Before Talking Price
A successful negotiation isn’t just about reacting to the seller’s responses, it’s about thinking several steps ahead. Approach negotiations like a game of chess, not checkers. In checkers, players move reactively, responding to the opponent’s last move. But in chess, every move is strategic, anticipating future possibilities and outcomes. To apply this principle, avoid making offers too quickly and instead study the seller’s motivations and needs.
Understanding what drives a seller to sell can turn an ordinary deal into a fantastic one. Some of the best seller financing and creative financing deals happen when you understand why a seller wants to sell. But here’s the key, it crucial to understand the seller’s motivation BEFORE discussing price. So, how do you uncover seller motivations? Start by asking questions and listening carefully. Building rapport and understanding their situation allows you to craft an offer that speaks to their needs while benefiting you as an investor.
Common Seller Motivations
Listen carefully during your conversations—these motivations can signal a seller eager to make a deal:
- Burnt-out owner: Someone exhausted from managing their property and ready to move on.
- Retirement or business exit: A seller who wants to liquidate assets before retiring.
- Absentee owner: Someone who owns property in another state and struggles with poor management.
- Multiple property owner: A seller with several assets, one of which they may be eager to offload.
- Maturing bank loan: Commercial real estate loans typically mature in 5, 7, or 10 years. If a seller’s mortgage is expiring, they may not want to refinance—especially with rising interest rates.
- Dissolving partnership: If business partners are splitting up, one might want to sell the property quickly.
When you address the seller’s core concerns, negotiations become smoother, and you gain a competitive edge.
How to Uncover Seller Motivation
It’s easier than you think! All it takes is authenticity, credibility, and listening skills.
- Be Credible: Talk the seller’s language. If negotiating multifamily properties, learn the industry jargon—cash flow, cap rates, NOI, and comparable sales. Do your homework so the seller sees you as a serious investor, not a newbie.
- Be a Good Listener: Build rapport with the seller. Once they trust you, they’ll start revealing their true motivations.
- Meet in Person: If possible, meet the seller in person. A face-to-face meeting increases your chances of negotiating seller financing or creative financing tenfold.
- FORD the Relationship: Use the FORD method to create a natural connection:
- F – Family: Ask about their family, children, and personal background.
- O – Occupation: Learn about their career—how long they’ve been in the industry.
- R – Recreation: Find out what they enjoy doing in their free time.
- D – Dreams: Ask what they plan to do after selling the property.
Real estate investing is a relationship-based business. No matter how much capital you have, success ultimately comes down to your ability to build trust and negotiate effectively.
Secret #2: The Power of Silence
Silence can be an incredibly powerful tool in negotiations. Many people feel uncomfortable with pauses in conversation and instinctively fill them—often making concessions in the process. Strategic silence can shift the balance in your favor by compelling the seller to rethink their position or reveal more information. Many sellers have high price expectations, but the property’s actual value might be significantly lower. For example, a seller may want $1 million, but your research shows it’s only worth $750,000. What do you do? Your goal is to bring them back to reality, gently but firmly.
Step 1: Gather Supporting Data
Before addressing the price discrepancy, compile strong market data that justifies your position. This can include:
- Sales Comparables – Recent sales of similar properties in the area.
- Market Cap Rate Data – Industry-standard valuation metrics.
Having this information ready ensures that your argument is based on facts, not opinions.
Step 2: Present the Reality
Now, it’s time to approach the seller. Keep it simple and direct:
“Mr. Seller, I understand you’re asking for $1 million, but your property is only worth $750,000. There are two identical properties down the street that recently sold for $750,000. So, realistically, your property is worth the same.”
Then, pause.
Step 3: The Strategic Silence
After making your statement, be quiet. This is where the power of silence comes in. Many sellers feel uncomfortable with pauses in negotiation and will often begin talking themselves into concessions. If the seller tries to justify their price, let them speak. Then, repeat your key points and follow up with:
“Mr. Seller, now that you’ve seen the data, could you give me your best price—your lowest price—and I will cover all your closing costs?”
This gives them a soft landing spot, making it easier for them to shift to a realistic price without feeling pressured.
Why Offer to Cover Closing Costs?
Some investors hesitate to offer full closing costs. However, when negotiating directly with a seller, this is often a minimal expense. The highest closing costs occur when commissions are involved, but in direct transactions (off market deal), costs are significantly lower than sellers expect. This subtle yet effective tactic has been tested time and again in our mentorship program, and it works remarkably well when negotiating deals.
Secret #3: Know When to Walk Away
Strategic silence can help shift the negotiation in your favor, but sometimes, despite your best efforts, a deal simply isn’t worth pursuing. One of the most powerful negotiation tactics is knowing when to walk away. It’s not easy, especially if you’ve invested time and effort into a deal, but sometimes walking away is the best decision you can make.
A Lesson in Walking Away
A student of mine had a nine-unit property under contract, but the seller refused to budge on pricing, repairs, or concessions. Despite the obstacles, my student was emotionally attached to the deal and wanted to proceed. I advised against it. You make money on the buy, not by hoping the deal will work out. He was betting on fixing the flaws, but the numbers didn’t support it. So, he walked away. Fast-forward three months later—the seller came back, ready to negotiate. Not only did he accept my student’s terms, but the deal was even better than before.
3 Lessons of Walking Away
- Never Negotiate from Desperation
A desperate negotiator will always lose. Sellers can sense desperation in your tone, your body language, and your eagerness to close the deal. If they see you’re emotionally invested, they’ll hold firm, knowing you’re unlikely to back out. - Your Power Comes from Your Ability to Walk Away
Ever bought a car and walked away, only to have the dealer suddenly offer a better deal? Real estate negotiations work the same way. Walking away shows strength, forcing the seller to reconsider their position. - When Emotions Go Up, Intelligence Goes Down
It’s easy to get attached to a deal, especially after months of searching and negotiations. But emotional attachment clouds judgment. The moment your emotions take over, your ability to evaluate a deal logically diminishes. Stick to the numbers, the exit strategy, and the long-term plan—never emotions.
The ability to walk away is a skill that separates good investors from great ones. Some deals simply aren’t worth it, and by stepping back, you might end up securing a better opportunity later. So, keep this strategy in mind as you negotiate, and you’ll always be in control of your deals.
Every Successful Commercial Real Estate Investor Has a Mentor
One of the fastest ways to excel in commercial real estate is to learn from those who’ve already achieved success. Whether you’re just starting out or looking to scale, surrounding yourself with expert advice can be the difference between struggling through trial and error or strategically growing your wealth. Get your mentor here: Commercial Property Advisors Protege Program
If you have any comments or questions, text PETER to 833-942-4516.
Leave a Reply