As I tell my colleagues, information is our greatest asset. When you have extremely detailed background about a potential investment, you can negotiate with confidence and strength.
Get the neighborhood-by-neighborhood, street-by-street pricing history of where you want to do business. Since I enjoy negotiating with sellers, I reference recent deals I have closed in the same area (for similar properties) so I have a good perspective about local market conditions. Living in the general area helps, too, because (in Dallas, where I reside and work) you learn about your community in a concrete way.
When a seller demands a certain price, and that number has no correlation to reality, respond with facts. Eliminate the emotional component, in which people create arbitrary prices and novice investors negotiate from a position of weakness. Put aside perceived value, and emphasize actual
If a seller obsesses over a price, which cannot be supported by evidence, be a teacher first and a negotiator second.
You can only close a deal if you show the seller your data. Explain what the traditional rate of appreciation is for a comparable home in the same area, or a home on the same street.
If your offer is line with those statistics, and you allow yourself some flexibility, then the seller knows what you will pay. More importantly, the seller also knows what you won’t pay because you have reams of data at your disposal.
Do you know when you should walk away from a negotiation?
If reason does not convince the seller, and if the price is still well beyond your most generous calculations, walk away.
Why close a bad deal just for the sake of doing a deal? That strategy makes no sense.
By all means, talk numbers. But talk about the right numbers – the ones you can prove – so you can negotiate successfully.