Master the Art of Negotiating Directly with a Vendor when Buying a Property
If you’re looking to build a property investment portfolio then you will need to master finding the right deals. You might choose to work with an estate agent, auction or even directly with the homeowner or vendor but one thing’s for sure, you’ll need a lot of leads coming in to get your pick of the best houses.
Now, this could be finding properties via an estate agent, auction or even directly with the homeowner (vendor), but one thing’s for sure, you’ll need a solid/regular flow of leads coming in, so you can choose properties that are right for your criteria.
Out of these three options, one of the most misunderstood methods of sourcing property is direct-to-vendor.
To source these types of deals you could use leaflet drops, newspaper adverts, online marketing, heck even simply replying to ads on Gumtree is all part of the mix in finding properties directly.
Once you start generating these leads, the upside is often 'off the market' properties provide the best deals.
However, when it comes to negotiating, it’s a whole different ball game when you compare; how to negotiate the price of a house when dealing with an estate agent to buying a home directly with a homeowner.
Now to go into minute detail on this topic (as it’s a pretty in-depth process) would be hard to do fully in just one article...
But below we still dig into the basics and uncover a step-by-step overview.
Along with some extra tips on the same process that I’ve used to successfully negotiate multiple property deals directly with vendors since 2007....which you can copy straight away and use for your own deals today.
The Process: How to Create a Win/Win Situation
When dealing with a vendor there is a simple four-step process you need to follow, if you’re going to learn the ‘Art of The Deal’ and negotiate great discounts.
So before we get started, we need to assume you have already found the lead (a property you're interested in that's available directly via the owner).
This could be from any source (leafleting, newspaper adverts, referrals from a friend etc...) AND where the property isn't marketed through an estate agent, so you will be negotiating ’directly’ with the homeowner.
So the process you need to follow to negotiate a successful deal is broken down into 4 steps:
- Qualify the Lead
- Pre-Viewing Checklist
- Viewing Techniques
- Negotiate With the Vendor
So let’s dig a little deeper into each of these...
Step 1: Qualifying the Lead
Now just to get one thing straight, this is and always will be a numbers game.
You won’t be able to turn every lead into a done deal, so don’t worry or fret on that.
Simply put... the most successful deals are the ones that create a great win/win situation for the homeowner and you.
Now if you go into every deal with the mindset of only what works for you, you will fall at the first hurdle.
You need to consider what the homeowner wants to achieve and what their pain/reason is for selling.
Solve this and you will be doing plenty of deals I guarantee you.
Now this ‘pain’ (or reason for selling) won’t always be financial.
It might be time-bound or an emotional reason.
Either way, you need an edge, a uniqueness that will put you way ahead of the competition if the seller is in two minds over different offers.
The best way to do this is to start as you mean to go on and have a mindset of how you can actually help the vendor.
You don’t need to always offer the best price.... but you do need to offer the best ‘solution’ and outcome for the seller in your going to get your offer accepted.
On these occasions, it’s those sellers who have a ‘NEED’ to sell and not just want to sell where your offer will succeed.
This first step is therefore all about qualifying the lead, to find that NEED to sell.
This is a series of questions you should ask (before you’ve even gotten to the viewing stage) to see if you can help the vendor and if the lead is likely to go anywhere.
- What is your reason for selling?
- How quickly do you need to sell?
- How long have you been on the market for?
- How many viewings have you had?
- Have you had any offers yet?
- What happens if you don’t sell?
There are loads more questions you can ask, but you don’t want to overwhelm the seller, and these will give you a great insight into the seller's situation.
Especially the last question...
Step 2: The Pre-Viewing Checklist
The purpose of the pre-viewing checklist is to make sure you have the right documents and ‘research’ with you at the viewing.
Simply taking along with you comparison research on possible values for the property will really help.
- Details on what other properties have sold for recently.
- What other properties are actually being marketed for, in the local area.
You can get all of these figures using Rightmove’s Price Comparison Report, here.
These will put you in a great position when you are negotiating with the vendor.
Sometimes you may need to ‘re-set’ the seller's expectations on what the market value of the property might be before you even start the negotiations.
This is where having these comparisons will really come into their own.
Often if you simply barge straight in and question the seller’s own valuation of the property you might come across like your trying to pull the wool over their eyes.
But if you can back this up with strong research and comparables, this will put you in a great position when negotiating.
Step 3: Viewing Techniques
We could easily get carried away here with a range of different negotiation strategies, but let’s keep it simple.
The role of the viewing is simply to help you understand the property & the seller’s situation some more and establish a relationship.
You don’t need to complicate it with a hard-sell.
You, therefore, have three main aims in mind. In this order
1 Build Rapport with the Vendor
This is crucial.
‘People buy from people they like and trust’ and get this part wrong, it doesn't matter what your offer is, it won’t be going anywhere if the vendor doesn't like you.
2 Complete a Property Condition Report
It’s very difficult trying to remember ALL the parts of the property after the viewing.
So help yourself out and complete a quick property condition report when you’re at the property. Nothing too in-depth, this doesn't need to be a survey.
Just a few notes on what work is needed, so this can be reflected in your offer and planned for
3 Fact Find and Offer-Match
This is where the offer comes together. The fact-finder is to get all the information you may need, to put together the best offer for everyone involved (remember the questions we looked at earlier...)
The ‘offer-match’ is simply matching the offer with the seller’s situation.
Done right and you should need very little negotiation to agree on a deal.
Step 4: How To Negotiate With The Vendor
Not all deals are done on the day of the first viewing.
So don’t worry about trying to force the deal over the line.
Plenty of deals are done weeks or even months after the original offer is given.
Homeowner’s situations regularly change and they may not be at the right point at that moment to accept your offer.
So don’t fret with this and don’t feel like you need to be a slick negotiator to get anywhere.
This couldn't be further from the truth and this goes back to building rapport with the vendor.
You will get lots of deals agreed even if you don’t provide the highest offer, as long as the vendor relates to you and your offer is ‘framed’ better than the competition.
To help frame the offer in the best light, I use the following 3-step process:
The match is very simple.
If you have done your fact find right you will know the vendor's motivation for selling and the implications to them if they don’t.
Your offer here is, therefore, to simply match the outcome they are looking to achieve with what you can offer
Tip: don’t think about the offer ‘price’ too much at this stage...focus on the ‘situation’ and solving the sellers ‘pain’. If the vendor is struggling with a mortgage... solving the situation would simply involve providing ‘a match’ that gets them to a stage where they don’t have to worry about the mortgage anymore. Remember... it’s not always about the price
This will help you close a deal without giving away an offer early on, by testing the water first.
Think about questions like:
- If I could... Would that work for you?
- If I could maybe... Would that give you what you want?
Negotiating the Offer
Your pre-close should have got your foot in the door and piqued the seller’s interest.
Now we need to work on the price.
This is where it comes back to your research.
By having comparable properties to refer to, allows you to re-set the market value.
This will help you together to agree on a new possible ‘market-value’ of the property.
Add in extra details like how long it’s been on the market, the condition, the service your providing so they can sell quickly etc... Then it’s a case of simply clarifying their situation and presenting the offer to match.
This is all part of the negotiation process.
Completing the Deal
If you got the first element right; building rapport and trying to help the vendor, then you will have put yourself in a great position and be way ahead of the competition.
The process should then be pretty smooth, with your offer matching what the outcome the seller is looking to achieve.
In a perfect world, the deal will be done there and then.... congratulations!
If not, it’s then a case of simply following up with the vendor in a couple of days or weeks.
Remember... Don’t frustrate yourself with feeling like you need to make every deal work.
Follow the processes above, build rapport and I promise you will do many great property deals!... all ‘off-the-market’ and direct with the homeowners too, which is where the best deals are found!
I hope you've found this overview and tips helpful and it’s given you some quick pointers to use straight away to help close your next deal and get started with investing in property.
This overview is actually about 1/3rd of the full process of “Negotiating Directly With Vendors”... (because I have to keep some of my secrets for my paid training clients).
However, even on its own, it’s important and can be used immediately to mix up your current negotiation process and see you convert more deals.
It’s a process that’s helped me convert many deals over the years and it’s my gift to you as I love to teach what I know and help out.