By Property Soul (guest contributor)
In a tenants’ market, it is commonplace to see tenants bargaining with landlords for a good rental deal. I shared a private apartment with two flatmates between the years 1999 and 2003. The 1,700 sqft flat was previously tenanted at $2,500 was let go at $1,800 a month after being left vacant for some time, despite the fact the owner was paying $2,500 every month for the mortgage. When it was time for renewal of the tenancy contract, the rent was revised to $1,600 after some negotiations. The following year, our rent was further lowered to $1,500 a month.
My experience with tenants as a landlord
My fate was reversed when I became a landlord from 2002. My 1-bedroom unit was newly-renovated and rented out at $1,800 a month for the first year. The next year the tenant requested to lower the rent to $1,500. She rejected my counteroffer of $1,600 and was very firm that this was the market rate.
I felt the adjustment was too drastic. I was sure I could find another tenant who would offer something higher than that. But after leaving the place vacant for a month, I subsequently leased it at $1,500. I regretted not accepting my first tenant’s offer and missed one month’s rent.
In property, negotiation is not only the job of property agents. If you want to get a good offer, you can’t avoid negotiations in situations when you are buying, selling, leasing or renting.
Below are some property negotiation skills I have shared in my book No B.S. Guide to Property Investment. As you already know after reading many of my blog posts, I am writing from the point of view of a fellow home buyer, property investor and house owner versus a property developer or a property agent.
When you need to bargain
How you do anything is how you do everything. If you don’t bargain in small things, you won’t bargain on big things too. You tend to adopt the ‘take-it-or-leave-it’ approach.
You may consider bargaining an activity for females only and negotiation a practice of businessmen. But in property investment, it is unavoidable to avoid negotiating the terms and bargaining on the prices.For example:
- Talking to developers for purchase of one or more units;
- Placing an offer or counteroffer on the asking price;
- Discussing with property agents on commission and service scope; and
- Reviewing the terms with tenants in the lease contract.
Tell yourself that everything is negotiable and always bargain for a better deal. Negotiation is a skill you need to practice often in order to master it. If you know the tips in negotiation, you can have your cake and eat it too.
Tip #1: Negotiation favors the prepared
Knowledge is king and information is power.
Never go to a flat viewing without learning about it first. Find out the background of the project and the market price of similar units beforehand. You can’t just take the facts from the agent or seller.
Being informed can put you in an advantageous position during negotiations. Useful facts include why the owner is selling, how motivated the seller is, how long the property has been in the market, what and when was the last offer, what price the seller bought the property, whether the owner is the real decision maker, etc.
Check the details you have are up to date and have been verified. Do the numbers before you start negotiating with the seller.
Tip #2: Make a counteroffer
Use leading questions to probe the underlying interests or bottom line of your opponent. The agent representing the other party may not disclose the details or a number, but he may drop a hint or give a range if you make an effort to probe.
If you can, try not to be the first one to make an offer. The first offer is seldom accepted. It will most likely be counter offered.
Likewise, never accept the owner’s asking price or the buyer’s first offer. Always test the waters with a counteroffer. The transacted price will mostly likely reach somewhere in between.
Give sufficient time for the other party to consider your offer. Resist the temptation to present a second offer before a rejection. When you receive an offer or counter-offer, wait for a while before you reply to show that you have given it some serious consideration.
In negotiations, a demanding style may not yield a commanding result. However, you should persist when they resist, and negotiate long and tough on your original offer.
Tip #3: Use timing to your advantage
Talking too much will only give yourself away. Know when to take a pause and when silence is golden.
People tend to make concessions when they feel uncomfortable waiting. If you don’t respond, you can pressure the other party to break the silence and come back with a compromise. Author Bill Coleman had this to say about the silence technique in negotiations:
“This is a classic negotiation technique. It’s a gentle, soft indication of your disapproval and a great way to keep negotiating. Count to 10. By then, the other person usually will start talking and may very well make a higher offer.”
On the other hand, to avoid the seller not getting back to you, you can set an expiry time for every offer you present. Your offer should look like this: “I offer to buy (the property) at (proposed price). The offer is valid by end of (tomorrow’s date).”
Take your time to negotiate. But once you are given a counteroffer close to your target, you should waste no time to close the deal.When your target price is finally accepted, obey a salesmen’s golden rule: shut up, sign the deal and leave as soon as courtesy allows.