Are you a natural born negotiator? Do you have what it takes to ask for what you want?
Steve Waters and Victor Kumar say there are no winners or losers in the negotiation game – it’s all a matter of practice and learning to find the common ground in the terms and conditions of a sale.
In this episode of Investing Insights, the team from Right Property Group partner up with Phil Tarrant from Smart Property Investment to share their tips and tricks to negotiating the right way, as well as discuss the importance of cultivating relationships with industry professionals, how to move on from failed ventures and why they believe that the most powerful negotiator is the most knowledgeable.
Tune in now to hear all of this and much, much more in the latest episode of Investing Insights!
Like what you hear on the podcast? Keen to speak with Right Property Group directly?
Fill in the details below and one of the team will be in touch soon.
Thank you for your interest!
Some parts of your form have not been correctly filled in
Phil: G’day everyone, welcome to the Investing Insights education series. Smart Property Investment, in partnership with our good friends at the Right Property Group. Today, something that I really enjoy, a topic, and I do it every day in my job, but it's something I think I've always done organically, and we're going to talk about negotiation.
Two guys in the studio, regular co-hosts on the show, Victor Kumar, Steve: how you going?
Steve: Great, how are you?
Phil: I'm very good. You reckon you're pretty good at this negotiation lark, don't you, Steve?
Steve: I kind of like to think so, yeah. It's what I do for a living.
Phil: Who's better out of you two? Who's the better negotiator?
Steve: Oh, hands-down, him. No, just kidding. That threw you, see? It started already. Negotiation's all about positioning.
Phil: It is. So let's stick on that. Everyone probably negotiations differently, right? Do you guys have different styles of negotiation?
Steve: Massively different styles, yeah.
Victor: Yeah, and it's really important, because if you try and imitate someone else, it's not natural, and people see it a mile away, so it has to sit well with you.
Steve: It's gotta be organic.
Steve: It's gotta be you.
Phil: That's right, yeah.
Steve: Yeah, it has to be your personality, like you can't be a personality you're not. As Vic said, agents, and people that'll remember this, sales agents, real estate agents, and of which you get in here a lot to do other podcasts, your top 100s, these guys spend tens of thousands of dollars every year in training.
Victor: And they do it every day.
Steve: And they do it every day. So, to be something that you're not and try and change your personality when you're negotiating against someone who's a trained professional, they're trained to see it, and they'll just exploit you.
Phil: That's good. So, if you're new to this podcast, this is something we do every single month. This is now the sixth one that we've done. Been very popular, but this part of the topic that I really want to get into, because I think it's good action, good activity.
Of the other stuff we've covered, and you'll see them if you look down on this page, or if you're on iTunes, on the feed. The first topic we did was "11 Things Successful Properties Don't Do." The second one was "Debunking the Most Popular Property Myths." The third one was around goal setting, and shifting your mindset.
Then we looked, in the one after that, at investing in units versus houses. The last one we did, which was quite interesting, which got a bit deep towards the end of it – and that was Steve's fault, he took it there – was around building a balanced portfolio.
Negotiation. Anyone who is a property investor, and you guys are buyer's agents, so a big part of what you do is negotiating, amongst other stuff. For anyone who's investing in property, will, at a point in time, negotiate. You both mentioned that you guys do it differently. If you were going to explain your style in negotiation, Victor, what is it like?
Victor: The first thing to remember when you're negotiating, that’s for anyone, is there are no winners and losers. Negotiations either break down, where you're not coming to an agreement, or they're successful, where you come to an agreement. How you approach it, and my way of approaching it is more of a, what I would call, having fun with it, pretty much calling a spade a spade. But it's not going in there trying to ground the other person into the dirt, so to speak.
It has to be done professionally. Professionally in the sense that ... with respect, so that it doesn't come back to bite you. As an example, if you're negotiating on a property with a vendor, and they have asked for a concession, and you don't give that concession, if it doesn't make any difference to you, it may come back to bite you, say at settlement. I had a friend of mine who wouldn't allow the vendor a couple of days extra in terms of settlement. Come settlement day, settlement got delayed, and my friend had his trucks all parked, ready to go in, but the vendor would not allow him in until the confirmation of settlement came in. These trucks sat there from nine o'clock until about three o'clock in the afternoon before he let them in. So it does come and bite you if you get it wrong.
Phil: It's probably quite hard to say, "Oh, this is the way I negotiate," but you could probably give observations on Steve's negotiation style.
Steve: Ah, here we go.
Phil: Yeah, here we go.
Steve: Why didn't I get asked that question?
Phil: Well, you are. Explain how Steve negotiates.
Victor: Good question. You've thrown me here. I'll be giving all his secrets away. If you look at how Steve negotiates, he looks at making it a congenial ... it's not aggressive, in a sense that "You're going to do it my way, or else."
It's always trying to find a common ground. It pretty much is one of the hallmarks of successful negotiation is trying to find the common ground, and going down that path of, in inverted commas, exploiting that. Steve, while he does not exploit people, does exploit the situation really well.
Steve: I'm looking at you.
Phil: You're going to get your chance, Steve.
Victor: I'm going to pay for this.
Phil: So Steve's got a good eye for the deal.
Phil: And he can sniff it out pretty quickly, and know right where it is.
Victor: It's knowing what you want out of that equation, right? It's not about ... it may be terms, it may be price, it may be that we're solving the issue for the vendor, or it's something that the purchaser wants. It all boils down to knowing what you want at the end of it. So, if you've got an end point to it, you'll get to it eventually.
Phil: What's Vic's style?
Steve: He'll rock up, and he'll have his fancy suit on, and he's-
Phil: It's a white suit, and he looks like Colonel Sanders.
Steve: You gift fried chickens with it.
Phil: You said that, not me.
Steve: Vic's style is more of a relaxed style. HE's a relaxed negotiator. All jokes aside, that's his style. He's about creating the relationship, which is one of the keys, and all good negotiators, it should be about creating that relationship with whoever you're negotiating with as quick as you can.
Vic's not – this is more what he's not, I suppose, more than what he is – he's not a rushed negotiator where it's like, "Let's get the deal done. Let's get it done right now." Yet, it's not slow and steady, either. IT's an interesting thing because how we, or how ... Back to me.
Victor: It's all about you, Steve.
Steve: Yeah, it's all about me. How I first started negotiating so many, many years ago, and it's kind of a hereditary thing for me, I suppose, in my past industry, is far different from how I negotiate today. You do learn as you go. Vic mentioned something earlier on, about "It's not about who wins, and who loses a negotiation," but at the same time, and you'll read this in a million books, it's not about a win-win situation either, because someone either always wants to pay less –
Victor: Someone concedes.
Steve: Yeah. Someone does concede, somewhere, but it's about keeping that relationship alive when you do it. For us, we're always going for the most through that third party being the agent. We don't really have the direct contact with the vendor, the seller. In some instances we may. But most of the time it's through an agent. For us, that agent ... It's not just about the one property, it's about how many more can we negotiate for him, in different areas. If we burn a relationship, if we don't keep that relationship alive, especially in today's market, we're not going to get the phone call before everybody else the next time.
Which is another point coming back to how I negotiate. It's also state based, or market driven. If I go over to WA tomorrow, where there's a little bit of blood on the streets, and probably more to come, how I negotiate over there's going to be far different, in terms of my style, than how I negotiate here in New South Wales, or Brisbane, or Victoria at the moment. The market is, to a degree, dictating how I negotiate. Agents don't really need people like us at the moment. There's a million buyers here over on the east coast, so they can play the game, so to speak.
Over on the west coast, they're going to love people like us, because we represent an opportunity for them to be able to sell stock when perhaps the general public aren't there in masses. We could probably afford to be a little bit more aggressive over there, and stand firm on our terms and conditions and price, whereas over here we need to be a little bit more flexible, and it becomes not just about price, but as Vic said, about terms, conditions such as settlement periods, cooling-off periods, all that sort of stuff. Early access.
Victor: It also comes back to, when you're talking about agents, and negotiating on properties, is that a lot of these agents, you need to be first of all recognising how they are negotiating against you. Whether they are using your own techniques against you, or using your own naiveté, if I can pronounce that word, against you if you're just starting out to invest. You need to be really mindful that there are people that you simply can't negotiate against because they'll stonewall you from day one, right? You'll come across them in all walks of life.
A lot of people say that. "I can't negotiate in real estate, I can't negotiate." But we negotiate on a daily basis, and if you've got kids, you're negotiating on a daily basis. If you're married, you're in a relationship, you're negotiating on a daily basis. Because we're doing that on a different level, we're not putting such credence on it. If we brought the same principles into real estate investing, that would help.
If we're talking about kids, there's the "pester power." Pester power, if you brought it back to real estate, it's constantly asking the agents the same questions, in terms of the property. It might not be the same property, in that sense. That's one of the reasons why we get so many of our negotiators over the line, is that we're touching base with them on a constant basis, and not waiting for them to come back to us with a counter-offer, as such. We constantly remind them that we're still here. We're still at this price. We're still at those terms, depending on how the property's panning out.
Phil: If negotiating doesn't come naturally, and I think for all of us here it's quite a natural thing, we live it and breathe it, we do it and we don't even know we're doing it, right? Whenever I'm chatting to you I'm negotiating, or hustling. But if it doesn't come natural, and a lot of people don't like negotiating. They find it confrontational, and they don't like confrontation. Negotiating, if you're a buyer, you're trying to get something for as cheap as possible. Some people just don't like asking for a discount. My wife, Victoria, when I met her, she'd get embarrassed by me.
Steve: Walk out of the shop, yeah?
Phil: She did. I'd be haggling, and negotiating. For me, negotiating ... If someone said to me, what's my negotiating style, I'd say, "I like to put a lot of theatre into negotiation, right? I like a lot of laughter, a lot of innuendo, a lot of suggestion. It's good fun. The person selling and the person buying have a bit of a kick out of it. I've found over time that I get the best results if someone likes talking and dealing with me. I'm not frustrating them.
Steve: You're not making them fight.
Phil: It isn't a fight, it's just good, robust fun, and a lot of people that doesn't come natural. They're scared to ask for a discount, or don't want to ask for a discount, because they might think x,y,z of me. Not a natural thing. How can you work on that? How do you do it? Is it just practise? Experience?
Steve: Some people just will never be able to negotiate. It's just not in their core. Having said that, there are some people that are born to negotiate, and it might be something from as simple as where they've come from. As an example, when we go out to negotiate with an agent, in different areas, so different, let's take, say, Cabramatta of Sydney, or if we take an inner suburb of Brisbane, often the demographic is quite different. Usually, in those demographics, the agents are also quite different. I'm certainly not going down a path where people might think I'm going, but depending on the agent's origin, perhaps hereditary if you will, will determine how we negotiate.
Phil: So the negotiation style is often shaped by their cultural experience?
Steve: Absolutely. It's so important, because it's going to dictate how you negotiate. The Asian culture. They're a much more aggressive negotiator. If I go to the Indian culture, and I'm looking at Vic here, the deal is never done when you're negotiating with those types of agents. Just when you think it's across the line, it's just not. It's just starting.
Victor: That is the heritage, right?
Steve: That is the heritage, yeah.
Victor: If I look at my background, I'm from Indian background, from Fiji, but originally my grandparents were from India. That's part of our culture. That's part of how we negotiate. If we haven't had a discount, then we don't feel like we've had a deal. It is important as that. Because part of the culture –
Steve: That's funny, because if we're dealing with, say, a UK based agent, as an example, they're much more relaxed, and more of a jovial, sarcastic type of negotiation, where you're giving each other crap. Australian agents, it's just whatever happens at the time.
While that may sound like I'm joking, it's such an important part of negotiation is to know who you're negotiating against, and what is going to be their style. It could be something as simple as you're going to auction. Which is a style of negotiations. For us, if we're going to an auction, our prep work, our recon if you will, starts weeks beforehand.
Not on the property, because that's what we already know about, that's why we're going to auction, but it's on the auctioneer, and the agents who are going to be working the auction. If we don't know the auctioneer, we'll go to four, five of his auctions well beforehand so we get to know his style. His little tells, his little signals. We'll get to know who the agent is. We'll get to talk to them, create a relationship. It's that serious. It's a big-ticket item. We're not buying a laptop. You've got to get it right.
Phil: Is it always seeking some sort of advantage through increased information, to help-
Victor: It's knowledge. It's knowledge.
Phil: ...influence the outcome?
Steve: But yeah, the basis. The most powerful negotiator is the one with all the knowledge. Who knows the most. Vic touched on it before. You can't go in to a negotiation bluffing knowledge. The guy or the girl on the other end of the table who's negotiating against you, especially the seller's agent, he's going to have that knowledge, so you need to be equal or better, and you can't lie.
At the end of the day, even though I've said it before, it's all about the relationship. You've got to remember that agents make their money when a deal is closed. When the property settles. If you're going to waste their time, you're only going to get one bite of the cherry in the market like this. They won't call you again. You need to be honest, you need to be-
Victor: Because you are hard work.
Steve: Yeah. Yeah. Exactly. You are hard work. We'll go to an agent, and we'll say, "Look, our offers aren't sexy, and sometimes they're low-ball, but we complete. And we complete quickly."
That's ringing true in their ears. "Well, these guys complete. They're not going to give me a hard time." They get paid when you get completed.
Phil: So what we're talking about here is what gives you an advantage in a negotiation. Negotiation typically starts at price. Once you get to a position where you might be close on price, you can start negotiation on other things. You spoke about terms, and stuff like this, but to reference the point you just made, Steve, an agent wants to shift a property as quickly as possible, and as cheaply as possible.
If an agent gets a property, comes on for a listing, they'll try and sell it off-market straight away. They'll go to guys like you, or other buyers' agents, because they know that these people have ready buyers ready to go, so the negotiation will be sharp and it'll be quick. It's not going to be "I want to buy this place, I've never bought a property before, I've got all these questions to ask you. I'm going to get my pre-approval sorted out."
They know that you guys are sharp negotiators because you're going to complete on it. You've got someone that's ready to buy a property and they're going to complete today. You're not time wasters, you're not tyre kickers. Essentially you're getting yourself an advantage immediately in a negotiation setting because they know that what you're saying is going to happen.
Phil: Having said that, if you take the Sydney market, and you'll often hear a lot of the buyer's agents talk about these off-market sales or silent sales, which do exist. Essentially, there are properties that never hit the internet, or realestate.com, or domain. As a side note, you will see them, but after the deal is secured, because they need the listings on there to make the phone ring.
But in a market like Sydney city at the moment, or the eastern suburbs, there are very, very few silent sales. IT's not because the agent doesn't want to have to the deal quick, because they know they've got this ready pool of buyers, it's because they can't get enough listings to sell. They need to have their sign boards out there. They need to have their names out there. So the silent sale doesn't exist. Or, if it does exist, its' from a seller who perhaps says, "Well, here's my ridiculous high price. You find someone for it, you've got a sale." The silent sale doesn't exist in the inner cities and the eastern suburbs, northern suburbs at the moment. You might get one every now and again, but they're not a common thread.
Phil: So, to have an advantage in negotiation, you need to be able to move decisively and quickly, so the agent knows you're not messing around. You need to have cash ready to go. What else can you do to make yourself a more attractive buyer or better negotiator compared to someone else? Openness or willingness to move quickly?
Steve: Maybe the question is "What shouldn't you do?"
Phil: What shouldn't you do?
Steve: Yeah. I remember years ago I was at one of the expos that we go to, and there was a guy up on stage talking about this subject and how he secures deals, and how he can make himself stand out from the crowd. What he does is when he goes to an open house or an auction, he'll go out and he'll hire a Ferrari or a Lamborghini, or something like that and put the slickest suit on he can because he wants to be seen as the guy with all the cash and intimidate everybody else. Let me tell you, that's the worst thing you can do.
Steve: You're the biggest tool in the street. The agents aren't going to want to deal with you, and if anything the vendor, or the seller, is going to see that, and say, "Well, you've got more money than sin, so I'll keep pushing the price up." That's what you don't want to do. You just want to be yourself, coming back to the authentic. Be authentic. People can see through it. Be genuine, I suppose.
Sometimes we have fun with it. We'll go in a pair of track suit pants and thongs, just to mix it up a bit. Not that that's a common occurrence, just saying, but if we're challenged, as a bet, yeah, we'll do it. It's not about how you present yourself in this scenario, it's how you keep the relationship going, which is what I keep saying.
Victor: The key to all of this negotiation is you never take it personally. If you didn't get the property, or if you didn't get quite the terms that you wanted, you shouldn't take it as something that's personal. If the agent counters with a higher offer, that doesn't mean that you are actually in a battle. That's what negotiation is all about.
The agent's supposed to get the best price possible for the vendor. We as buyers agents are always the investors. We're trying to get the best price for us. In other words, the cheapest price. Price does not necessarily mean dollar amount. It could also mean the terms. It could be a delayed settlement. It could be an early access to work on the property to clean it up.
Phil: Speak on that quickly. A lot of people probably aren't familiar with this. You haggle on price, and you get to a sticking point. We spoke about compromise before, so if you go, "Okay, this ain't going to happen because the price $400,000," and that's probably what it's going to end up, but you can get advantages as a buyer by saying, "Look, I want to delay settlement," so it gives you plenty of time to sell some assets, or reel some equity for someone else, so you get an advantage there, or you can say, "Look, I'll settle in a week's time, two weeks' time, but you're going to have to take another ten grand off the price. You've got these hooks to be able to still manipulate the price.
Steve: Or it might be deposit terms as well. Deposit bond. $1,000 deposit terms, deposit whatever it may be. This is all sort of disregarding price, because if we know what the price is, as you've just suggested, then the only thing you've got left to negotiate are the terms.
Phil: Or maybe inclusions.
Victor: You'd only be able to negotiate on those when you know the vendor's situation, or where they're coming from. Most of the time, the best negotiations are where you are actually solving the other side's problems, and getting what you want out of it.
Phil: That could be debt, or distress, so you've got to look for those, as a way of understanding information. If you've got the most information, you can make a better decision. If you go to a negotiating course, if you commence a negotiation and say, "We're trying to load up a negotiation with a whole bunch of points so you can't be seen to be conceding on stuff, right?"
Let's say price aside, you get into conditions. Deposit's one thing. You'd say, "Look, I'll give you a 5% deposit, instead of a 10% deposit, early access, delayed settlement," this type of thing. What other things can you throw in there that you can walk away from? Like you can start questioning contracts ... just so as a good negotiator you can look to be ... that you're conceding on some things. I know you guys have done deals where you've gone, "Okay, well, $400,000 that's fine, but you're going to have to put some new carpet in there before we move in there. Loading up a deal so you can come back-
Steve: I think everybody wants to walk away with a feeling that they've succeeded, or, as you say, perhaps you've given in to get what you want. It really depends on the property, where it is, and once again, the market conditions. Sometimes there's just going to be no negotiation on anything, so it's more about securing the deal because you know the market is moving quickly.
That, in itself, can be a headache, especially in some markets today. So that also comes back down to the relationships. Coming back to your point, there are "hooks," as you call it, where you can get the early access, but that's a buyer beware, that's not always a good thing. There is the delayed settlement deposit terms, inclusions, whether, you know, polish the floorboards, put the carpets, get rid of the above ground pool for me, or whatever it may be, but you do have to concede in some areas, depending on the market. Once again, compared to, you should be conceding on nothing. Because you can.
Victor: One of the key things, when you're negotiating, is not to take your eye off the prize. If the prize is to actually get the property, at a price that's within your range, and just because you had to concede on a settlement term or deposit term or something like that doesn't mean that you walk away from the deal. I've found this time and time again. People that are starting to negotiate for themselves, they tend to lose sight of the bigger picture and get stuck in the smaller battles.
Steve: The smaller detail. Just be prepared to, in some cases, open extreme, as we call it. That might be low-balling, if the market lets you do that, but you've got to have your walk-away price. There's got to be that level where you say, "Okay, that's it," and be prepared to walk away.
Victor: You don't lose face when you walk away.
Steve: You don't. You're actually strengthening your relationship if that be the case, because for your next load of negotiations you'll be dealing with the same agent. He's getting to know you, and he's getting to know your style, perhaps, and that you are serious. The other thing that I'd probably suggest is, be confident. You can't go in there starting negotiation trembling, sweating up, bluffing your way, because they will see it a mile away. If you've got to practise with your friends and what have you beforehand, do that. There's no shame in that. Once again, be confident.
Phil: Show that confidence. Confidence only comes through experience.
Steve: Just do it.
Phil: How many – you're probably going to say it depends on the market and stuff, but you guys are throwing out deals all the time, right? You're throwing low-ball all over the joint, hoping ... Using a fishing analogy, you'll throw out a big bait, and you never know, you might jack something big. You guys are investing a lot of time in putting out deals, and offers, and negotiating. What sort of heat rate are you getting? Is it ... depends on the market, but is it low, high?
Steve: That's a hard question.
Victor: It depends.
Steve: Yeah, it depends. We have our own KPIs because the more offers you throw out, the better chance that you've got. We like to have somewhere between 250 to 300 offers out every week. That's a lot of offers to manage. That's the word here, manage. Those offers might take a month to come in. They might take 30 seconds to be accepted. They might be spinning in the wheel of the offering world ... 400, 500 offers out there. There's been instances where it's taken us a year to negotiate something. That's still in there. It's too hard to answer you, what's our strike rate. It might be 1% this week, and it might be 10 next week.
Phil: I guess I'm getting at is that if serious about investing, you've got to be out there knowing your markets and putting offers out there and the preparation for negotiating-
Steve: You've got to be active all the time. So, take us out of it, and let's say you're going out to negotiate a property and you want one of, so It's time to add something to your portfolio. There's only so much ground you can cover. There's only so many agents you can talk to, and it's going to take quite some time to get your knowledge up for the are, because you've been out of the market. Now you've got to research it and talk to the right agents. That's going to take a period of time. If you're not active in doing that, your chances are diminishing all the time. I suppose the key takeaway is be active all the time, because the best opportunities present themselves quickly, but they go even quicker. Practise makes perfect, as well.
Phil: That's good. Lots of info. I want to go out and buy some stuff now. I think some real key points here, one is that if you're not confident negotiating, you need to get confident. Bluff it out if you have to. Don't show your hand. Get in there and get involved. Simple stuff. It's not always about price, it's about conditions as well. Make sure that you're armed with a number of different hooks, number of different ways in which you can look to maximise and make the negotiating process a good one for everyone. Victor, how would you summarise negotiating for you, going back to what we originally spoke about? Guy who does it for a living? One word. One sentence.
Victor: Have fun with it. Have fun with them. Don't take it personally.
Phil: Steve? Anything to sum up, in negotiating?
Steve: If you don't ask, you don't get.
Phil: Good. Thanks guys, really enjoyed the chat. Remember to get in touch if you've got any questions about this podcast, about the Right Property Group or what the guys do, if you want us to cover anything in particular on this podcast, Investing Insights. Email [email protected] Victor will pick them up and get in touch with you. He'll be happy to field anything.
Phil: Any questions about whatever. You can check out the guys also at rightproperty.com.au. We spoke about it last time, you guys are doing seminars every month. Or not seminars, open forums, aren't they?
Steve: It's an open forum.
Phil: It's like a networking thing for investors.
Steve: Yeah. It is. It's a safe place, as we call it. We don't allow developers to come in and start flogging their stuff, or allow Amway, as we call it.
Phil: No Amway?
Steve: No Amway. It's just an open forum where we have different topics, and different guest speakers. It's very informal. You throw questions out as you think of them, rather than waiting until the end. That's the way we like to do it. Goes for a couple hours at Parramatta in Sydney, the first Monday or Tuesday of the month.
Victor: Also in St. Kilda in Melbourne.
Steve: And St. Kilda in Melbourne, once a month, last Thursday of the month or something like that.
Phil: Okay. Good. I've been to one before, two before. Maybe a few more.
Steve: They're good fun. It's nice to knock around with other investors, and I guess the breadth we get to these is quite ... from people just starting out ... you'll be chatting to a bloke who's got 50 properties, and you'd never know.
Phil: We always learn something. It's good. Thanks guys. Remember to come and check us out again. We'll be back next month. If you want to listen to any of the other episodes of the Investing Insights podcast with our partners at Right Property Group, you'll see them on the bottom of this feed on the website if you look into it, or check out the feed on iTunes as well. Thanks for tuning in. We'll see you again next month. Bye.