Watching for Tips on Negotiating

Have you seen the show Pawn Stars on the History Channel?  I have watched several episodes because I have enjoyed watching the negotiations.

Some of what I do is wholesale real estate – this means that I contact a seller, negotiate a price, and get the property under contract.  Then I sell the same piece of real estate property to somebody else before I close on the first part of the transaction.  In some cases, I assign my position to the new buyer.  In other cases, I setup the closings to be on the same day (or within a couple of days).

If you watch the show, this is the same thing that the pawn shop owner is doing.  He is buying something for a wholesale price and then selling it to somebody else for a retail price.   People bring in their ‘treasure’ and often have a price in mind.  Rick, the pawn shop owner, asks them a series of questions that both determines the details about the treasure and establishes rapport.  He asks them what it is worth and then what they want for it.  He is very up front with them that he needs to make a profit and pay for his overhead.  He can’t pay the retail price for something or he won’t make money.  It turns out that about 75% of the time, they can’t come to an agreement on price.

This is a lot like dealing with a seller of real estate.  Almost every seller I have encountered has an idea of the value of their property.  Sometimes it is based on what they paid (originally or the amount of money they have spent on maintenance / upgrades / rehabs), sometime it is based on what their neighbors got when they sold (or what the neighbors said they got).  None of that matters to me – I have to look at what I can sell it for and back out what costs I will have and what profit I must have to keep my business going.  And, often, the seller and I will not come to an agreement.

That means that, as a wholesaler, I will need to talk to a lot of sellers and make a lot of offers to find those that can meet my price.

Negotiating happens all around us.  Are you watching for it so that you can pick out ways to improve your own negotiating skills?  Please comment if you have an example!