Real Estate Negotiation Tactics
The Iceberg, Salami, & Orphan

I'll tell you what they are, then I'll give you a real life example. It's actually a deal I'm working on right now.

The first one up is the Iceberg Theory.

f you've seen the movie, Titanic, you'll sort of know where I'm going with this.

Usually, only about 10% of an iceberg is above water. The rest of it is hidden beneath, and can be very deceiving. The reason the Titantic hit the iceberg was because they steered away too late... and while they missed the part of the iceberg above water... the hull of the ship was torn in to -- underwater.

People and real estate deals are like that too.

In high stakes situations where money is involved, if you're any good, you learn quickly to put on a poker face. Your job is to keep that up while figuring out what's going on with your opponent -- who, also is trying their damnedest to keep a poker face too.

So here's how I prepare for that. RESEARCH. I want to figure out their motivations, what they're concerned about... and what "steps" they missed.

real estate negotiation video 1

Let me explain "steps".

In most real estate deals, there are a lot of moving parts. You could be talking about renovation costs one minute, then timelines... then all the terms, conditions, subject clauses and whatnot.

Every one of those "steps" has to covered. And if you pay real close attention to the person across the table from you... you may discover they "missed" one. Or just didn't think about it as a negotiating point.

Now you can use that to leverage your position. Change the deal.

You cut the deal up into very thin slices (like salami). And you attack each piece in a very specific order.

Here's what I do:

I negotiate the small stuff first. It's key to get them to agree to things.

Nodding their heads and saying yes. Because when you get to the big stuff, like financing, you have this in the back of the pocket:

"Well, Mr. Seller, we've come this far now, we've resolved all these issues, and we've agreed on them all. So let's tackle this one."

It's so much harder to back out of a deal when you've done all this "work" already. That's what you want... small commitments that lead to bigger yeses.

OK. We've covered two already, the third one I'm going to weave into my example. It'll make more sense that way.

So this property I'm working on right now. It's a class C type apartment in Texas, with high occupancy. The Seller, a REIT, wants to get rid of it, because the entire trust is trying to upgrade all their properties to A types and commercial.

The first thing I did was my homework -- The Iceberg Theory.

I went online and did research on the company. Wanted to figure out if they were doing well or poorly. I had a feeling from my research... they were struggling with this apartment I was interested in.

Here they were upgrading their entire portfolio to A types... and they just didn't want this one anymore. It was their Orphan Property. (That's the third tactic... find deals where the seller has a lot of properties and doesn't want some of them.)

Let me explain.

Because they didn't want it anymore, I suspected they were neglecting it... and when I went out to inspect the property, I found out I was right. There were quite a few repairs and cosmetic things that needed to be done.

So here's where I start the Salami Method. I found about 10-15 issues and problems with the property. And when I brought it to the table, we deal with each issue, one at a time.

First we talked about repairs... then after all the small stuff was dealt with, we talked about financing.

The biggest problem with the property was it was at a LTV ratio of 100%. The mortgage owed on the property matched the value of it. In other words, no equity at all.

I can't say more on this deal, as it's not done yet... but I think you get the idea.

real estate negotiation video 2

1. Iceberg Theory

2. Salami Method

3. Orphan Properties -

real estate negotiation video 3

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