Chapter 3 THE POWER AND ART OF EFFECTIVE NEGOTIATING

Question 1

What is the goal of a win/win strategy in negotiation?

Answer 1

To have your goals in focus while helping the other party move closer to their goals.

This approach emphasizes mutual benefit in transactions.

Question 2

What is the critical question that often goes unasked by buyers and sellers during a transaction?

Answer 2

Is this transaction going to move me closer to my intended goal or not?

This question is essential for both parties to assess the value of the transaction.

Question 3

What has changed in real estate investing compared to the past?

Answer 3

It has become more complicated due to increased bureaucracy and regulations.

Earlier, investing was simpler, resembling throwing darts at a map.

Question 4

What can give you an edge over competition in real estate?

Answer 4

Establishing your comfort zone and specializing in one or two towns.

This allows you to gain in-depth knowledge about property values and local dynamics.

Question 5

What does timing refer to in the context of real estate negotiation?

Answer 5

Being early to spot opportunities and take control of the property.

Timing is not just about dates but also about market conditions and buyer/seller motivations.

Question 6

What is the key word in the process of negotiating for real estate?

Answer 6

Control.

Control allows for thorough due diligence before committing to buy.

Question 7

What are the two most important elements to start with in negotiating?

Answer 7

The basis of the transaction and doing effective homework.

Understanding these elements is crucial for successful negotiations.

Question 8

What must you review before entering a negotiation?

Answer 8

Your goals and the desired outcomes of the transaction.

Clear goals help maintain focus during the negotiation process.

Question 9

List the criteria that a property should meet to be considered for acquisition.

Answer 9

• Meets predetermined criteria for real estate ownership
• Moves closer to goals
• Fits within economic and management abilities
• Has potential for new value creation
• Decision-making players agree to move forward

These criteria help ensure that the property aligns with investment strategies.

Question 10

What should you do once you have control of a property?

Answer 10

Be aggressive with due diligence to fine-tune the economics of the transaction.

Thorough due diligence is essential for making informed decisions.

Question 11

What is a common misconception about properties that have been on the market for a long time?

Answer 11

That they are undesirable or have been rejected by everyone.

Sometimes, market changes can make such properties more attractive.

Question 12

What does a win/win situation in negotiations mean?

Answer 12

Each party attains a substantial percent of their critical goals.

Winning does not necessarily mean outpacing the other party.

Question 13

What is the importance of empathy in negotiation?

Answer 13

It helps in understanding the other party’s motivations and achieving a successful outcome.

Empathy can enhance negotiation effectiveness.

Question 14

What should you do if you encounter an attractive property that seems too good to be true?

Answer 14

Remain cautious and avoid the greener grass syndrome.

It’s important to verify the property’s value and potential thoroughly.

Question 15

What are some factors that can suggest an opportunity in real estate?

Answer 15

• The property meets or exceeds minimum criteria
• Circumstances indicate a potential opportunity
• Timing is right to take control

These factors can influence decision-making in negotiations.

Question 16

What is the role of due diligence in real estate transactions?

Answer 16

To review findings and determine whether to extend, conclude, modify, or terminate the transaction.

Due diligence ensures informed decision-making throughout the process.

Question 17

What should decision-making players agree on before moving forward on a deal?

Answer 17

They should be in agreement to move forward on this deal.

Question 18

What is the next step after gaining control of the property?

Answer 18

Be aggressive with the due diligence to fine-tune the economics of the transaction.

Question 19

What should you do after reviewing the findings of due diligence studies?

Answer 19

Extend, conclude, modify, or terminate the transaction.

Question 20

What do successful real estate investors often exemplify?

Answer 20

They follow effective decision-making processes and act quickly when necessary.

Question 21

What is the importance of conducting effective homework before negotiations?

Answer 21

It prepares you for the negotiation stage and limits time and effort until you control the property.

Question 22

What are the two basic types of negotiation?

Answer 22

• Blind
• Open

Question 23

What characterizes blind negotiation?

Answer 23

You have no idea who you are dealing with and make little effort to understand their motivations.

Question 24

Why do real estate brokers often act as roadblocks in negotiations?

Answer 24

They represent sellers and prefer to keep buyer and seller apart to control the situation.

Question 25

What is a common outcome of buyers and sellers getting together during negotiations?

Answer 25

Transactions can be lost due to personality conflicts.

Question 26

What is the key to success in negotiations with someone who cannot make decisions?

Answer 26

One side must commit to each point discussed while the other side must go back to the principal for confirmation.

Question 27

What is the advantage of blind negotiation?

Answer 27

It allows for quick offers when speed is critical in the transaction.

Question 28

What does open negotiation involve?

Answer 28

Extensive homework to know as much as possible about your counterpart.

Question 29

What should you do to make negotiations effective?

Answer 29

Know the motivations of the other party and prepare accordingly.

Question 30

What type of information can a city cross-reference directory provide?

Answer 30

* Place of employment * Name of spouse and children * Address matching

Question 31

What can a county courthouse/city hall directory reveal about a person?

Answer 31

* Real estate ownership * Tax payments * Legal issues

Question 32

What is a crucial factor to consider in the timing of a transaction?

Answer 32

Understanding the deadlines the other party faces.

Question 33

What does knowing who the other party is trying to impress help with?

Answer 33

It allows you to tailor your offer to meet their motivations.

Question 34

Fill in the blank: The most common kind of negotiation is _______.

Answer 34

[Blind negotiation]

Question 35

True or False: Open negotiation is more straightforward than blind negotiation.

Answer 35

False

Question 36

What might a seller need to understand to facilitate a deal?

Answer 36

Alternative directions to achieve their goals.

Question 37

What types of questions can help uncover the other party's timing needs?

Answer 37

* When do you need this property? * Is the first of March okay? * Can you get an okay by June 15?

Question 38

What can time urgency lead the party to do during negotiations?

Answer 38

Make a deal that is realistic, possibly at a higher cost than they desire.

Question 39

What role does the loan officer's quota play in negotiations?

Answer 39

It creates a timeline that must be considered in the negotiation process.

Question 40

What is the significance of understanding economic factors in a transaction?

Answer 40

It helps in assessing the seller's motivations for selling.

Question 41

What is the impact of urgency on negotiations?

Answer 41

Urgency may lead to a deal that is realistic, even if it costs more or offers less than desired.

Question 42

What can cause participants to end a deal during negotiations?

Answer 42

Participants may end the deal if they feel they are being delayed.

Question 43

What are important facts to know when negotiating with a loan officer?

Answer 43

Time periods for submission to loan committees, quotas for the loan officer, and other time traps affecting the need for money.

Question 44

What can a 90-day delay in credit checks or appraisals lead to?

Answer 44

It can be disastrous if there is a contract provision that needs to be met within a shorter timeframe.

Question 45

What should be verified before completing a deal?

Answer 45

Key items such as the quoted price, legal description, and environmental issues.

Question 46

Why is it important to verify the quoted price?

Answer 46

To ensure it is the lowest price and to check for any hidden costs.

Question 47

What is a legal description in real estate?

Answer 47

A specific description of the property, such as 'Lot 1, Block 7 of the Cummings Plat Number 1.'

Question 48

What additional information should be included in a property description?

Answer 48

Lay terms describing location, size, and features of the property.

Question 49

What should you do to ensure you know what property you are buying?

Answer 49

Verify the legal description and physically measure the property boundaries.

Question 50

What should you understand about mortgages before accepting an offer?

Answer 50

All terms of the mortgage, including payment structure and potential penalties.

Question 51

What are some common confusing clauses in mortgage documents?

Answer 51

Terms of payment, amortization, balloon payments, and pay-off penalties.

Question 52

What should be included with the property in a contract?

Answer 52

A comprehensive inventory of items and fixtures included in the sale.

Question 53

What is a critical clause to include regarding environmental problems?

Answer 53

A warranty from the seller that there are no environmental issues.

Question 54

How can code violations be checked?

Answer 54

Through local building department inspections or by hiring a property inspection company.

Question 55

What should a seller be cautious about regarding closing dates?

Answer 55

Buyers may insert provisions that allow them to delay the closing beyond the established date.

Question 56

What should sellers check regarding the sale price?

Answer 56

Ensure that the price is not affected by other conditions or deductions outlined in the agreement.

Question 57

What is the importance of how mortgages are paid in a sale?

Answer 57

It can impact the seller's tax considerations significantly.

Question 58

What is a good practice for starting negotiations?

Answer 58

Establish the tone of negotiation and have a flexible game plan.

Question 59

What should buyers avoid during property negotiations?

Answer 59

Criticizing or overly praising the property.

Question 60

Why should sellers avoid excessive talking during negotiations?

Answer 60

Too much talk can kill deals.

Question 61

What should be done if there are valuable plants in the garden?

Answer 61

Create an inventory to ensure they remain part of the property.

Question 62

What can happen if an attorney does not check property boundaries?

Answer 62

The buyer may mistakenly believe they are purchasing more property than they actually are.

Question 63

What is essential for a buyer to obtain before finalizing a mortgage?

Answer 63

A thorough explanation of the mortgage terms from their lawyer.

Question 64

What should be done if the buyer wants to ensure specific items are included?

Answer 64

Get a detailed written inventory of all items and fixtures.

Question 65

What is a potential consequence of not verifying the legal description?

Answer 65

The buyer may purchase the wrong property.

Question 66

What is a common misconception about sellers disclosing problems?

Answer 66

Many believe it is law for sellers to disclose all known issues, but this may not be the case.

Question 67

What should you avoid doing when negotiating with the other party?

Answer 67

Criticizing the agents or brokers representing the deal ## Footnote You never know their personal connections to the parties involved.

Question 68

What is important to communicate to the other party during negotiations?

Answer 68

Why you want to buy or sell the property ## Footnote This can help gauge the other party's receptiveness.

Question 69

What is a critical factor in establishing trust during negotiations?

Answer 69

Doing everything you said you would do on time, or sooner.

Question 70

How should you handle phone calls during negotiations?

Answer 70

Avoid using the other party’s phone or taking calls about other business while present.

Question 71

True or False: You should praise yourself during negotiations.

Answer 71

False ## Footnote Let others mention your successes instead.

Question 72

What is better than having no communication at all during negotiations?

Answer 72

Having good communication.

Question 73

What form does effective negotiation take for a buyer of real estate?

Answer 73

An offer to buy or a letter of intent to buy.

Question 74

Why is it important to have terms written down during negotiations?

Answer 74

Talk is cheap and memory of what was said often varies.

Question 75

What should sellers limit during negotiations?

Answer 75

The time that the buyer has a 'lock' on the deal.

Question 76

What must buyers be able to do if elements of their due diligence prove unsatisfactory?

Answer 76

Withdraw from the deal.

Question 77

What must occur before the actual negotiation begins?

Answer 77

A confrontation.

Question 78

In bartering, what does it indicate if both parties are hesitant to make an offer?

Answer 78

They are not negotiating effectively.

Question 79

What is the main goal of both the buyer and seller in a negotiation?

Answer 79

The sale of the property.

Question 80

List three enemies to every transaction.

Answer 80

* Taxes * Rejection * Greed

Question 81

What keeps negotiation on the right track?

Answer 81

Poise, diplomacy, charm, and courtesy.

Question 82

What is a common mistake made by buyers in negotiations?

Answer 82

Not delivering offers on time.

Question 83

What is the essence of negotiation?

Answer 83

Effective communication.

Question 84

What can failure in negotiation indicate?

Answer 84

Opportunities for learning and improvement.

Question 85

Fill in the blank: The sweetener of success is _______.

Answer 85

failure.

Question 86

What should you do if you encounter difficult-to-negotiate individuals?

Answer 86

Recognize they may be frightened or unsophisticated.

Question 87

What is a key to succeeding in real estate negotiations?

Answer 87

Building trust and a network.

Question 88

What should you analyze after experiencing failures in negotiations?

Answer 88

Your negotiation strategies and approaches.