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Negotiation Tip from the CEO: Price Should Never Trump Terms

Posted by on Jun 29, 2018

by Mitch Cox

Negotiating to purchase property is all about reaching an agreement that works for the buyer and the seller. Price is obviously a key point of the negotiation, but it is not the only point—and sometimes not even the most important.

I always start with asking the seller, or the broker representing the seller, their asking price. If dealing with a broker, I feel him out to see what the broker thinks is the lowest price. Then I figure that price into my deal to see if that price will allow me to get the return on my proposed project that I believe justifies the risk, the time, and the effort. If it works, I leave the price alone and then try to negotiate the length of time for my due diligence which is most important.

Solomon wrote in Proverbs over 4,000 years ago that a prudent man looks well into the matter and seeks counsel from many others. It is critical to the success of any development to understand the market, the soil conditions, the zoning, the title, environmental issues, and the cost of your proposed development, among others. No stone should be left unturned, and you need a reasonable amount of time to accomplish this diligence.

Then you need a reasonable amount of time to close. Sometimes your development plate is full, and you want to put off closing for 6-12 months after the due diligence period. In this case, you need to let the seller know you are serious, so you offer to make your first deposit non-refundable, and you are willing to offer more non-refundable money for the extended closing period.

If the seller’s price works for me, he is willing to give me the time to do my due diligence and my time for closing,  I’m happy and I don’t try to push down on the price. In the development process there are frequently unexpected delays. If the seller is happy with his price, he is usually willing to work through delays to ultimately get to the closing.

My goal is always to negotiate a win-win for both parties. If I’m happy with the price and terms I’ve negotiated, why should I try to squeeze the seller on price?