Negotiation Tactics for Maximizing the Selling Price of Your Land
Negotiating land prices is a critical skill for a real estate investor.
Know Your Value
When negotiating the best possible price for your land, knowledge is power. Before making an offer, learn everything about the property and the area.
Buyers and sellers should walk into negotiations clearly understanding the asset’s value and their walk-away number. Having these numbers ahead of time makes the process easier and less emotional.
Preparation is the most significant determinant of negotiation success. Unprepared sellers are prone to succumbing to buyer demands and accepting offers that aren’t in their best interest.
It’s also important to consider the source and alternatives you could pursue if you can’t reach a deal with your counterpart. This identifies your “best alternative to a negotiated agreement” (BATNA).
A key point to remember when negotiating is that you always want to keep pursuing something critical to get what you want.
Do Your Research
Whether buying land for building a custom home or investing in land as an investment, you’ll need to negotiate the best possible price. This involves researching the market and preparing for potential issues that may come up in negotiations.
For example, if a professional land survey reveals soil contamination, this information can help you save money on the purchase by negotiating contingencies that address these issues before settlement. This preparation can also help you determine an appropriate initial offer.
Know Your Walk-Away Number
Knowing your walk-away number is an essential negotiation tactic. It allows you to negotiate a better price for your land because it forces the other party to make concessions to close the deal.
This is an excellent strategy if you feel you are being taken advantage of during a negotiation. Setting your wish, want, and walk values is also helpful before negotiations.
Know Your Priorities
The adage is “location, location, location,” but knowledge also influences land sales. It is essential to know your priorities before you go to the negotiating table.
Make sure you get all critical information in writing. Verbal agreements or communications carry little weight in real estate transactions.
If you have any unanswered questions about the property, include a contingency to ensure you can back out of the deal if necessary. This protects you from any unpleasant surprises down the road.
Know the Buyer’s Goals
Understanding the buyer’s goals before you enter a real estate negotiation is essential. A typical ploy buyers use is to introduce an unimportant issue, fight you on it, and then ask for something more substantial. This is called a Red Herring.
It’s also crucial to know your walk-away number going into negotiations. This will help you remain disciplined and not cave on price. Using this information, you can counter with a higher offer that is still competitive.
Know Your Leverage
The more you know about the property, including why the owner is selling it and how much they paid for it, the more leverage you have. This is true for both coercive and positive leverage.
Always get any vital information in writing. Verbal agreements and communications are rarely enforceable in real estate transactions. Ask all your questions and consider adding any unanswered issues as contingencies in your offer.
Know Your Counter Offer
Once you receive an offer from a buyer, expect to have some back-and-forth negotiation on price. One strategy is to counter at your listed purchase price. This will signal that you’ve priced your land and intend to get the money you deserve.
Counter offers can also include concessions like a shorter closing timeline, seller-paid appraisal, and more. Be cautious about pushing negotiations too far because it could turn off the buyer.