Real estate negotiators achieve their optimal outcome when they understand their needs and the potential investment opportunity.  Negotiations should never be emotional, but rather they should always be rooted in tangible data. 

Fact based negotiations keep everyone focused on the numbers and helps the buyer formulate an investment basis for the property.  If you are seeking a 20% return on an investment property and you know based on the current rents and projected selling price, you can only pay x for the property, make sure that you can justify x is the appropriate price.  If it’s lower, than this could be an excellent opportunity, but if it’s higher, then you have already set your maximum bid price.  Stay focused on the numbers and never bid more than your research suggests you bid. 

Novice investors also miss the opportunity to increase their market knowledge through their negotiation sessions.  Sellers typically have a very good grasp on what is going on in the market.  Regardless of the outcome of the negotiations, understanding where the seller feels the market is head in the next five years could provide value insight into future investments.  Obviously sellers will be overly optimistic to achieve the highest selling price, but by probing a potential buyer could find out about potential new developments, retail or residential units coming online or going offline and a variety of other neighborhood specific items outside buyers might not be aware of.

While buyers should come prepared to negotiate based on facts and market research, they should also be prepared for a seller negotiating solely on emotion.  Sellers have invested time and money into the property they are currently marketing and will always believe that they have the best property on the market.  Many times sellers feel like a low offer is a reflection on their management skills or their skills as an investor rather than simply the prevailing market price.  Never take anything personal and always stand behind the research.

Buyers should also avoid being overly concerned about what the seller paid for the property, but should request this information from their real estate agent.  Buyers need to know what a seller paid for a property (public records that any realtor can provide) because it can help them understand if a seller might be holding a mortgage worth more than the property or if they might be underwater after paying commissions and other selling costs.  Furthermore, sellers will be much more eager to provide financing if they receive a large settlement from selling the property.

Always keep the end goal in mind when negotiating.  Buyers should consider price and terms when considering purchasing a property.  Market customs vary, but always remember, everything is negotiable.