Six Tips to Better Real Estate Negotiations
This week I've been reading a lot on negotiations in preparation for an upcoming class that I am teaching. I think often times we are afraid of negotiations because we view it as a contest or fight instead of a challenge to bring two or more parties to agreement and satisfaction with an end result. I could tell you all about the need to know different communication styles, how to read non-verbal signals from across the table, and the art of playing tricks on your opponent but you can find that anywhere by simply going to Google and typing in negotiations. Instead, I thought I would share with you what I've learned over the last ten years through my own personal business and from overseeing thousands of transactions as a managing broker. Here are my six tips to better real estate negotiations:
1. Layout clear expectations of the process to your clients. Buyers and sellers need to know that in today's real estate market there are four rounds of negotiations. The first round is when you reach mutual acceptance on price and terms, next comes the inspection period negotiations, third is if the appraisal comes in lower than your contract price, and fourth is the "last minute" items that always seem to come up in every transaction.
2. Know your clients needs, must haves, and wants. Have your clients make a list of what their needs are from the purchase or sale of their home, what they must have, and what they want. Have them fill out the three columns and keep in your file for when negotiations get started. Use it to bring clarity and focus if you find yourself in an emotional situation where there needs to be some "give and take".
3. Have your clients create a list of concessions they are willing to make. Similar to the list above, have your clients write out what price they are willing to sell at, what personal property they will include in the sale, whether or not the closing date is important to them, etc. Don't share this information without permission from your client. Again, use this list if things reach a stalemate and look for areas that can bring your client clarity and focus on their main goals.
4. Educate your clients on the real estate market. A failure to do this tip will cost you more transactions and cause you more heartache and frustration than anything else. Your clients must have an understanding of local market trends, the types of concessions other sellers are making for buyers, the average list price to sale price ratio, the average time on the market, how various loan products and interest rates are affecting buyers and sellers, etc. Don't assume they know we are in a different market than five years ago. They need your trusted advice and knowledge in this area to help them negotiate a sale. Don't let them down.
5. Understand the authority you have been given to negotiate for your clients. When you represent someone, you have been given a great deal of power and authority to help them negotiate their real estate transaction. Knowing what you can and cannot disclose is extremely important to you upholding your fiduciary duty to your client. You must present a united front on all positions your client decides to take. You do not have the authority to sabotage your client's position by stating to the other agent your disagreement with your client. You also do not have the authority to share personal motivation, needs, or struggles your client is going through while you are marketing and negotiating a sale for them. My personal favorite is when a real estate agent will announce at a broker tour that his sellers are super motivated because of the divorce they are going through and the likelihood that the seller will lose her job. If you were not given permission to say these things to other agents or buyers you have broken your clients' trust.
6. Remember your job is to bring people together not win a contest. Negotiations are not about YOU. Let me say it another way. Check your attitude and your unhealthy desire to see someone lose and you win at the door. Negotiating is about helping bring two sides together to close a transaction where all parties can look back and say they were respected and received the best outcome possible. The in-your-face approach will only come back to bite you in another transaction. Remember the Golden Rule.
These are the six tips I've learned over the course of my tenure as a real estate broker. I know there are more things to consider. There must be, because you can buy about 1000 different books on negotiating these days. In the end it comes down to wisdom and experience. Two things we all want right away. My final thoughts for you are to make sure you learn from each transaction how you can do better next time, treat everyone with respect, and don't say stupid stuff that hurts your client's position in negotiations.
Question: What has your experience taught you about successful negotiations, do you have additional tips to share?
Make it a great day!