Negotiating to Everyone’s Satisfaction
In this heated market, it’s hard to keep buyers and sellers on the same page. Use these six tips during negotiations to help both parties feel like they’re walking away with what they wanted.
August 9, 2018
Real estate negotiations can be taxing for both you and your client. Especially now that homes are flying off the market at breakneck speed, prompted by low inventory and rising housing costs, the risk of a contentious or even hostile negotiation is high. The skills you need to navigate a successful negotiation—such as understanding your role as the agent and knowing the product you are haggling over—are the same today as they were 50 years ago. But there are different ways to apply these skills in today’s high-pressure market. Here are some techniques for making sure negotiations leave all parties satisfied.
Don’t ‘Fight’ for Your Client
Yes, you want to protect your clients’ best interests and make sure they get the best deal possible. But you shouldn’t have to “take the gloves off” to do it. In this ultratight market, the stakes are high, and sellers in particular may abuse their advantage and run roughshod over buyers. That’s already a toxic attitude—so don’t contribute to it by jumping into the catfight. Stand your ground for your client, but remain calm, courteous, and professional. It can actually disarm the other side and get you closer to completing the transaction.
Lowball offers may be the hottest button to push in this environment. It’s a seller’s market, and a lowball offer can often come across as offensive. Many real estate professionals feel they must side with their client in these situations, even showing anger toward the other side. Unfortunately, that attitude will not close the sale. You want both sides to feel they got exactly what they wanted—and that won’t happen if they feel like they’re walking away from the process with scars.
Know the Invisible Value of Your Product
Buyers can see with their own eyes many of the structural and aesthetic features that make a home unique and appealing. But do they know about the home’s other assets—a newly replaced roof or HVAC system, for example—that could work to their benefit? It often happens that a seller may be asking a fair price for the market, but buyers who don’t have the full picture of the home still balk.
When negotiating, you need to be able to speak to every detail that supports a home’s worth. For a residential property, know whether any additions or custom detailing have been made. For a commercial property, know the income and expenses it generates, as well as features that can reduce operating costs. Storm windows, extra insulation, and energy efficient heating and cooling systems also are items that can have a big impact on negotiation terms. Knowing your product inside and out and being able to demonstrate that can smooth conflict and make negotiations easier.
Use Your Market Expertise to Pinpoint Trends
If you’re working with a client to close a sale in a neighborhood that is becoming active with rapid sales, this will affect your negotiation position. Say properties in the area are selling in less than a month. That should tell you that your buyer needs to make a competitive offer from the start if they stand a chance of winning the home. you can relay this message. On the other hand, if the market is slow and properties are sitting on the market for long periods of time, this should tell you that your seller needs to be prepared to accept lower offers. Having intimate knowledge of the dynamics of the market you’re in can help you give better advice to clients up front and keep negotiations from stalling.
Keep Everyone’s Eyes on the Prize
It’s easy for buyers and sellers to get hung up on insignificant items during negotiations and lose sight of the big picture. It’s your job to lend perspective. Sellers, for example, may stall when buyers ask for extras such as furniture or appliances, forgetting that you helped them negotiate a sale price over ask. Buyers, too, may push back against the price or other negotiation items, even when the seller has accepted all of their contingencies.
Remind your clients that their ultimate goal is to buy or sell a home, and squabbling over minute details isn’t worth risking the sale. If the negotiation falls through, they may have to start over at square one. Everyone needs a devil’s advocate to help them see clearly what they stand to lose and gain. You must play that role for your client. But…
Don’t Ignore the Small Items
Even though you don’t want clients to focus too heavily on small issues, you do want them to feel like they’ve gotten the most out of a deal. So negotiating for smaller items should be on the table, though it shouldn’t co-opt the whole negotiation. If you come to an impasse, offering giveaways such as furniture or appliances can restart the negotiation. In the sale of a commercial property, machinery or delayed closings work well as giveaways. Many times, the seller will be happy not to have to move the equipment or furniture, and the buyer will feel like he or she won something. But what is important to the buyer may not be to the seller. Keep that in mind throughout the negotiation.
Pay Attention to Perception
Remember, perception is everything when negotiating. If the seller receives an offer at full list price within days of going on the market, he or she may wonder if the home was priced too low. Conversely, a buyer whose lowball offer is accepted immediately may wonder why the seller was so eager. In both situations, the clients may perceive that they’ve have made an error. You must thoroughly explain your client’s motivations to avoid distrust and a possible showdown at the negotiation table. Perhaps the seller needs to relocate quickly for a job or the buyer has unique needs that the home will meet. It is you, the negotiator, that has the ability to explain this in a way will leave the either side feeling more relieved about their choices.
Dixon Commercial Real Estate
Thomas J. Dixon is the broker-owner of Dixon Commercial Real Estate in Miami. He was the 2004 chairman of the Miami REALTORS®, and for more than a decade, he has taught a three-part series on commercial brokerage for the association. His company also handles real estate tax assessment appeals. He can be reached at email@example.com.