“Gimme your best offer.” It’s a phrase used throughout the world to spark negotiation–whether over the price of market produce, the purchase of a car or even a new home. It is a starting point, and the good negotiator will quickly identify the best tactics and routes to achieve his/her sales/buying goal.
Real estate is full of negotiation. Price, of course, comes first to mind as a critical point of negotiation. But before we even get to that phase, there are several other key areas where savvy agents must use effective negotiation skills to win the mindshare of clients, buyers and other agents.
The Listing Agreement–Negotiating with Sellers
The listing agreement can be compared to a recipe. The agent and buyer work together to determine the best ingredients–timing, price and market position–that will sell the home. If one ingredient is off, the success of the sale is at stake. While the agent should be in the driver’s seat during this phase, there are times when agents must use persuasive negotiation techniques to convince buyers to make the right decisions–for the sake of the sale.
The most common example of negotiation at the listing agreement phase is list price. Rightfully, homeowners take great pride in their homes and often the emotional price tag does not match the market price suggested by the agent. In this scenario, it is up to the agent to objectively list reasons that support the suggested list price, such as:
- Average price per square foot for the type of home and neighborhood
- Physical layout and condition of the home
- Accessories and appliances
- Curb appeal
An agent with great success in the seller’s neighborhood and price range will certainly have an advantage in convincing sellers of their point of view, and with a combination of objective and professionally subjective data, agents will increase their success at negotiating list price and can smoothly move to the next phase of selling the home.
Marketing the Property–Negotiating with Agents
For real estate agents, “shop talk” can take place at any time, any place. The most popular topics: recent sales and new listings. Both buyers’ and sellers’ agents have stories to share in these areas, but it is the seller’s agent who will take advantage of these discussions to verbally market new listings. By raising intrigue of a listed property to agents, you increase the likelihood of showings and offers. Many agents extend their marketing message by hosting an agent open house. The agent open house is the selling agent’s opportunity to present the listing and position the home to agents. During this time, the savvy agent will strongly support the home price, so as to head off low offers and create a “buzz” around perceived value and demand for the home. These techniques may not be hard-core negotiation, but rather they set the stage for offer negotiations to come.
The Offer Stage–Negotiating with Buyers
During the offer stage, both sellers’ and buyers’ agents rely upon negotiation skills to support their client’s price, timing and other conditions. Because all parties want a completed sale, the common objective is to resolve varying terms and conditions. Through open lines of communication, a bottom line and “best offer” can soon be reached.
- Negotiating offer price–Some buyers and their agents present “low” offers. Again, because much of real estate is a perceived value, this offer may stand in the buyer’s mind as a fair offer for the property. It is up to the seller’s agent, with the seller’s permission, to negotiate a price closer to list price. In some cases, a seller’s agent may be able to negotiate items outside of contract price, such as closing date and inspection terms, to counter a low offer. Because these are often “back pocket” negotiation items, agents are wise to keep the seller’s timing and other concerns on a need-to-know basis.
- Negotiating the inspection–The home inspection can be a nervous time for buyers, sellers and agents alike and is a critical gate of the contract process. For sellers, there is the chance an inspector will find an unknown, which may cost the sellers money to repair, concession on the contract price, or even loss of the contract. For buyers, what appeared to be their dream home may in reality hide an infestation of termites, plumbing nightmares or even foundation issues. All are reasons to re-negotiate the sale, or even walk away. Some techniques used when negotiating inspection issues are:
- Limit inspection terms: On the sale of historic homes, a buyer’s sensitivity and tolerance to inspection issues may be softened by the home’s age and perceived value. In other cases, some new homes are of such high value and demand that inspection issues are considered, but may not be brought to the table for re-negotiation.
- Adjust contract price: Often, sellers are required to fix inspection issues prior to closing, creating an expense for the sellers. A technique often used to reduce out-of-pocket expenses to the sellers is to arrange the exchange of funds at closing, at which time buyers can schedule the fix on their own terms. This may be attractive to both parties and is something agents will want to discuss with clients and offer as part of the inspection negotiation.
Effective negotiation skills are not just an asset to agents–it’s a requirement for success. Whether in an up or down real estate market, agents that use effective negotiation techniques will win profit and/or satisfaction for their clients.
Howard Brinton is a real estate sales motivational speaker and the founder and CEO of Star Power Systems, a sales training organization that offers tapes, books, videos, conferences and a club that distributes selling techniques from the nation’s top producers.