(This is Part 2 of a six-part series. Read Part 1, Part 3, Part 4, Part 5 and Part 6.)
Good negotiation skills are akin to having a Global Positioning System, or GPS, in your car. Having them will take you where you want to go. Without them, you will be hopelessly lost in today’s highly competitive, slowing market.
Last week’s article looked at three different approaches to negotiating more effectively. Today’s article examines three critical mistakes that poor or inexperienced negotiators make.
4. Don’t be a White Knight
A major mistake many inexperienced negotiators make is negotiating as if they were one of the principals. A classic example is the agent who says, “I’m not going to let my sellers take a price that low!” This is known as the “White Knight Syndrome.”
I remember dealing with a listing agent who was notorious for wanting to control all aspects of the transaction. I cringed when my buyers wanted to place an offer on his listing. Prior to the offer presentation, I explained that my buyers wanted me to watch how the sellers responded to their offer. They were particularly hoping that neither agent speak until the sellers responded. (This goes back to the principle that “the first one who speaks loses.”) The strategy worked. I was able to present the offer without interruption. Furthermore, the sellers agreed to the price that their listing agent later told me, “that I would never have let them take.”
5. How much will the seller take?
A major negotiation error that could cost you both your license and thousands in litigation fees is to represent that the seller will take less than the asking price for the property. When someone asks you what the seller will take, there is only one correct answer: the asking price. If the person persists, respond by saying, “The only way to know for sure is to write an offer.” One agent made a major blunder when she told a reporter from a major newspaper her seller would take $500,000 less than the asking price on a $2.3 million listing. The seller sued her and her firm and won a huge settlement. The point is that even if the seller tells you that he or she will take less, the only way you can discuss it is if you have a written price reduction.
6. Stupid broker tricks
Smart negotiators never discuss the terms of any other offer that the sellers may have received. Because people don’t like having their offer “shopped around,” discussing the terms of competing offers can cost you the transaction. Assume, however, that you represent the buyer and you would really like to know what those other offers actually were. A question that many sophisticated negotiators will ask is, “How much have the sellers turned down?” A large majority of agents will answer the question. The correct answer, said with a smile in your voice is, “You know I can’t discuss the terms of other offers. If your clients are interested, writing an offer is the best way to determine what they will take.” Asking this question poses two hurdles to negotiating the deal. First, the sellers’ circumstances may have changed and they may be more willing to take a lower offer. Consequently, what they turned down in the past may be acceptable today. Second, by asking this question and conveying the answer to your buyers, you may cause your buyers to overpay or not to write an offer at all.
For example, if your buyers can afford a top price of $375,000 and the sellers turned down an offer of $400,000 three months ago, most buyers will elect not to write the offer. If the seller is facing a job transfer, a foreclosure or needs the money for some other reason, they may be willing to take your clients’ offer. Timing, rather than money, may be the issue. Inquiring only about what the seller will take doesn’t address these other issues. Whenever possible prior to writing an offer, do your best to discover what the sellers’ motivation is for selling their property. A seller who is facing payments on the current home plus a new home will be much more motivated than the seller who has no payments and can move whenever he or she elects to move.
Improving your negotiation skills requires having the right language. Watch for next week’s article to learn how to avoid the language that can undermine your negotiation success.
Bernice Ross, national speaker and CEO of Realestatecoach.com, is the author of “Waging War on Real Estate’s Discounters” and “Who’s the Best Person to Sell My House?” Both are available online. She can be reached at firstname.lastname@example.org or visit her blog at www.LuxuryClues.com.