Inman

3 unsung rules of real estate negotiation

Negotiation — that give-and-take act of horse-trading. The idea is that you have something I want, I have something you want, and through an iterative process of offers and counteroffers, we arrive at a mutually acceptable agreement.

In real estate, the seller has a house, the buyer (presumably) has money or the ability to borrow some of that stuff, and each wants to swap. Let the games begin!

Now, during much of the past decade, agents didn’t have to think too hard about the nuances of the negotiation process, thanks to "stated income" loans and a demand for housing that was, shall we say, a bit off-kilter.

LENDER: So, I see you babysit the Patterson twins on alternating Sundays?

BUYER: Yep! But only until I get my real estate license.

LENDER: And would you "state" that you make, oh, $72,000 an hour?

BUYER: Uh, OK.

LENDER: Congratulations! You are approved for the gross domestic product of Western Europe, expressed in rupees. Now get along and go buy yourself that pretty two-bedroom townhome!

In short, a buyer paid what the seller asked. The only real "negotiations" that took place involved who got to keep the window coverings, the ornamental fountain and buyer’s minivan (the seller).

Times have changed, of course. Today, negotiations are alive and well. Sellers still believe their homes are special, while buyers expect the Blue Light Special.

And the many newer agents who cut their teeth in 2003, who never had to really fill the role of negotiator, are finding they have to learn a new skill.

Now, while I am no Donald Trump, I have learned a thing or two over the years about negotiating. I’m a mom, after all.

And there are two rules of constructive negotiating I have seen bludgeoned repeated lately: Never reopen old issues, and never offend the other party. While these concepts may seem obvious enough, they are lost on too many agents and their clients these days.

Rule No. 1: Don’t reopen old issues

This is a mistake my daughter used to make. My daughter, however, was 5 at the time.

"I will give you $5 if you let your sister out of the closet." I would open.

"Six," she would authoritatively counter.

So far, so good. But then all rational thought would quickly take leave.

ME: "Five."

DAUGHTER: "Seven."

ME: "Five."

DAUGHTER: "Eight and a new Beanie Baby."

ME: "Five."

This would continue, with my formidable opponent pausing periodically only to reload her random number generator, until we reached agreement. Agreement in our case was always $5. Go figure.

My daughter was playing the role of the seller, and it’s a seller I saw this week. When you say you are willing to sell for seven, then seven or something less is the direction in which we should logically be heading.

Raising the price is counterintuitive, and throwing in a late-game demand for a plush collectable (or a ceiling fan) is counterproductive. The result is that your sister will stay in the closet — and your home will stay on the market.

This week, I also saw the roles reversed: twice. Buyer makes offer, seller counters offer, and buyer responds with an offer lower than his original price and asks for a couple of appliances to be named later.

Excuse me? Of course this accomplished two things. It made the seller question the buyer’s veracity and general trustworthiness, and it violated rule No. 2.

Rule No. 2: Don’t make the other guy angry

"Corian counters are cheap, the road noise is unbearable, your house is ugly, and so is your dog, by the way," said the would-be buyer. OK, I’m paraphrasing here, but this was the general message delivered by the man who was considering an offer and felt the need to justify his price.

The seller does not need to feel a kinship with your client, but it’s always helpful if he doesn’t want him dead.

Dealing in good faith requires respect (at least feigned) for the other party and the other party’s position, and you’ll never find common ground by throwing trust under the bus early in the process.

As crazy as it sounds, I have seen sellers accept a lower offer because they liked the buyers more. This goes double, by the way, for the agents representing them.

Rule No. 3: Don’t bother if you don’t mean it

This is a bonus rule, and it relates more to the rampant fear of commitment among today’s buyers. Sure, they were beat bloody during the boom years, having been forced to play hands dealt from the seller’s stacked deck. Payback is, well, you know.

But when my client gets an offer, it is logical to believe that the buyer is sincere in his desire to purchase the home and is not simply writing offers for sport. Again, twice this week I have seen buyers proffer offers only to have them say "never mind" when the seller accepted.

Like a game of thumb wars, winning wasn’t in reaching the goal of a consummated purchase agreement but in demonstrating the most muscle in the negotiating game. Having "won," they took their ball and moved on to the next playground.

I suspect that agents are partly, even largely, to blame for this. So anxious to make the deal are we that we neglect to first gauge our clients’ commitment and comfort levels.

We forget that our clients aren’t buying a pair of shoes, and that it is necessarily a weighty emotional and financial decision, yet we treat the process as a triviality in our eagerness to get our hands on the paycheck at the end of the stick.

Sometimes, I think we should be a little less busy selling and a lot more attentive to the part about counsel and representation. And sometimes, the best representation means that the offer doesn’t get written.

If the client isn’t all in, if he doesn’t really know what he is willing to pay before opening discussions, or if the result of our efforts is a failed offer and a couple of emotionally charged and frustrated parties with nothing to show for it, there will be no paycheck — which, if you think about it, is appropriate.

Because, as agents, we really haven’t done our job at all.