Are your negotiation skills as good as they should be? If not, you’re not only cheating yourself of income, you could be costing your clients thousands of dollars as well.
Recently, Barb Van Stensel of Keller Williams in Chicago responded to an article I wrote on how to obtain price reductions on overpriced listings. She said that with her sellers, an agent needs a much stronger approach than I outlined in the article. Van Stensel shared seven key strategies she uses to deal with tough conditions in her market area.
1. I’m not here to take inventory — I’m here to move it
Do you want a listing or do you want sellers who have sold their home and have moved? The first step in Van Stensel’s strategy is to stay in constant communication with her sellers about what new properties have come on the market, what has been placed under contract, and what has closed.
According to Van Stensel, when you keep your sellers up-to-date on exactly what is happening in the market, "it is a lot easier to get the seller to understand the marketplace and to make an informed decision." Otherwise, you end up marketing for six months, and when an offer finally does come in, the seller wants to know, "Is that all I get?"
2. Pre-schedule your price reductions
Van Stensel says she has no problems obtaining seller permission for price reductions. The reason is simple. To work with her, the sellers must agree to reduce their price by 3 percent after every 10 showings or every three weeks — whichever comes first.
3. As the price changes, the marketing changes
Van Stensel has a great strategy to have agents and buyers revisit her listings whenever she obtains a price reduction. Her approach is to continually change the photos, especially the main photo that appears in first position on any brochure, on the multiple listing service, as well as on any major real estate portal.
The reason is that when agents and buyers see the same photo, they remember that they have already seen the property and that it was overpriced. Because they don’t click through to view the listing again, they have no way of knowing that the price was reduced. Van Stensel says this strategy definitely creates more attention for her listings when there is a price reduction.
4. Charge a refundable marketing fee
Van Stensel charges a $250 marketing fee up front that is reimbursed when the property closes. While this approach is quite effective with properties priced under $700,000, she has found it doesn’t work on higher-priced listings. The marketing fee "creates a partnership, and the sellers appear more serious because their $250 is on the line. As dumb as it seems, it changes their mindset tremendously."
5. Do your own showings and get paid more
Van Stensel handles her own showings rather than letting agents routinely access her listings with a lock box or key safe. She says this point of differentiation has helped her to persuade more owners of expired listings to list with her.
6. Detach sellers from their property
Van Stensel prefers to meet her sellers away from their home so that her sellers can "be away from their emotions about their home." For this strategy to be effective, you would normally be doing a two-step listing presentation. The agent previews the property prior to meeting with the client to discuss the price.
The challenge is that when you meet sellers at their property, they have the upper hand because you are on their turf. Meeting them in a neutral place or your office can give you a slight edge in terms of the negotiation.
7. The $27,000 mistake — the tale of two condos
Van Stensel was competing with four other agents for the listing on a two-bedroom, two-bath condo. Her competitors were unanimous in the belief that the property should sell between $260,000 and $275,000.
Based upon the quality of the finishes, the floor plan and the price per square foot in the livable area of the unit, Van Stensel knew the property would garner a much higher price.
She obtained the listing and put it on the market at $317,500. It sold for $305,000. Apparently, her competition had not taken the time to view the floor plans and the finishes in the comparable sales.
In contrast, another agent listed a comparable property just three blocks west. The building was the same age, same size, same room count and was listed at $310,000. The top producer who listed the property didn’t realize that this particular building was one of the best condo conversions in the area.
The result was that this property, which should have sold for more than $300,000, sold for only $280,000. According to Van Stensel, that agent "sunk that seller by $27,000" by not knowing the premium prices that location commanded.
If you want to be more effective in your negotiation skills, work on implementing these suggestions in your business. You may be very pleasantly surprised at the results.