Real estate negotiations are battles. They pit the interests of buyers on one side and the interests of sellers on the other. As a real estate agent, you are tasked with emerging victorious for your side.
To emerge unscathed, you need to understand the rules of the game. Obviously, you need to know the laws and regulations that govern real estate transactions, but savvy strategy will give you the upper hand.
Here are three rules of game theory to make you a better negotiator.
1. Never play a dominated strategy
Imagine you are playing a game of tic-tac-toe. You are the x’s, and your opponent is the o’s. It’s your move, and you have two options. Those two moves are below. Which option would you pick?
Obviously, you would pick the square in the top-right corner. That would lead you to a win. If you picked the bottom righthand corner, you would lose.
The bottom-right corner is the dominated strategy. It is dominated by the top-right corner. Picking the top-right corner, in this scenario, would always lead you to victory.
In your negotiations, always pick the strategy that is going to provide you the best outcome for your client. After all, that is your duty as a real estate agent.
If you aren’t winning the negotiation, you aren’t representing your clients’ best interests.
2. Put yourself in the shoes of your opponent
Peyton Manning, the recent Super Bowl-winning quarterback for the Denver Broncos, is one of the best quarterbacks of all time not only for his passing capabilities but also for his understanding of defense. Manning often knows the formations the defense will be running before the ball is put into play.
Knowing what your opponent is going to do and what your opponent wants will give you the edge in your negotiations.
If you know that the players on the opposite side of the transaction are looking for a closing as quickly as possible, this can put you and your clients in the driver’s seat.
Noticing a weak point in negotiations will allow you and your clients to dictate your terms of the deal.
3. Never assume common knowledge
Imagine you are representing a buyer who sends you a listing she would like to see. In the listing description, the listing agent has depicted the house as a fixer-upper.
However, in your client’s eyes, this is her perfect house. In her opinion, it does not need any fixing.
The listing agent has committed the fatal error of assuming common knowledge. He thought that everyone would see this house as a renovation project.
A house described as a fixer-upper can mean a much lower closing price than the price at which it was originally listed. You now have the winning edge when it comes to the negotiation just because your opponent assumed his opinion was common knowledge.
In negotiating a real estate transaction for your clients, your goal is to get the best possible outcome for them. Knowing the rules of game theory will help you win your battles.
Nico Hohman is a real estate agent and construction manager for NextHome Discovery. Follow him on Facebook or connect with him on LinkedIn.