Buying and selling real estate in Manhattan is as tough a marketplace as you can find in which to consummate a deal. Even growing up with a dad who negotiated for a living and being a real estate investor myself, I recognized that it still wasn’t enough to prepare me for the rigors and high stakes of negotiating real estate transactions in NYC.
The first thing I did after getting my license was to enroll in the Certified Negotiations Expert program. I continue to pursue a greater knowledge of negotiations through reading and education. It has saved my clients millions of dollars.
To have the best outcome and to avoid negotiation tricks, you must first understand that negotiating is a form of art and every person has their own style.
There are five basic styles, and identifying the other person’s style early in the process will give you a more empowered position for negotiating.
- Competing (I win, you lose)
- Accommodating (I lose, you win)
- Compromising (I Lose/win some, you lose/win some)
- Collaborating (I win, you win)
- Avoiding (I lose, you lose)
The other key to achieving your negotiating goals is to have as much information as you can get from the other party. I like to call it “recognize and recon.”
Recognize and recon begins with the first showing. For the selling agent, there is a delicate balance between providing information to buyers and carefully listening to what people are saying as well as paying close attention to body language while you are “selling” the attributes of a space.
It is a prime opportunity to size up the level of interest and who you will be negotiating with as well as gaining an understanding of what might motivate the buyers.
A solid strategy is to take notes directly after the showing so that you can review them if they do submit an offer. I use Siri on my phone to take notes.
The other key to successful negotiation is knowing what to expect. Here are four tricks you should know about and when to expect them.
No counteroffer from the seller
Look out for this one when you make a lowball offer. As brokers, we all know that a lowball offer is a relative term, and it is relative to the type of real estate market in which your client is selling or purchasing.
Is it a buyer’s or a seller’s market? The state of the market is relevant to your negotiating tactics. Make sure you have accurate comps and that whomever you represent is well-informed about the comps.
What does a no-counter look like? You submitted, the offer and six hours later, you get a call informing you that the seller will not even give you a counteroffer. This trick is to get buyers to bid against themselves before the seller counters the offer, to reduce the amount being negotiated before a counteroffer is given.
Get on the phone, and find out if there are other factors that will motivate the seller like closing date, dropping contingencies, etc.
Also known as the pressure cooker or “we have another offer,” this trick is more common in a seller’s market, but even in a buyer’s market you might encounter this when you are bidding on a property that is well-priced and perceived by the market as a value that won’t last long.
The best strategy to employ is to first understand if your buyer is emotional about the property. If they are, then establish a plan that wins the deal for them. If they are not emotionally attached, then prepare your client to walk away at X price.
Either way, your best chance to win the deal is to have information on the seller’s motivations. Not all sales are entirely about price. The other party might be offering more money but with a contingency that makes the seller nervous, which makes your offer more attractive.
“Sorry, we have an all-cash offer and yours if contingent upon obtaining financing,” you might hear. This is why it’s critical that you have your client do all their pre-purchase preparations before beginning to search for a home and you should have their financial statement of assets and liabilities in-hand.
Any offer submitted will be much more competitive if their mortgage banker has them not just pre-approved, but also pre-approved with a greater degree of the underwriting process completed so that your client can sign a non-finance contingent contract or a contract contingent only upon obtaining a loan commitment letter.
Nitpicking post-inspection renegotiation
This can happen when a buyer has a home inspector do an assessment of the systems in a home and uses the report to nitpick and renegotiate price or at the least nickel-and-dime the seller during contract negotiations.
Every home has some issues. The best way to address this is to expect it and be proactive in having your sellers order an inspection before they decide to sell and get a contractor to give a bid for the repairs needed.
The buyer will order a home inspection during the contract negotiations and having the information in hand will likely save your client money, and it will definitely reduce the time it takes to conclude the contract negotiations.
The best way to avoid negotiating tricks is to be a broker who is well-versed in the art of negotiating and work with your clients in a collaborative spirit. Make sure that they have clearly conveyed to you what their motivations and goals are so that you can advise them as to the best way to counter the various moves.
We all know that buying and selling is a complex process and that the above barely scratches the surface of what can happen and how to counter it. If there is one critical takeaway, it is that information is power, and one of the most beneficial skills an agent can possess is being a great listener and knowing that how something is said is equally as important as what is said.
Christopher Totaro is a licensed real estate salesperson with Warburg Realty in New York City. Connect with him on LinkedIn.