Let us deal with the truth. At the very nucleus of your fiduciary duty to your client is the thought that you need to work hard to arrive with the best amount. That simply means you are drifting away from negotiation and you need to be sharp so you learn from the best in the trades. As John F. Kennedy would say, “Never negotiate out of fear, but never be afraid to negotiate”. Eyeing on becoming an excellent negotiator?
Get a cup of coffee, concentrate on reading this, and see our top 17 real estate negotiation strategies listed below:
- Put an Escalation Clause so that Your Offers will be more competitive. An escalation clause is an efficient way to give your client the best opportunity to obtain multiple offers. Normally, the language used in an escalation clause is something like this:
“___________________ is willing to pay $10,000.00 higher than your highest written offer but not to exceed $1,500,000.00. A copy of the highest written offer to be sent along with acceptance”.
- Scrutinize the type of Negotiation and Specify the value-creating methods. Read books on negotiation strategies and some hand-outs that can be found over the internet. It is best recommended to assess the type of negotiations that you are trying to attain; whether you are negotiating the best deal for yourself, it will always be a win-win situation. One of the crucial challenges in negotiation is to specify value-creating methods: things that are not expensive for the other party to give and valuable for you to receive; and vice versa. This is prevalent in real estate negotiations.
As an example, if a house is on a market for $500, 000.00, but your research, supported by your broker’s justification, tells you it is overpriced. By your assessment, a fair price would be around $400,000.00 but when you offer that price, the other party stated that you are “not even close” and does not count. You may think that the seller is in denial in terms of the slum in the housing industry, which has affected figures in your town for quite a bit.
Sellers are also researching the prices paid for the nearby properties a few years ago, while buyers are looking at comparable deals from the fast few months to come up with a fair market value of the property. You might also consider creative deal structuring to break within the incoming impasse. Begin by regarding that regular property purchase is a very tight deal. And as soon as the seller commits to a specific buyer, the seller cannot legally dispose of the house to other buyers, even if it offered a significantly good price.
In your scenario, a “loose” deal structure might supplement a way forward. Imagine that you come up with a slightly higher offer that is higher by say, $425,000.00. Then give the seller about a couple of months or sixty (60) days to keep shopping the property. If better deals come during this period, the seller has a right to walk away by paying you a so-called “breakup fee” which is about $25,000.00 or less.
This type of deal scheme comes up with a value based on several beliefs in terms of the value of the property. Having said that, you are marketing this to the seller: “You think the house is worth $500,000.00, but I think that you will not obtain a better offer than my $425,000.00. I am very confident in my belief that I am willing to give you a couple of months to justify you are right. If you do find a price better than my offer, I will keep looking for the ideal property. If you do not find a better deal, we will close in in a couple of months, at my price.”
- Fiduciary duty should be taken into consideration seriously. If you want to keep up with the fiduciary duty to your very own client, you need to make every effort count, to get them an excellent deal. Even if you are just performing it for the sake of saving your face. As stated by Shark Tank Barbara Corcoran in the New York Times,
“Negotiation is like dating,” she said. “There’s got to be some romance. If the guy gets the girl home on the first date, it’s too easy and the relationship doesn’t last.”
“Nothing poisons a deal faster, than when the asking price is accepted outright or when a buyer’s first offer is accepted. Either the seller feels he under-priced his home, or else the buyer feels he offered too much money for it. Rather than work on the relationship a bit, the buyer and seller tend to drift apart,”
- You have to let them think that saying yes was solely their decision. Of course, no one wants to be coerced into doing something. That is the reason why excellent negotiations subtly encourage the other party to think that they are in perfect control. An efficient way to do so is to offer them an immediate out.
To tell you the truth, based on studies, using affirming languages such as “you’ll probably refuse, but.” Leads to boosting up of compliance. An example of how you can use this method in your negotiation, goes something like this, “The buyer is asking for you to pick up the closing cost so that the deal can be closed. You are free to say no to that, of course, no strings attached, but would you consider it?”
- Come up with a win/win scheme. A lot of new real estate agents make the mistake of jumpstarting each negotiation as if they are engaging in a war. The annoyance of the listing agent is the last in the list, but you can hurt your client’s interest here. Instead, learn the art of taking issues and pay close attention to solutions and not on turning everything into an adversarial quandary. Your fellow agents and your clients, ultimately, will be truly happy.
- Always utilize the market value instead of the asking price as your beginning point. One good technique is to compute the value of the property. This, instead of the asking price, is the beginning point for your negotiation. In prime markets, it may need an offer above the present market value to obtain a property under contract. A lot of people want to bid low, making a truly unacceptable offer. This is not recommended. It does not say anything about the position of the seller. It is encouraged to come up with an offer just below what the minimum seller is likely willing to accept. The seller will have no choice but to accept the offer a little less than the minimum, or he will aggressively counter to not shoo away a solid buyer. You know, in tennis, it does not matter how hard your first serve is if you do not get the ball live, the first serve is nothing but a waste.
- Adapt the art of persuasion. In restaurants, waiters include a gift like a fortune cookie or mint after your sumptuous meal, and tips increased by 10%? That is what you called reciprocity. We have collated the six (6) art of persuasion:
- Reciprocity: People are obligated to give in return to something received.
- Scarcity. Artworks, trophy properties, and antique works are good examples of scarcity by persuading individuals to act on a certain matter.
- Consistency. People are more comfortable in scenarios that are steady over time and try to hold on to it. That is why when you always treat the listing broker like an enemy, it will surely backfire against you.
- Authority. People are likely to heed with the request if it is coming from an expert or authority in the industry. That is why lawyers have degrees posted on their walls, and why designations and certifications can be truly helpful.
- Linking. Individuals like other people who are similar to themselves, and based on studies, that group class is correlated with persuasion.
- Agreement and Unanimity. The kitchen or bathroom that is pinned over and over again on Instagram will aid a home sale a lot easier. In the same manner, if you possess a reputation as a superb agent to work with, more agents will surely want to work with you. As an output, you will obtain leverage in terms of negotiations. Want to learn more? Just click here.
- Try to obtain more information than the other side. The old proverb in real estate is practically location, location, and location. On the other hand, when it comes to negotiation, the key is data, data, and data. Let your data drive your decisions and negotiations. Get pieces of information and leverage it to your benefit. The secret is to have a lot of information as compared to the other side.
The individual who is equipped with the most amount of data is more likely to win over such negotiation. You should also know the best alternative to a negotiated agreement if the negotiation does not go the way you want it to be, what are the other options for both parties? Listed are a few things you need to find out:
- Market Time
- Average market time for the same properties
- Average Market time in its entirety in the market
- Have an idea what else is in the market
- Number of rooms
- Homeowners association fees
- The “why”
- Learn the power of the word “NO”. Contrary to popular demand, the word “no” is considered to be one of the most empowering terms someone can utter. Based on studies, the word “no” is a moment of strong and pure choice. It says something positive about you, indirectly.
Imagine during a hostage-taking, getting someone to agree with you even by saying no can be a lot more powerful than saying yes. This is because the word “yes” is considered a horrible word simply because it scares people. They wonder what they have committed themselves to as they become out of line and nervous. They start to become distracted and when they are, the tendency is that they will not listen to you.
When you get a “no, it will make you move forward; you are eyeing for an agreement. We have to remember that an agreement does not specifically emanate from saying “yes” since we are used to being trapped by that word.
- Utilize Price Anchoring to find a good deal. The “low anchor” is considered to be the most efficient negotiation strategy. It is the scenario when you intentionally state a low ball range or offer to a prospective buyer to alter their idea of the financial parameters of the said deal. Traditionally, this will get a prospective buyer to perform right to their bottom line, close to it at least.
- Give regard to the power of truth. You have to be sure to make the truth your trusted negotiation partner. The term truth, in transactions involving real estate, tends to send each party free to make quality, informed decisions that make everyone practically on the loop to the closing table. Separately, the present market condition has not altered the principle of comparable value. One good example is the location. Once reigning superior, an ideal place may be tentatively brought into question. Still, after the pandemic’s final retreat, it is sure to transform into its original state; a property’s most cherished amenity.
- Learn to know what the other party requires the said deal. You have to have an idea of what the other party needs and not the reason why they are disposing of the property. But instead, what will satisfy them to come up with a win-win transaction. Learn from the agent and recognize the positive points of the property or the positive features of the buyer if you already met them. Come up with the best deal so that the transaction will be successful and smooth. It is best to close this utilizing this thinking.
- Always transact with the phone at the onset before committing anything to paper. It is best recommended that agents negotiate terms and conditions over the phone together with the most cooperative broker, before writing it down. It is efficient to prepare for a counteroffer could be a bit messy when there are tons of unnecessary back and forth happening. If you are transacting with an agent through the phone, it is very helpful to write up the contract as you speak in maintaining more straightforward things. Several counteroffers will create complexity and confusion and make for a less than favorable real estate purchase experience. All you have to do is to just keep it as simple as it can be.
- Meet the sellers in person. The most efficient technique is to ensure you meet the sellers in person. Make an appointment according to the best possible time and never just wait for an open house. Meeting them face-to-face is crucial to a smooth negotiation. When looking at various offers, the sellers only select the highest figure when there are no other considerations to compare. The seller’s initial choice is someone they like, so if you get a chance to converse with them and find some things in common, you are basically in a better position in terms of negotiation. When your offer is just sitting together with four other offers, you will stand out simply because they can put a face on yours.
- Maintain your cards close, but never stay nonchalant. This technique is used efficiently when it is a buyer’s market. It is essential to be nonchalant and use innuendo, giving freedom for the listing agent to know that you have other choices. The other side of the table must never think that the property is what you want or that you do not have any options at all.
- Maintain healthy conversation emails and texts each day of the week. Keep abreast of the latest communication technology since it is being availed of by the new generation. But do not depend on electronic communications alone. There is a natural back and forth in a conversation where way more understanding and information comes out, and those things can be fundamental in getting to wins. You might know that the seller is very nervous since they are purchasing a home and trying to close both sales and move the very day. If you are confronted with a multiple offer scenario, your client now possesses a card to play. Similarly, they can offer a seller a one-week lease after the transaction. This may be the deal-breaker.
- Utilize Inclusions Strategically. For some negotiation specialists, one of the parameters that most agents miss is on the inclusion. A lot automatically includes the dryer and washer, as well as the refrigerator. Many put it as exclusion and say it is open to negotiation. If your $1000 will make or break a sale, it might be an excellent idea, however, if you can be able to leverage it for something the seller wants. This is effective, you are already taking the appliance so your client can obtain that savings and come up with an inspection team.
If you are looking to move to Dallas Texas and need an expert to help you find the right neighborhood, contact us today at ReByKaylee.
Apartment investor/ TREC® Brokerage LLC Owner
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