In a real estate sales transaction, agents act as facilitators and mediators who identify issues and areas of agreement, keep the parties on track, and guide buyers and sellers to a beneficial agreement. It’s your job as a real estate agent to get the best deal for your client. That’s more than just the price.
Successful real estate negotiations involve juggling multiple factors and requirements while being an excellent communicator. There are a few things you can do to help negotiate a price that’s right for your client.
1. Know the Market
What is the average days on the market for homes in the area? What are other similar houses selling for? Is it a hot market, buyer’s market, seller’s market? What contingencies and inclusions are customary for the area? Are there several other houses for sale on the same street?
It’s easy to see how knowledge of the local market and economy can be useful in negotiations. If you’re in a buyer’s market, the buyers may feel comfortable walking away from a deal if they don’t like the terms because there’re a lot of other options out there. When there are multiple offers, sellers can be choosy with offers and stingy on the terms.
2. Know What Your Client’s Needs and Wants
Different clients are grappling with different circumstances and different financial challenges. A variety of factors such as financing, children, new jobs, and the sale or purchase of another home determine what’s important to your client. A deal that’s great for one client could be bad for another.
3. Know What the Other Party Needs and Wants
A wise negotiator has learned as much as she can about the transaction and the parties. You’re better able to identify smart concessions and contingencies if you know what’s important to the other party.
4. Balance the Bargaining Mix
The bargaining mix is the collection of issues or goals involved in a negotiation. Besides price, keep in mind other things that can be negotiated to your client’s benefit:
- Furniture and appliances
- Closing costs
- Closing date
- Home warranty
- Financing contingency
- Appraisal contingency
Any of these things can be added, waived, or adjusted to make an offer or counteroffer more attractive. Depending on how the items above are negotiated, the sales price may be increased or decreased. Price negotiation doesn’t happen in a vacuum.
5. Develop Excellent Communication Skills
Negotiating the best deal for your clients involves a lot of listening and effective communication. To successfully manage real estate negotiations, you need to:
- Use active listening
- Employ emotional intelligence
- Clarify issues and alternatives
- Evaluate the parties’ positions and motivations
- Emphasize the benefits
- Deal with objections
6. Handle Objections
Objections are the roadblocks to successfully closing a deal. Treat all objections as valid; they can tell you a lot about the parties’ true desires and misconceptions. Clarify and define the scope and character of the objection. This is where active listening is crucial. It’s best to address objections head-on. Skirting around them can lead to misunderstandings, frustration, and problems later.
Solve the easy problems first, and then look for ways that other issues can be mitigated.
7. Price or Offer Right the First Time
If you start strong and smart, you’ll likely encounter fewer roadblocks. Sellers should be realistic when pricing houses, using data about recently sold houses in the area. An over-priced house will take longer to sell and the price may need to be reduced several times. Buyers are advised to make their strongest offer first.
8. Ditch the Gimmicks
Low ball offers and high pressure tactics can backfire, inspiring animosity. Also avoid drama, pettiness, veiled insults, and tricks.
9. Give a Set of Options
If you’re at a sticking point, give the other party several options and let them choose. Negotiation is give and take, offer and counteroffer. There’s often more than one way to solve a problem.
10. Have a Fallback Option
If you have no good choices if a deal falls through, you’re stuck in a weak negotiating position and may end up with a bad deal. Sellers should have viable alternatives if the house doesn’t sell, and buyers should have a few other houses they really like. Having a clear, pragmatic “best alternative to a negotiated agreement (BANTNA)” puts your client in a stronger position.
Patience and preparation are key to successful negotiations. Identify each party’s goals and motives and then connect benefits with their needs, wants, and desires to show them that this deal, or this property, satisfies their interests and concerns.