While there are other factors, all real estate sales focus on one conflict: The seller wants the highest price for the property, and the buyer wants the lowest price for a property he or she wants. That doesn’t mean that the parties are hopelessly at odds. In fact, a successful real estate closing means that both parties received what they wanted.
The job of the real estate agent is to make sure that happens.
The Agent’s Role in Negotiation
The most successful negotiation strategies are based on the principle that these bargaining sessions have a common goal that is somewhat mutually beneficial. But the economic conditions of a reasonable negotiation transaction (price, property, offers, counteroffers) can matter little when compared with a party’s:
- Willingness to compromise
- Patience and impulse control management
- Ability to see another party’s point of view
- Communication skills
- Dedication to ethical obligation
- Ability to see tasks through to a sound conclusion
This is why the real estate agents play a vital role facilitating this process. While they want the biggest commission, they also want the transaction to close. Agents are mediators who identify issues and areas of agreement, keep the parties on track, and guide the buyer and seller to a beneficial agreement.
To successfully manage real estate negotiations, these skills will be helpful:
- Active listening: The listener confirms their understanding of the speaker’s messages by asking questions and paraphrasing his or her words
- Emotional intelligence and relationship skills: This includes reading people and managing emotions
- Excellent communication skills: both message sending and message receiving
- Ability to clearly identify and communicate the issues, possibilities, and alternatives in a specific real estate negotiation
- Skilled at recognizing the parties’ motivations and evaluating their positions
- Talent for emphasizing benefits for both parties
- Consistent aptitude for dealing with objections and maintaining perspective
Prepare for Success
So, you’ve got the skills; now you must prepare your client. Buyers and sellers are often inexperienced with negotiation. Review the process, the sales contract form and addenda, the offer-counteroffer back and forth, concessions, contingencies, deadlines, and commonly negotiated items and costs. Also, prepare your client for the worst-case scenario. This is important for managing expectations, reducing stress and conflict, and making your life easier.
Prepare the Information
The old saying “knowledge is power” is no truer than in a real estate negotiation. Gather as much information as you can about your client, the other party, the property, market, financing, and laws. You’ll want to know:
- Why the seller is selling and the buyer is buying
- Whether it’s a buyer’s market or a seller’s market
- How long the house has been on the market
- How many houses the buyer has seen
- How many offers the seller has considered
- How many times the price has been reduced
- Any financial difficulties that might affect the parties’ choices
Advise your clients to be careful what they say about their motivations and alternatives so as not to jeopardize their negotiating position.
The bargaining mix is the collection of issues or goals involved in a negotiation, some of which are generally more important than others. Everything is negotiable, including:
- Price: This can be affected by negotiations over the items below
- Closing costs: Buyers might ask the seller to pay part of their closing costs
- Closing date: The buyer may want to take possession at the start or end of the month as this can affect when they start payments
- Contingencies: financing, appraisal, and inspection
- Home warranty on the systems and appliances
- Repairs: If an inspector notices defects that should be fixed, the buyer can negotiate to have the seller fix them before closing. Also, the price can be reduced to account for an outdated house
- Personal property: Sometimes the seller will agree to leave some furniture with the property, like chandeliers and patio furniture. Most of the kitchen appliances are often included, but double check
Rules of Negotiation
Think of these as “rules of negotiation conduct,” principles that should guide your behavior from the beginning of any negotiation:
- Communicate clearly, thoroughly, and often
- Don’t decide too much too early in the transaction process and have a clear idea of the alternatives
- Don’t approach a deal in terms of a “fixed pie”
- Remember that the agent is an advisor. The client must make the decisions
- Remember that the agent is not an attorney
- Avoid offending the parties
- Strive to avoid underhanded or suspicious conduct
- Try to be patient, and encourage your client to do the same
- Determine deadlines: Deadlines can greatly influence the parties’ approach to negotiation. If the other party is facing a deadline, you can often use this to your client’s advantage
- Clarify your client’s motivations and those of the other party
- Amass all the information you can
The must-have proficiencies for a successful real estate mediator are superb communication skills, high emotional intelligence, and a talent for gathering and juggling variety of information and knowing how to use it.
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