Negotiation is the number one skill that will make or break your real estate business. In today's tough environment, it may be time to hop in your car and see your clients face-to-face rather than using your fax machine to negotiate that offer.
There's one very clear trend that has emerged from today's market. The experienced agents who mastered face-to-face negotiation are the ones who are doing well in this difficult market. It takes a skilled negotiator to close a REO or short sale, to get reluctant buyers off the fence, or to persuade sellers to aggressively price their property before it declines further in value. Here are some of the “tried and true” negotiation strategies that are just as effective today as they were 40 years ago.
One of the most important negotiation principles is "the first one who speaks loses." The quickest way to kill a deal is for the agents to insert themselves in to the decision making process. In the area where I worked, listing agents always accompanied all buyer showings. Hundreds of times I watched listing agents kill my buyer’s interest by pointing out features that the buyer hated or suggesting lots of wonderful ways to fix up the house when the buyers would have been happy with the house in its original condition.
Sadly, we have a whole new generation of agents who have never mastered negotiation skills due to the heated seller’s market that lasted for over ten years. In fact, back at the height of the market in 2004 and 2005, I remember being shocked to hear that agents who were representing buyers in multiple offer situations were eliminating loan contingencies and physical inspections from their offers. During this strong seller’s market, listing agents and sellers didn’t want to have 5 or 10 buyers’ agents demanding that they each have an opportunity to present their respective offers face-to-face. Faxing an offer was easier than driving across town to present it. Besides, when there were so many offers, why bother wasting your time if yours wasn’t going to be accepted anyway?
I remember being in a multiple offer situation where our asking price on a property was $395,000. We had two offers. One was $320,000 and the other was $375,000. The seller was willing to take $375,000. I suggested countering at $390,000. Since the market was strong and the buyers wanted the house, there was no downside in trying a higher price. Furthermore, the buyers had no idea what the other was since we made the same counteroffer to both buyers. The buyers signed off on the $390,000 price.
There are several important lessons from this. Over the least few years, it has become acceptable to “shop” offers by disclosing what the other offers have been on the property. If I had disclosed that we had an offer $320,000, how likely would it have been for the seller to have picked up an extra $15,000 in sales price? Or if I had disclosed that we had a $375,000 purchase price, the people who offered $320,000 would have probably chosen not to write an offer.
Face-to-face skills are more important than ever? Are yours as good as they should be?
Posted by Bernice Ross. Follow me on Twitter @bross
If you need to strengthen your face-to-face negotiation skills, there is an excellent chapter on how to improve your negotiation skills in my book Real Estate Dough(R) Your Recipe for Success. The matching card game, Real Estate Dough Negotiation actually allows you to practice negotiating in a fun and stimulating real estate simulation. As one player put it, "Real Estate Dough Negotiation is more fun than Monopoly(R)!"