Your footsteps echo through the corridors as you walk towards the negotiation room. On your right, a client looking to you for guidance and protection. But on your left is the unrelenting tune of self-doubt, coloring every step with the fear of failure.
As an exam coach and an agent with years of experience, I have often been quizzed about real estate negotiations, with students demanding practice tips. A favorite among them is: Do real estate agents negotiate price? Yes, they do. Realtors have a fiduciary duty to protect and serve their clients. And that means ensuring their clients get the best deal.
This makes negotiations an integral part of an agent’s service to their clients.
With insider tips and strategies, this article will guide you on how to negotiate effectively and get the best deals for your clients. You’ll be equipped with the knowledge to navigate the negotiation process confidently and achieve a successful outcome.
Whether you’re a buyer or seller’s agent, this comprehensive guide provides essential insights to help you make informed decisions.
Understanding the Basics of Real Estate Negotiation
The first day I walked into the negotiation room, I felt out of place. I was a new agent, but my client still deserved the best representation. I learned two things that day: realtors can smell fear, and once they do, they come for blood.
Before you decide to enter negotiations, it’s important to understand the psychology behind the process. For me, this process has been marked by three Ps:
- Push
- Pull
- Persist
Once you have these three in your toolbox, a checkmate is inevitable. I don’t mean to suggest you will get your way every time. But you and your career will enjoy a long list of triumphs.
Remember to adopt every strategy according to your specific situation, depending on your roles and responsibilities.
The Psychology of Negotiation
Whether agents or realtors, real estate professionals are salespersons, and that means they need to know how to wield their negotiation swords to walk away with an exceptional deal. But with caution.
No one, salespersons included, likes sales talk. Whether you are selling a home or helping a client find one, refrain from deliberate sales talk.
Be frank, honest, and genuine in all your conversations with the opposite party. They know you are an agent looking out for your client’s interests. But you lose them when you try to overexert and become pretentious.
So before I even expand on the three Ps, my first negotiation tip is authenticity. I am not suggesting you divulge your client’s details or even their price point. But be relatable.
Tip 1: Push
Pushing is not about demanding a sale but rather pushing information. We proactively provide data while demonstrating empathy and understanding.
What exceptional information can you communicate about your client or property that would set them apart, especially with multiple offers? Use it.
Beyond that data, position yourself for empathy. Let either the buyer or seller know, depending on your place in the transaction, that your client understands their position. And above all, they want to ensure everyone’s interests are served.
Tip 2: Pull
One thing agents forget is that the person with the power to walk holds all the cards. If you or your client are in the power position, you have a better negotiation room.
But that means you need to understand your place within the market. If you are in a seller’s market as a seller’s agent, you have space to flex your negotiation muscles. This is the best time to explore all deals on the table and take your time ensuring you make the best choice.
A seller’s market simply implies that there are more buyers in the market than houses. This scarcity places sellers on a pedestal to choose which offer they want to accept.
But in a buyer’s market, where houses abound, and buyers are low, a buyer and their agent are in a position of power.
So, depending on your position, pulling back means knowing when to walk away from a deal or withdraw completely. Sometimes, it is this tease that creates a sense of urgency to close the deal.
Tip 3: Persist
Never nag, never spam, but by all means, get the yes. The idea of persistence emphasizes a relentless nature to push until you have the result you desire.
One thing both real estate and life have taught me is consistency. Never give up. If you are struggling to seal the deal, find what is missing and work around it.
But do it with grace.
Setting the Stage for Success
The second must-know tip for negotiations is the art of setting realistic expectations. Mastering this tip will ensure you are never blind-sided and help you prepare your rebuttals.
If you are on the buyer’s side, anticipate the seller’s moves and stay one step ahead. But if you are the listing agent, you should prepare for lower-than-expected offers and potential inspection issues.
Managing Emotions
There is a 90% chance your client will get emotional during this process. Honestly, selling or buying a home is a massive undertaking.
But despite this fact and humans being creatures of emotion, emotions are dangerous.
Your client will be looking up to you for guidance, so keep emotions at bay. Try also to keep your client calm and on the path of reality. Ensure both you and your client are also mindful of the other party’s emotions. Work to create a positive and respectful environment.
If your client or the seller gets dragged away by the inevitable whirlwind of emotion, try some non-reactivity tricks like mindfulness. Invite them to breathing exercises or pause discussions until a later stage.
If you are to effectively prepare for the negotiation process, it’s important to understand your position in the transaction.
The following are not the law, they are simply ideas from an agent who has tried them.
Buyer-Side Strategies
In real estate negotiations, anticipation is a powerful tool. To anticipate seller moves, understanding current market trends is essential.
Knowledge about recent sales prices and average days on the market can provide valuable insights into the seller’s likely asking price and negotiation strategies.
Ensure you understand the seller’s motivation for selling. This will help you shape your negotiation approach. Are they eager to sell quickly, or are they willing to wait for a higher offer? This information can help you gauge how aggressive you can be during negotiations.
Finally, monitor the seller’s property closely and be prepared to act quickly if it appears that there is interest from other buyers.
Moreover, staying one step ahead by closely monitoring any interest from other buyers in the seller’s property allows you to act swiftly when needed.
Seller-Side Strategies
On the flip side, if you’re representing a seller in negotiations, preparing them for lower offers is vital, especially in a buyer-dominated market condition.
The best strategy to mitigate disappointment is to set a fair, market-based price from the get-go.
Flexibility also plays an essential part here. Being open to negotiating and compromising on price terms, particularly when multiple offers have been received, could significantly increase the chances of sealing deals successfully.
Apart from pricing factors, take into account other elements like sale terms, closing dates, and contingencies. These often form crucial components of negotiation discussions.
Remember that transparency is key when it comes to addressing inspection issues. Be upfront about any known issues with your property, such as structural problems, leaks, or pest infestations. Disclosing these issues can help avoid surprises during the inspection process and reduce the likelihood of renegotiations.
If unforeseen issues do crop up during inspections, be prepared to negotiate repairs. Sellers can consider options such as offering to cover some or all of the repair costs or agreeing on a lower sales price to keep negotiations progressing smoothly. The end goal here is to find a solution that satisfies both parties.
Effective Communication
Successful real estate negotiations rely heavily on effective communication and a proactive approach to addressing your client’s needs.
Active listening is a critical skill in real estate negotiations. By actively listening to the viewpoints of the opposing party, you can gather valuable information about their goals, priorities, and concerns.
Should miscommunication rear its head, it’s okay to take a step back and review the whole process. Focus on finding the source of conflict and work around it.
Ask open-ended questions and encourage them to share their thoughts and perspectives. This information will help you tailor your negotiation strategies and ensure that you are advocating for your client’s best interests.
Closing the Deal
The final step in the negotiation process is to seal the deal. But reaching this last step doesn’t mean the hard work is done.
Negotiating with Confidence
Successful real estate negotiations require a delicate balance of assertiveness and flexibility. Effective negotiators must strike a balance between these two.
While it’s important to advocate firmly for your client’s interests, it’s equally crucial to remain open to compromise and creative solutions. Assertiveness ensures that you don’t undersell your client’s position, but inflexibility can lead to impasses and missed opportunities.
Approach each negotiation with a clear understanding of your client’s priorities and bottom lines. However, be prepared to explore alternative options that may better meet the needs of both parties.
This balanced approach demonstrates your commitment to securing the best possible outcome while acknowledging the other party’s perspectives and interests.
Build Strong Client Relationships
Trust and open communication are the foundations of a strong client relationship, which is essential for successful negotiations. Did I also mention that it boosts your reputation as a realtor?
Establish clear lines of communication from the outset, ensuring that your client understands your negotiation strategy and feels heard and valued throughout the process.
Regularly update your client on the progress of negotiations, seeking their input and addressing any concerns they may have. A strong client relationship not only fosters trust but also enables you to better understand and advocate for their unique needs and goals.
Closing the Transaction
The culmination of a successful negotiation is the closing of the transaction. This moment represents the realization of your client’s goals and the pinnacle of your hard work and strategic negotiation efforts.
Celebrate this achievement with your client, acknowledging the challenges overcome and the collaborative effort that led to this successful outcome. This shared celebration strengthens your relationship and reinforces your client’s confidence in your abilities as a skilled negotiator.
But remember, there are legal and ethical boundaries around this celebration. I covered this in a tell-all guide: Do You Tip Your Real Estate Agent?
Reflecting on Lessons Learned
Even the most successful negotiations present opportunities for growth and learning. After the transaction is complete, take time to reflect on the negotiation process, identifying areas where you excelled and aspects that could be improved.
Seek feedback from your client, as their perspective can provide valuable insights into your communication style, negotiation tactics, and overall effectiveness. Use these lessons to refine your approach and continue developing your skills as a confident and effective real estate negotiator.
Leveraging Agent Expertise for Optimal Price Negotiations
Whether you represent a buyer or seller, effective negotiation is a crucial skill for agents. Through this skill, you can position yourself as a trusted and highly skilled real estate professional. One who is capable of navigating even the most complex negotiations with poise and effectiveness.
Next Steps:
Ready to hone your property negotiation skills? Here are a few steps to try:
1. Understand your position: Are you in a buyer’s market or a seller’s market? Know who holds the power.
2. Master the psychology behind negotiation: Remember the three Ps – Push information with empathy; Pull back when necessary; Persist until you have reached your desired outcome.
3. Set realistic expectations: Anticipate potential issues that may arise during negotiations.
4. Manage emotions effectively: Keep your and your client’s emotions at bay during this critical process.
5. Communicate effectively: Listen actively to understand both parties’ needs better.
We hope these strategies will prove valuable as you navigate real estate price negotiations! Do share any tips or experiences from your own journey in the comments below. We’d love to hear about your unique insights into this complex process!
