The Art of Negotiation: How To Make It Big In Real Estate

More often than not, real estate transactions boil down to negotiation.

Sellers won’t give the lowest price any more than the highest paying buyers are willing to pay. If you’re a buyer and you want to get your dream house in Hollywood, you’ll need to negotiate. If you’re a seller and you want to sell your property in Texas, you’ll need to negotiate. Negotiation is part of a creative process, and here’s why:

Professionals negotiating.

Negotiation is an Art.

It is generally wrong to pose an aggressive posture in any of your interactions with real estate agents, be it as a buyer or a seller. Contrary to popular belief of “you should be in a commanding position”, you actually should be easy to get along with and easy to talk to.

Then again, you should never forget that you are in that meeting or in that open house for one reason: to find the best way to address your real estate needs. This means that while you are negotiating the deal, every piece of information that you provide to the other side (to the buyer if you’re the seller, and vice versa) should be carefully released at just the right time, spoken in just the right way and designed to improve your position in the transaction.

Arguing over the asking price.

The “art of negotiation” is not just a simple isolated exchange between two parties, but rather a continuing effort. You must remember every action that you take during the entire transaction, beginning with submittal of offer to close escrow. Many real estate transactions where the buyer or seller got past the “offer and acceptance” phase and then acted like the deal was done, only to find themselves not having a deal because of cold feet.

As the saying goes, it ‘ain’t over till the fat lady sings. Thus, don’t give up your position too early: don’t make unnecessary concessions, and don’t compromise without gain.

Don’t be clumsy. You might insult the other party.

This is perhaps the main reason why many negotiations fail. There is an art to creating an offer to buy a home at the best price, and it’s not just about being the cheapest or tuning out to be the most affordable. It’s about the manner in which the transaction is handled.

Most people understand that if you walk up to a person selling their home and you bring a rather condescending tone on how they do business, the chances are that the seller will actually look at your offer as pretty low.

This is because you have put the seller into a “compromised position.” You have forced the seller’s sense of pride to overrule their desire to sell the home to you. Once you have put the seller in this position, it is difficult to correct it. Very few buyers are able to correct the mistake of insulting the seller. Pride is a really big deal.

On the other hand, insulting the buyer is just a mortal sin. There’s no way you can make up for a hurting buyer. You may well have botched your chance of selling a house, and may just end your career if the word spreads about your professional misdemeanor.

A mental arm wrestle.

As such, most people understand the obvious concept, but people often don’t realize how many different ways they can put either a seller or buyer into this defensive position. For example, buyers take the approach of including a defect-list in their offer which highlights every undesirable feature in the property, doing so to support a low offer.

At the end of the day, this is the same thing as saying “your house is undesirable and here is why”. The seller is insulted and either discards the offer, or counters at a higher price than they might have if they were not insulted.

Low-Ball offers don’t work.

A crazy low-ball offer is another common way to insult the seller. For most real estate buyers who are serious about finding a home that truly meets their needs, low-balling is a mistake. Buyers spend a lot of time searching for the right home, even before they look for a realtor. Once they find a great home and start writing an offer, their priority now shifts from “finding the dream house” to “winning this negotiation and get the house below fair value”.

More often than not, you won’t find “below market value” and “perfect home” in the same transaction. This is simply because its whole concept defies logic: how many times have you shopped for a product and have been willing to pay a premium for a particular product because it has all the features you highly desire?

The point is that just attempting this tactic often kills the deal, and the buyer usually ends up at square-one when the day ends. You’ll just waste a lot of time, or probably throw away a chance at your dream home. Stay focused on your true goals and negotiate realistically.

With this is mind, you can finally sell your Houston house for cash like you’ve always wanted.

Real estate tug of war.

Negotiate with Information, not Opinion.

Subjective price negotiation is a common scenario in almost every real estate transaction. Though it comes as a normal case, the challenge is to put your foot down on the best price that is justified by market comparables, yet giving an offer that is presented in such a way that it does not insult the seller.

Use the local market data to prepare and then support your offer: this is by far the most effective tool in price negotiations. Showing a seller market data is way more persuasive than simply saying, “I just feel like you are over-priced”. You can make your negotiation argument stronger by not basing on feelings alone, but rather using the real data that you can get your hands on.

Coming to a financial agreement.

Another reason market data helps is because many real estate agents barely know how to perform a market analysis. Simply put, they don’t really know what the property is worth, nor have property properly appraised. If the buyer-agent produces data that supports their client’s offer, many times the seller’s agent is swayed by the data and recommend that their client accepts the offer.

Meanwhile, this also holds true for the seller. If you can show the facts and the mathematics behind the numbers you are presenting as the best deal for the house (be it cheaper, or simply the right price for the right home), you can easily persuade the buyer to tender to your realtor service.

Structure the offer in a way that it will be accepted.

A good buyer’s agent coaches their clients about the best ways to position themselves and their offer to increase the likelihood of the seller’s acceptance. The saying “first impressions last” fits perfectly in this case.

This is also true for a strong buyer’s market; because if you want to pay the lowest price for a piece of property, you then have to be sure that all the other components to your offer, other than price, are as attractive as possible.

This includes a conditional loan-approval from a reputable lender, timeframe for close of escrow, use of qualified inspectors, amount and type of earnest deposit, contingencies and how they are structured, comparative analysis of the property, and the professionalism and attention to detail in the offer.

A financial compromise.

Remember that while price is very important to the seller, there are other aspects to consider in a deal. For instance, the seller only wants to go through the escrow process one single time to not waste any, so if all the components of your offer must say “I can close”, your lower-price offer may be preferable to a higher offer that says “I am not so sure this is the right house and I may be a pain and NOT close escrow”.

All things considered, real estate is all about proper communication. To master real estate, you should also master the art of negotiation to have the most success.

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