15 top negotiating strategies

Brush up on your negotiating skills with these tips from agents, brokers, and experts in the field.

by Bridget McCrea   How important are your negotiating skills? Just ask your clients. Eighty-eight percent of Texas homebuyers recently surveyed considered an agent’s negotiation skills "very important." Less than 2% said negotiating ability was not important at all. However, 18% of buyers reported being only "somewhat satisfied" with their agent’s negotiating skills, while 10% said they were "not satisfied."

If your negotiating skills could use some polishing, you’ve come to the right place. Here are 15 ways to enhance your effectiveness as a negotiator.

Establish rapport

Before negotiations can start, agents must establish rapport with their clients, says Jim Gillespie, owner of RealEstateSalesCoach.com in Temecula, California. Homebuyers are looking for someone they trust to act on their behalf. Only when that relationship is built, contends Gillespie, can agents successfully negotiate the deal. "Until you establish that level of rapport as an agent, the client will always doubt and question what you’re doing and wonder if you’re just doing it for the commission," says Gillespie.

Prepare them for the worst

Shad Bogany doesn’t mince words when it comes to telling homebuyers what they can expect from the real estate experience. During an initial consultation, this broker-owner of ERA Bogany Properties in Houston walks buyers step by step through the process, points out areas where deals typically fall apart, and explains that sellers rarely fix everything in a home before selling it.

"If a buyer is looking to have everything on their home inspection report done, then they should be looking at new construction," says Bogany. "By being completely realistic and preparing them for worst-case scenarios, my clients are better prepared to deal with any challenges that come up during the negotiating and sale process."

Explain the nuts and bolts

Buyers and sellers don’t always understand market conditions. Whether it’s a buyer’s market or seller’s market can make a big difference in the negotiation process. That’s why Bogany always briefs his clients about market conditions before pricing a home and putting it on the market. Be realistic, he says, and your clients won’t get sidelined when a potential buyer offers a price that’s below asking.

Bogany says it’s also critical to explain to buyers that every $1,000 that the home price is reduced translates into an approximately $8 reduction in the monthly mortgage payment. Buyers intent on negotiating hard for that last $5,000 reduction, he says, should be aware that they could lose their desired home by trying to save $40 a month.

Set objective criteria

Jim Remley, co-owner of All State Real Estate and owner of Pro Performer Seminars in Sutherlin, Oregon, calls negotiating the most important element of the sales process, but says agents don’t always have the skills required to make this part of the homebuying or selling process go smoothly. He says too many agents use the PFA, or "pull from the air," method when selecting a negotiating strategy. "When agents use this method, they tend to negotiate from extreme positions and try to find a middle ground," he explains, adding that an agent may have listed a home at $200,000 because "that’s what the seller wants," while another agent may show that home and write an offer of $125,000 because "that’s what the buyer wants to pay."

"The agents then begin to negotiate based on two extreme positions with no objective foundation," says Remley. A better approach is to negotiate from an objective standard. The buyer’s agent in this example could have instead chosen to build a solid CMA for the buyer, then negotiated with the seller’s agent by using objective market criteria. "This moves the negotiating away from who’s the best at dickering to who has the best information," Remley adds.

Remove emotion

Remley suggests that agents remove emotion from the negotiation process. "Consider what attorneys do when questioning a witness in a trial," says Remley. "They attempt to evoke emotion because they know that when people become emotional, they lose control of rational, clear-headed thought." Remley says when the agent on the other side of the deal becomes emotional, it should send up a red flag for the more experienced negotiator. "This is good news for the latter, who can instantly gain the upper hand by simply remaining calm and focused."

Don’t keep contracts a secret

When working with sellers, Wilona Dyson, a broker-associate with Keller Williams The Woodlands, provides copies of contracts and other key documents for review while their homes are being prepared for sale. That way, when the time comes to fill them out or review offers, she knows her clients already have asked all of the questions and learned everything they need to know about the important documents.

The same strategy works for buyers, giving them a chance to ask questions before they are ready to make an offer on a house.

Plant the seeds of reality

Dayton Schrader takes a realistic approach to negotiations by explaining to sellers that some homes fetch full price and others simply do not. As a broker-owner of RE/MAX North San Antonio 5, he uses a similar approach with buyers, telling them that if they find a home in good condition that’s priced right, they’d better act quickly. "I always prepare them for the fact that they might have to pay full price, particularly if it’s an exceptional home," says Schrader. Schrader then walks his buyers through the logistics of the sale, explaining to them that it could be 48 hours before buyers get an answer on their offer. On the seller side, he prepares "net sheets" that clearly outline–in $5,000 increments–exactly where the seller will be financially based on various offers.

Promote patience

Does the seller have 20 other offers to pick from? Has the seller been waiting 12 months for an offer? Do the buyers need to hold the line or jump in and make the deal happen? To work through these questions with clients, Schrader says patience is the key. By remaining patient and by advising clients to do the same, the uncertainties that come along with the real estate sale will be much more manageable. "Patience means not being rattled and not panicking," says Schrader, who points to the seller who has his or her home on the market at too high a price for too long–and who suddenly has to sell within a month–as an example of a potentially problematic negotiating situation. "I caution my sellers not to let that happen," says Schrader, "and to not let impatience get in the way of the business transaction."

Lay it on the table

Don’t be afraid to lay everything on the table with your clients, especially if it means preparing them for the worst and talking openly about their minimal acceptable numbers, says Joeann Fossland, a real estate speaker and coach and CEO of Advantage Solutions Group in Tucson, Arizona. "If they’re braced for what could happen, then they’ll be happy when they get more than that," she says.

Go for the win-win

During the real estate process, sellers want to move on and buyers want to move in. With this in mind, Fossland says successful agents must figure out their clients’ priorities. Is it net price? Timing? Some other factor? Once determined, she says the best approach is to ask for a little more than what your clients want, thus leaving room to negotiate. "Everyone feels better when both sides give a little, so showing your hand with your minimal acceptable is not smart," Fossland says. "But if you have an offer that’s close enough to what your client can live with, you might want to help seal the deal, because the more times an offer is countered, the less chance you have of bringing it together."

Get the facts

Cindy O’Gorman, with Ebby Halliday REALTORS® in Dallas, likes to get the facts before she negotiates. She says having the facts lined up helps her work with offers and counteroffers by giving her the ability to share the most relevant facts with the potential buyer or seller.

"Some agents will take an overall price per square foot and come in with an offer," says O’Gorman, "but they don’t see the value of why your sellers priced the home like they did." By lining up neighborhood comps, however, and showing why certain homes sold for the prices that they did, O’Gorman gains an upper hand in the negotiating process. "Being able to explain past sales and comps can make a big difference during the negotiations," she says.

Put the client first

Walter S. Sanford, president of Sanford Systems and Strategies in Kankakee, Illinois, poses an interesting question to agents: Are you responsible for making the transaction happen or for making it happen at the best price? The answer is simple, says Sanford. Always negotiate with the client’s motivation in mind, and not your own.

That’s because price and other contract negotiations can alienate the seller or the seller’s agent, forcing them to consider other buyers. "Because the buyer and seller motivations are often mutually exclusive, it’s the agent’s responsibility to determine what the hierarchy of motivations are," says Sanford. "To succeed at negotiations, the key is to work clients’ needs, not your own."

Look at the bottom line

Sherry Weston, a broker with Flagstone Realty in Dallas and an instructor for Leonard-Hawes Real Estate School and Tarrant County College, cringes when she sees homebuyers write lowball offers just to see if they will stick. While everyone likes to think they got a great deal, the strategy can backfire quickly, especially if the seller has another interested buyer in the wings.

"A lowball offer like that can throw the seller into the arms of another buyer," says Weston, who suggests agents formulate offers with a bottom-line cost in mind, then figure out how much more to add to the price to make it favorable for the seller after two or three negotiating sessions. "We look at the cost, then we decide what the buyer wants to pay for the property," says Weston. "Then, we go in and figure out how we’re going to get there within two or three negotiations down the road."

Keep clients in the loop

In this age of rapid communications, Ann Weaver, with Century 21 Judge Fite in Duncanville, knows it’s critical to keep clients in the loop, particularly during negotiations when everyone is on edge waiting to hear about a counteroffer or acceptance. Weaver’s role puts her on call for information sharing on a 24/7 basis. "Clients today know what they want, and the best way of ensuring that they get it is by responding as soon as possible," says Weaver. She also believes that the speed at which she communicates with the cooperating agent is equally as important. "I’ve found that if my clients are slow to respond, the other party will get impatient and walk away from the transaction."

Let them have the final word

If there’s one negotiating strategy that Dyson has stuck with over the years, it’s letting the other party have the final word. She shares the value of the strategy with her clients, explaining to them that the person who gets the final word feels like the winner.

Gillespie concurs, and adds that after making a concession or demand, it’s best to sit back and let silence fill the air. Uncomfortable as the situation may be, he says agents should wait for the other side to speak first. "Whoever speaks first in that situation is going to be the one making a concession to the other person," says Gillespie. "Sit there for two or three minutes if you have to, but don’t break the silence until they do."

Bridget McCrea is a writer and former real estate agent in Dunedin, Florida. She has written articles for Texas REALTOR® and many other REALTOR® and business publications.

Photo © PictureQuest.

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