Articles of Interest

The Art of Negotiating
By Darryl Davis (Reprinted with Permission)

PowerFact:
Negotiating is like a dance. The movement, the unspoken communication, the partnership. As real estate agents, our responsibility is to introduce these two partners, sometimes reluctantly at first, and to choreograph a beautiful performance that leaves each side better off than before.

Overview:
Every buyer and seller, every human being, brings a certain “listening” into any situation. You do this yourself. It's that little voice inside your head that comments on everything you do and see. It's your expectations, your opinions, your feelings. Well, negotiation is all about successful communication. And successful communication stems from getting in touch with your own listening and the listening of those around you.

In the following article, I'll offer you an array of practical tips and techniques that you can put to use immediately. Some of it will be real estate-specific, and some of it will deal with your mental outlook. All of it will help you excel at the art of negotiating.

Preparation to Presenting Offers

Meet with the listing agent before the presentation.
If you're not the listing agent, you should meet with the listing agent prior to going into the seller's house or before the seller comes to your office. Why would you do this? Because you want to join forces with them. You want to link together to produce a positive result. What you don't want is for this listing agent to take on a role like, “Okay, I'm representing the seller. You're representing the buyer. I'm going to check you out and keep an eye on you.” It should be like we both get this accepted or we both don't. And if we both do, we get paid for our efforts. So you want to call the listing agent and set up a meeting right away.

Find out the seller's motivation.
Again if it's your listing you already know this. If it's not your listing, you want to find out from the listing agent the where, when and why of this seller. Where is the seller moving to? When do they want to get there? And why are they moving there in the first place? Is this important for you to know? Absolutely. Remember: we want to know their motivation — another way to say that is “what they're committed to” — because that's what we will be committed to. That's what you'll be coaching them and working with them to achieve, and you can't do that unless you know where they're coming from.

Review the listing agreement.
If it's not your listing, you wouldn't have the agreement, but you'd have the printout. You should look at how long the property has been on the market, whether they've had any offers, if so, for how much, etc.

Review the market conditions.
Get clear about the number of houses that are on the market. Also, review the number of houses sold.

Be there in person to present your offer.
Again, that is if you are not the listing agent. Let me spend a minute on this one. Let's say you call the listing agent to present the offer. The listing agent says, “Well, I'm going to present it for you.” Would you accept that? No way! Now, I know that in some parts of the country, it's completely accepted. We give the offer to the listing agent and the listing agent presents it for us. Well, I strongly disagree. You MUST be there in person. After all, I don't have to tell you that the listing agent simply won't present your offer as well as you would. Why? Not because they don't like you or anything negative like that. But simply because they don't know your buyer like you do.

There are two items that will support you in case you encounter resistance. First, your MLS rules state that you have the right to be present during the offer. Second, in wording your offer, make it contingent upon the fact that you (the buyer's agent, in this case) will present the offer directly to the seller. This point is so important that I want to address the presentation in great detail.

Presenting an Offer

Are you ready for the best way to present an offer? It's a six-part process.

Part 1: Learn the seller's motivation.

We talked about this earlier. Now, we'll do it in person. Put simply, find out what the seller is committed to. The where, when and why. You want to bring to the surface what they're committed to so that this forms the context of your discussion. Otherwise, they'll be listening to you like they would to any other salesperson.

Part 2: Humanize the buyers.

Portray the buyers as human beings and not just ambiguous names. Let the sellers know about the buyers' family, where the buyers work, why they like this area and, in particular, this house.

Part 3: Create a “listening for possibility”.

It's imperative that the sellers listen to you with an ear towards what can be accomplished. To create this “listening,” show them the multiple listing one-line printout of all the homes in your market. Bring this list and say something like, “Gloria, look at all these houses in Oceanside. And of all these houses, they picked yours.” See how that creates some urgency?

The second aspect to creating a listening for possibility is to explain the difference between terms and price. Here's how the discussion might go.

“You know now, there are two things to look at with these buyers, terms and price. Let me tell you why they're so important. Obviously we need X amount of dollars to satisfy your requirements. But terms are just as important, if not more so. The reason for this, Gloria, is because if the buyer gave you full price or even more than you're asking for, but they're only putting down 10% … they have terrible credit … and they want you to hold a note ... well, it's not such a great deal. The terms have to work.”

Part 4: Present the terms first.

Tell the positives. Mention items like the deposit, if it's a large one. Whether the buyers own or rent, if the deposit is there, that's a major positive. If they own and the house is sold, that's a positive. If they rent, it's a positive. Even if they're just putting a small amount — say 10% — you can make this a positive too. You might say, “I've had a mortgage lender pre-qualify them. They qualify for 90%, so there won't be any problem.” And so forth. Let the sellers know that they can close and go to contract as soon as possible.

Part 5: Present price.

The best way to do this is to first present the average ratio for sales price to initial list price in the seller's market. In other words, if a home first listed for $200,000 and sold for 180, it sold for 90% of the initial asking price. To illustrate, let's say that this is the trend for the whole market. And, let's say that the seller you're now presenting to has asked for the same $200K, and your offer is 186. So, you would demonstrate how your offer comes to 92.5% of their asking price, an increase of 2.5% over the market average — isn't that great?

Of course, if your offer is LESS than the market average, you can still somehow make it work by analyzing different numbers. For instance, find the sales price to list price ratio for their immediate subdivision ... or style of home ... price range ... time frame, etc. The key is to present your offer to make it look like you come in above the average. However, if no matter what you do your offer doesn't meet the average, just cross your fingers, smile and drop the number on them!

Part 6: Close.

Here's what this looks like: A) recap depositors; B) hand them the pen; C) drag signature; D) ask the spouse a question.

Now, again, when you do this it's important to make sure you're mentally “present.” There's nothing else on your mind, no hidden agenda, no personal issues clouding your thoughts — nothing except 100% concentration on the seller and a sincere commitment to help them.

Handling Seller's Objections

“We could get this price ourselves.”

Have you ever gotten that? “Yeah, I'm gonna just put our house back on the market. We can get this price ourselves.”

What's the response to this? “Well, maybe you could, but like you said, you'd have to put the house back on the market, advertise it, put together marketing materials, be around to show it, and then maybe you'd find a buyer. We have a buyer right now, so there's no need to reinvent the wheel. Plus, our deal has excellent terms, and it accomplishes your primary goal — getting to Texas in four months. If you put the house back on the market, I'm afraid that you won't be able to make that deadline, and you may not even get the price we have offered to us today.”

“We won't accept because the price is too low.”

Here's exactly how to say it. “We have a choice, either accept what the buyers are offering or wait several months for a new buyer that may never materialize. I have no problem not accepting this offer, but my concern is how long will it take. If the terms were really bad I would say, stay firm. But because of these particular buyers, my advice is to go for it. If I thought you were giving your house away, I wouldn't even bring you this offer because I would buy it myself.”

“Can you take less commission?”

“Gloria, if you were getting below market value, and you were taking less, I could see getting less. But we're in the fair market so, no, I can't.”

That implies I could reduce my commission if they were taking less themselves. If they were giving the house away, yeah, I would contribute.

Now another answer is, you just say “no.” Here's a way to do this.

“So, Gloria, the house listed for $179K, and we just got $170K, and I did the whole process. So that means you net somewhere around $157K. Are there any questions?”

“Can you cut your commission ?”

“Well, let me ask you, does $157K work for you?”

“If I had to take it .”

“Okay, so that would work for you.”

“If I had to. It's less than I wanted .”

“No, I understand. Well, even though that would work for us, let's try this. Let me try and get the buyers up. But if you had to, you'd take 157, right?”

“If I had to .”

“Okay great.” You call the buyers. “Will you come up?” No, that's it, they won't come up.
You see, here's the concept. They would only ask you to cut your commission for one of two reasons. First, it's because they want or need more money. So, we try to get them more money from the buyers, and if that doesn't work, they have the option not to accept the offer. The other reason they might ask you to cut your commission is because they want to negotiate with you. But, listen up: you don't negotiate. Why? Because it's a two-way negotiation between buyer and seller, not a three-way. You got that? So, the best thing that I can tell you is don't even talk about commission.

“You listed our home and brought in the buyer. You're getting paid from both ends. That's not fair.”

“Well, here's the fact. Yeah, I am getting from both ends, and that's why I deserve double the commission, because I've been doing double the work.”

“You put our house on the market and it sold in just a week. You're making thousands of dollars for just seven days of work.”

Here's what I used to say. “You should actually pay me more because I did such a good job.” (Of course, you'd say this smiling, not with an arrogant tone.) If that didn't work, you could say, “Here's what we could do. We could not accept this offer and drag it out a few months, and then you'd feel like I earned it.”

Folks, here's the most important thing about the topic of commission . Don't talk about it. Because if you talk about it, it just calls attention to the money you earned and to the percentages, etc. The question is, “do you want to sell this house to these buyers?” “Yeah, but that commission bothers me.” “I totally understand, but do you want to move?” Just keep bringing it back to their commitment.

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We covered a lot in this article, but before I move on, I want to make sure that I clarify one very important thing. I believe that you can have all the techniques in the world on how to negotiate with a buyer and seller, but unless you truly know how to communicate, it'll make no difference. In case you haven't noticed, we're not exactly blank slates, seeing the world each day with innocent eyes. We go into situations and we bring with us an expectation, opinion or point of view about whatever it is.

So, the more you can get tuned into the “listening” that buyers and sellers and other people around you may bring to a certain situation, the more effective you'll be as a negotiator. Clear your mind. Recognize the voice in your own head and understand that other people have their own listening as well. Do this and it won't be long before you find yourself being much more powerful at the art of negotiation.

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About the Author:
For the past 14 years, Darryl Davis has traveled around the country coaching agents and brokers on how to achieve their next level of success. In 1993, he created The POWER Program , the only training course for agents that meets once a month for a full year. On average, graduating Power Agents double their production over their previous year. In addition, Darryl is the author of the best-selling book How To Become a Power Agent in Real Estate. To learn more about Darryl please visit www.DarrylDavis.com or call 1-800-395-3905.