Negotiating – A Lost Art

July 16, 2010

Residential

At least fake that you like the other side of your negotiation.

At least fake that you like the other side of your negotiation.

Today’s chaotic market presents pricing, communication, marketing and mortgage challenges that vary with each transaction, each listing, and each buyer. However, one often overlooked component common to every transaction is the lost art of negotiating. I call it a “lost art” because many sellers focus solely on marketing and advertising when choosing an agent, and buyers focus heavily on finding the perfect finishes in the perfect house. These, however, are only small components of the selling and buying processes, and the number of sales that fall apart during negotiations has risen drastically in today’s market.

Sellers are still offended by very low offers and sometimes refuse to open discussions with the buyers. Buyers continue to believe that every list price is outrageous, and that every seller is desperate to sell. Sellers who won’t actively engage the buyer presenting a low offer reduce the value of effective negotiating to zero. Buyers who stop talking when a seller makes a weak counter offer do the same. However, the deal is not dead until each party has given their absolute bottom line.

Aggressive, fact-based negotiating is the key to keeping communications open and bridging the buyer-seller gap. Information and experience are critical to successful negotiations. On both the buy and sell sides it is the agent’s job to provide useful data and a meaningful analysis upon which to base discussions. The CMA, or competitive market analysis, is prepared by both the buyer’s and seller’s agents as the basis for determining a fair market value for the property.

While data is critical, negotiating is still an art, not a science. Experience is the only way to master the art, if that is even possible. Predicting the other side’s next move, target sales/purchase price, and other triggers is at best an educated guessing game, since each transaction, participant, and situation is completely unique. However, guessing is far more effective when it based on a useful data and extensive experience earned from hundreds of prior negotiations.

While it is impossible to accurately outline the flow of each real estate negotiation, there are a few points that are worth mentioning:

  1. Engage every buyer or seller despite the unattractiveness of their current position. It is only their final position that counts. Negotiate until you know that final position.
  2. While extremely difficult, try to keep emotions out of the discussions. Emotions only taint the discussions. You do not have to like the buyer or seller, but you will get further if you play nice, or at least fake it for the sake of the negotiation.
  3. You must give a little to get a little. Offending the other side may irreparably damage discussions, causing the other side to back into a corner. Getting them out of the corner is more difficult than giving a little.
  4. Know your data. Fact-based positions are hard to dispute. Do not be afraid to provide your CMA to the other side if it bolsters your position. Comps are public information, but each party may be looking at different comparable properties for different reasons. Make your reasons clear and listen to the reasoning of the other side. You can always dispute their data if it is incorrect.
  5. Find an agent you trust. Negotiations will happen between the agents, with your input and direction, but not directly between buyers and sellers. Do not take offense if your agent initiates discussions with questions about your position and approach unless they seem to be just trying to “get the deal done.” He/she may pose questions that help him better present your position to the other side. Conversely, do not be afraid to question your agent’s approach if you do not feel right about it. While they are the voice, you are still the buyer/seller. They are ultimately there to advise you, not make decisions for you.

So what is the bottom line? Negotiations are a critical factor in the real estate buying and selling process. Find an agent with proven experience, either through a referral or by interviewing him/ her extensively. Ask them how many of their transactions have fallen apart during negotiations, how many times their buyers’ homes have appraised for more than the purchase price, and their years of experience. Discuss their offer/negotiating approach, and switch agents if you become uncomfortable during the listing or search process, before negotiations begin.

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About Stacy Braack

Stacy is a seasoned real estate professional with a broad range of hands-on experience including first time buyers, investors, luxury homes, and distressed properties. While this may appear to be a scattered set of expertise, she believes the experience provides maximum effectiveness in today's chaotic market, which requires extensive knowledge of all aspects of the industry. Stacy's educational background includes a BS in Industrial Engineering from Stanford University and an MBA in Marketing and Finance from the Kellogg Graduate School of Management. Professionally, Stacy has done everything from operations consulting to city government before she found her passion in real estate almost eleven years ago. It is this passion that drives the most benefit to her buyers and sellers. She is fully committed to your goals - both financial and personal. Her clients describe her as extremely direct, honest, and responsive, and they repeatedly trust her to handle one of the biggest events in their lives. For buyers she works non-stop to find you both a home you will love to live in and one that is a smart investment. Many of her 2008 buyers have realized instant equity in their new homes through 'pit bull' negotiation skills. While the market has been tough for sellers, her listings have sold at a rate above that of the market. Extensive, constant, and extremely high-quality marketing, including both print and internet mediums, support every listing, from investment studios to luxury penthouses. She believes that your goals are her priority and her full-time job. She has built her business on referrals from satisfied clients, and she would love to add you to that list. You can contact her at 773-405-4431 or stacy.braack@sothebysrealty.com

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