In this guide we’ll break down 11 real estate negotiation strategies you can use in your business.
Negotiation is an art and a science. But like any art, it demands practice. And like any science, it requires study. A lot of people aren’t great at real estate negotiation at the start. And many properties don’t really require it: You hand in an offer with the earnest money, and the offer is accepted or refused.
But if you’re going to be representing high-end properties, delving into commercial real estate, or otherwise escalating your career, you need to know how to negotiate effectively.
Let’s take a look at some of the most effective real estate negotiation strategies that have helped me in my business, and will be sure to help you, too — whether you’re trying to buy an investment property or sell a luxury estate.
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1. Know Your Stuff
Before you even enter into negotiations, you should know everything about the property and the area.
Let’s say the agent says, “The comparables for this property are all much higher.” Is that true?
If you didn’t look up your own information, you wouldn’t know. The better prepared you are for a negotiation, the more ammunition you have on your side — and the easier you’ll find it to know whether you’re getting a good deal.
Remember, in a lot of areas, real estate negotiations go very quickly. You never want to get caught unaware of the situation.
2. Let Them Start The Conversation
In many industries, the most common negotiation tactic is not to be the first to list a number.
Well, in real estate you really don’t have that luxury. If you’re helping someone sell, you need a listing price. If you’re helping someone buy, you need to suggest an offer price to the buyer.
But what you should do during the negotiation process is let them speak first.
When they speak, you’ll get a feel for how serious they are about sticking to the current deal — and how much persuading they might need to change their mind.
3. Always Have a Contingency Plan
A real estate transaction is really a hostage negotiation if you don’t have a contingency.
It’s important to have a plan B. If you’re representing a seller, you should have other offers down the pipe. If you’re representing a buyer, you should have other houses they’re interested in.
It’s hard as an agent; you’re not representing your own interests. You’re representing someone else’s.
You have a fiduciary duty, so that means you can’t negotiate against your client, even if your client could be better served elsewhere.
So, your negotiation skills begin outside of the negotiation process by giving your seller or buyer more options. If your seller or buyer feels backed up against the wall, then you may not have been doing enough to represent them.
4. Be Prepared to Walk Away
One of the most important real estate negotiation tips is to be prepared to walk away.
But as mentioned, what you really need is to ensure that your buyer or seller is willing to walk away — unless you’re buying or selling for yourself, they’re ultimately the boss.
Take some time to talk to your client. Part of being skillful advocates is that real estate agents must educate their clients on what’s available and what they should or shouldn’t do.
If someone is trying to buy in a complete seller’s market, they have to be realistic. You don’t want your clients getting robbed if they could wait until the next year — it might put cash in your pocket now, but it’ll damage your reputation later.
5. Know Which Strings You Can Pull
Is the buyer concerned about closing costs? Is the seller worried about having to make repairs or renovations?
Talk to the other agent during the process of real estate negotiations to uncover what is and isn’t important to them.
A listing agent may be upfront in saying that the seller will cover closing costs. Alternatively, a buyer may need to be specific — maybe they’re concerned about closing costs because of the cost of the property, and what they really need is any type of concession.
The more you know, the more negotiating power you have. Over time, you’ll get a feel for people and what’s truly important to them.
6. Focus On The Emotions Involved
Selling a house is just as much about emotion as it is about finances. Never forget this when negotiating with either a buyer or a seller.
If you’re a listing agent, know that a potential buyer may be more likely to pay more if it’s their “dream home.” If you’re a buyer’s agent, know that a seller may be swayed to sell if they’re selling to their ideal candidate, such as a young family.
Negotiations aren’t just financial transactions. The asking price isn’t writ in stone. You should always talk to everyone involved and focus on what’s most important — whether both parties are comfortable in the transaction.
There have been many deals that have been swayed with a personal letter rather than raw cash.
7. Be Polite And Courteous
There’s a place for cutthroat sales, but real estate isn’t one of them.
You’re going to deal with other agents in your area multiple times. You want to have a good relationship with them — and you don’t want to get a bad reputation.
While you need to be a hard negotiator, you should still remain courteous and polite.
Let them know what you need from the deal and let them express to you what they need.
Part of developing your negotiation skills is determining how to reject an offer gracefully.
8. Always Negotiate Face-to-Face
A successful negotiation cannot occur via text.
It’s important to negotiate a real estate deal face-to-face. If not face-to-face, at least over the phone.
Most negotiation skills simply don’t translate well to text. It’s too easy for the other person to think about things and second-guess themselves — even if the deal is a good one.
When you negotiate face-to-face, you can read more into the person’s gestures and expression. You’ll be able to improve your negotiating skills through confidence and body language.
9. Don’t Negotiate Against Yourself
It’s very easy to start negotiating with yourself.
What does that mean? You make a purchase offer, but you can see that the other party doesn’t seem interested.
Consequently, you go back to your client and say, “I don’t think they’ve accepted it. We need to go higher.”
But you haven’t heard a “no” yet. It’s a common real estate negotiation tactic for someone to act as though they aren’t interested even when they are.
Likewise, a client might try to get you to lower your real estate commission by expressing disinterest and waiting for you to respond. You should never be the one to negotiate against yourself — to give yourself (or your client) a worse deal.
10. Get Some Professional Help
Not every Realtor starts out in the profession as a great negotiator. And a lot of Realtors always feel like negotiating isn’t their strong suit.
So, you may want to do some additional studying. Consult with a certified negotiation expert. Look up new negotiation formats. Learn from professionals.
There are seminars, lessons, and classes that you can take to improve your strength in negotiation strategy. By working with a real estate negotiation expert, you’ll find new tactics and build your confidence.
11. Try To Work From Common Ground
Realistically, you and the other party both want the same thing: the deal to close. Your negotiating strategy should take advantage of this.
Work from common ground. You both want the property sold. You and the other agent are both interested in your commission rate.
Likewise, while you might want them to take your initial offer, you know they want a counteroffer. But you also know that everyone around the negotiation table has to be realistic. It’s either worth that amount or not.
The best negotiators are really problem solvers, who recognize that both home buyers and home sellers ultimately want the deal to close — with as few complications as possible.
FAQs on Real Estate Negotiation
How can a real estate professional become better at negotiating?
Seminars, classes, and consulting with mentors can help a real estate professional develop their negotiation skills. Other than that, negotiation is often just about practice.
How important is negotiating for a real estate agent?
Extremely. A buyer’s agent is going to need to help their buyers purchase a home at a reasonable price, even in a seller’s market. A seller’s agent is going to need to negotiate with prospective buyers to improve the purchase price over the list price.
Even those who deal primarily with commercial real estate and real estate investing will find themselves going through intense negotiations.
What can you do if you’re uncomfortable negotiating?
Some people aren’t natural negotiators. So, what do you do if you need to negotiate on behalf of an aggressive real estate investor? Or if you really want to do your fiduciary duty?
For a real estate professional, it’s easier to negotiate because you’re negotiating on someone else’s behalf. You can also use automated tactics, such as an escalation clause, to limit the direct interactions you have.
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