The topic of negotiation has been written about ad nauseum and in many, many books, so in this article I am going to keep it short and write only about strategies I have found to be the most effective. If you want to read further, two of my favorite books are: the all-time classic Getting to Yes by Roger Fisher and William L. Ury; and Bargaining for Advantage by G. Richard Shell.
Don’t get personal. In this case, having an objective third party handle negotiations during a real estate transaction is key. If you list your home as for-sale-by-owner (FSBO), you will be at a huge disadvantage when it comes to negotiating the deal. First of all, you will be personally attached. This makes it more difficult to see the transaction from all angles. And, since most buyers will have their own representative, you will be negotiating with someone more skilled and knowledgeable about real estate transactions.
Let’s be fair. I start all negotiations with the intention that the best outcome is a fair deal for both parties. I believe in treating people with integrity, and trying to take advantage of someone or “take them for all they got” does not align with my values. The hostile tactics like those are ineffective, immature, and unfair. Consider what you believe to be fair, and aim for that.
What is their problem? Get to know the other party. What problem are they trying to solve by conducting this transaction? What do they need? What are their priorities? LISTEN to them! Research! What solution can you offer? How can you structure the deal so as to benefit them while getting what you want?
Show proof. It makes no sense to me to only say to someone “give me a lower price.” Why should they? Because you asked? No. I believe it is much more effective to show someone your reasons for demanding a better price. In one deal I was negotiating, I prepared a report that included sales comparables, charts, and photos that explained why I was offering a lower price on their home.
Demand proof. On the other hand, if someone is making you an offer below listing, one of the best questions to ask is this three-letter word: why? Ask for explanation. Ask questions. Obtain as much information from the other party on why the are offering the terms described: what is their reasoning, and why they are structuring the deal as they are? Where they are getting their information?
Know your comps. If demanding a high price for your home, or offering a low price on a house you want to purchase, you must know the sales comparables. You also have to know houses currently on the market. Agents have software programs and subscriptions that show them the latest sales in your area, along with sales history. Information such as condition of the houses, photos, square footage, year built, etc. puts you in a better negotiating position.
Don’t meet halfway. This is an old-school tactic, and rarely effective. Why do people do this? Most dislike negotiating because it can be an uncomfortable experience. Negotiating parties might see this as an easy way to agree on a deal. But, if you think about it, meeting “halfway” makes no logical sense. It is not based on any objective data. Instead, agree to [agree to what?]
Consider all terms. Most people get stuck on price. This is totally normal, I mean, why wouldn’t we? But when it comes to negotiations, there can be much more to consider. If a buyer is offering less, or if you have multiple offers, these might be some questions to ask: what is the buyer’s down payment amount? Do they have a pre-approval letter and good credit? This will make the transaction smoother and closing more likely. Are they waiving contingencies such as inspection? Or, are they offering a shorter closing? Do you need time to pack and move after closing, and the buyer is willing to do a rent-back?
Be the big dog. Have you ever seen a crazy, yappy little dog getting up all in the face of a big dog? Have you noticed how the big dog stands there watching the little one from the side, waiting for it to be done with its tantrum? Well, I have a 90-pound male German Shepherd (include pic) named Logan, and his cousin, Dante, (pic) is a 12-pound Lahsa Apso. Dante’s whole body is as big as Logan’s head. Yet, Dante tries to dominate Logan by barking, lunging, and snarling at him. He looks ridiculous and it will never work. So, be Logan and stay cool during negotiations. Getting angry, aggressive and yelling is ineffective and only serves to make you look foolish.
Don’t push. Speaking of aggressive style negotiating tactics, they might work, but they will leave you drained, and you will not build a reputation worth knowing. A lot of times, if not most, they are counterproductive. Imagine this: you and the “opponent” face each other and hold your hands out, palms touching. Then, start pushing. You will feel the other person push back. If you are both pushing with similar strength, guess where you will go? Nowhere. If you push harder than the other party, and keep pushing and pushing until they cannot push back against you any longer and they let go…guess what will happen to you? You will fall flat on your face. Enough said.
Know when to walk away. Yes, as Kenny Rogers advises, sometimes you have to cut your losses and let go. Some deals are not meant to happen. If you have given it all you’ve got and there is no agreement in sight, it is time to move on and look for the next opportunity.
Negotiations can be complicated, time consuming, and demanding, yet putting these concepts to practice might help keep your sanity. Above all, keep your integrity and demand fairness on all sides.