Real Estate Agents have to be Negotiation Experts by Ed SmithCreated: 10/6/2016
We negotiate every day in our real estate business: to get a listing or representation agreement signed; what the commission rate and terms will be; with referrals and co-broke fees; constantly throughout the entire sales contract or lease process. It is our fiduciary duty, our job, to get our client the best deal possible. Considering we only get paid when the sale closes or lease is executed, our livelihood depends on our ability to negotiate successfully.
Negotiations only have three outcomes: Lose – Lose, here both sides reach impasse and the deal dies. Lose – Win, one side prevails in the negotiations, but will the loser continue with the deal? If one or both sides are adversarial and feel they must win this will be a tough negotiation. Win – Win a negotiation goal that is for each side to feel that they have obtained a fair deal; this usually is a result of compromise by both sides.
The beauty of commercial real estate is the opportunity to do business with the same clients over and over again. Can we help the tenant we put in a building again when their lease is up? The owner when they have their next vacancy? Will your investor buy another building in the future, or have vacancies that need filling in the building you sold them? You will have these opportunities when you demonstrate that you are collaborative negotiator, working for the win-win deal, which is fair to all.
Preparing for successful negotiations requires a proper attitude, as agents we sometimes need to coach our clients and customers “as to how the game is played”, that compromise is required. Meet ahead of time, create a strategy, determine what issues are most important, prioritize them and determine what can be compromised.
You and your client must present a united front; act on the wishes of your client even if you don’t agree. In private you may try to change their mind. In the negotiations there should only be one spokesperson.
Set the “stage” to avoid distractions. Try not to hold the negotiations in either of the principal’s private offices. Seek a conference room or better; meet in a neutral location, perhaps the real estate agents office. Ask everyone to turn off phones until the negotiations are completed.
Before starting the discussions make sure all the facts are available and have been verified. Postponements, due to incorrect or a lack of information, may cause the talks to bog down. Delays provide time for additional parties to make offers that may be better than your deal!
Are the decision makers present? This is paramount; one negotiation tactic, The Higher Authority, is to negotiate the deal and then the opponent indicates this must now be approved by _____. You can be sure it will not be approved without additional concessions being requested.
Listen more, talk less! Gather information from the other side. What is most important to them? What points do they repeat? Take written notes of what has been agreed upon, what concessions the other side made, and what concessions you make. Observe the opponents body language and facial expressions; be aware of your own gestures and expressions.
Deadlines help create decisive actions. Set a deadline for the meeting. Begin by saying I must leave in an hour. If the negotiations slow down remind them of your deadline.
Resolve the main issues first, smaller issues can be set aside until later. Never let a negotiation bog down over a minor point. Concentrate on getting agreement on the major points such as price and terms.
Set an insoluble problem aside. Make a note of the disagreement and come back to it at the end of the negotiations. If you’re very close to a deal, both parties will be motivated to find a solution to this last piece of the puzzle. Break these insoluble problems into several parts. Attach and solve each component separately.
If an impasse is reached take a break. This allows both sides to discuss the issue with their clients. When returning from a break recap (from your notes) what has been agreed upon so far; this “progress report” helps encourage the resolve of the remaining issues.
There is a wealth of information available online, in books and courses, educate yourself on negotiation skills and tactics.