In an article by Seth G. Weissman in the current Georgia REALTOR® Magazine, he says: "There are two fundamental truths in the world of real estate brokerage. The first is that most REALTORS® thrive on making deals happen. The second is that great deal makers are great negotiators. If you agree with these statements, you now understand why REALTORS® who are looking to become more successful, invariably focus on improving their negotiation skills."
What follows is a summary of my interpretation of the article. Comments and questions are most welcome :>
All REALTORS® need to improve their negotiating skills significantly. With more information at their fingertips than ever before, consumers are increasingly questioning whether or not we add enough value to justify our commission. Negotiating is at the top of the list of value-added services. "A great negotiator can usually save a client more than the fees they charge."
5 Key Skills to Good Negotiating
1. Participate in the negotiation while being a detached observer.
Filling that dual role takes practice and requires a different mindset. When we are being the "active participant," we are not necessarily detached from the outcome. The active participant is more likely to take things other people say at face value and tend not to observe what is going on around them.
The detached observer is skeptical, takes nothing at face value and observes closely what is going on around them. In a negotiation, the detached observer is always asking themselves questions pertaining to the transaction. When we focus on those questions during the negotiation, we find that we see things differently.
In most cases, being a detached observer requires detaching from the outcome, staying focused and not "losing it," no matter what.
2. Be the mediator
If we are truly to be good mediators, we need to keep in mind that our success can be defined as helping clients achieve THEIR goals instead of the goals we might have if we were the owners of the property. It is often only to easy to forget that we are negotiating on someone else's behalf and respond accordingly to a good or bad offer.
The job of the mediator is to act as a go-between in trying to make a deal happen. Instead of attacking someone else's position (low offer), the mediator tries to understand the other party's position (ask lots of questions) so that they can explain it in the best possible light to their client. A mediator understands that that a negotiation is a discussion between the parties to see if there is enough common ground to do the deal.
Using the example of a low offer, the mediator (acting as listing agent) might say: "I've received your offer and, of course, I will immediately communicate it to my client. Based on what my client has already told me, however, I don't think this offer is in the ballpark." When the other party asks why, the mediator's response might explain that there are 3 recent comparables for like properties not in as good a condition as this property. "My seller is aware of these comparables and has priced his home at the same level as the others that have already sold. Frankly, even if you pay full-price for the listing you'd still be getting a pretty good deal."
Now, not only should the buyer not be offended, but the discussion is put on a level to help the buyer understand the seller's position and hopefully make a better offer on the next go-round.
3. Practice Patience
Although patience may be one of the hardest things to have when your client is desperate for a deal, it is probably on of the most important traits of a great negotiator. It requires that we not be too eager and give the other party a reasonable amount of time to respond.
Part of the learning curve is learning to accept that negotiations take time, may involve several back and forth offers (and counters) and sometimes never result in a deal. Educating clients that they need to be able to walk away from a deal is essential as is leaving room for compromise. Being too eager many times translates in money being left on the table to the party who has a hard time letting deals evolve in their own time.
4. Know the value of the real estate you are selling (or buying)
This article suggests a terrific exercise for newer agents in trying to learn about property value. The gist is, determine a neighborhood (subdivision) that you are interested in and track the properties that are currently for sale. Preview those properties and write down the price (or range) at which you think they will sell and days on market. "Modify your predictions when any adjustments are made in the listing price. Then compare your predictions with what happens in the marketplace. If you regularly engage in this activity, you will become better at discerning the true value of a property in that given area. And if you keep the information, you will be creating a personal database that will have real value to both your buyer and seller clients."
What makes us good negotiators is knowing the value of the property we re negotiating for and thereby knowing when we get a good deal.
5. Establish the procedure of negotiating before an offer is ever made
The negotiating process should begin way before the parties ever make a serious offer. We need to educate buyers and sellers on what to say (and how to say it) when they are around a party from the other side as their words can have a very strong affect.
Consider what message phrases like "motivated seller," "will consider all offers" or "must sell" sends to the buyer and how they affect the seller's leverage in the negotiation. Likewise, when a buyer starts talking in front of the listing broker about "the wonderful meals they can cook in that kitchen," "won't this bedroom be perfect for little Mary (or John" and where the furniture goes, the buyer's leverage is affected.
The good news is that negotiating is a learned skill that can improve with practice, practice, practice.