Bring Professionalism, Not Emotion, to the Bargaining Table

Savvy Realtors® know that stellar negotiating skills are of paramount importance to providing excellent customer service. It’s one thing to find a buyer a house, but it’s far more essential to coordinate a transaction that leaves all parties satisfied. 

“A buyer will work with an agent who has excellent negotiation skills over one who does not,” says real estate coach Brian Buffini. “You must communicate and demonstrate your negotiating skills in order for your buyers to feel confident that you can represent them in their homebuying process.”

The first element to becoming a good negotiator is to be a good listener, says Marilyn Cantrell, an associate broker with McEnearney Associates in McLean.

“There are at least four people involved in any negotiation: the buyer, the buyer’s agent, the seller and the listing agent. Every one of those people influences the transaction."

“You need to go into negotiations with as much information as you can,” says Cantrell. “There are at least four people involved in any negotiation: the buyer, the buyer’s agent, the seller and the listing agent. Every one of those people influences the transaction, so you need to use any information you can get from any one of them to accomplish your goals.”

Joy Deevy, a Realtor® with TTR Sotheby’s International Realty in Alexandria, says it’s just as important to listen for what people are not saying.

“If a listing agent says, ‘Well, we’re not sure if the sellers will take less than the asking price, but we’ll see,’ then you can pick up on the fact that the sellers are likely to be tough negotiators,” says Deevy. 

Sometimes a lack of communication is the biggest obstacle to a satisfactory transaction.

“Recently, I was the listing agent on a property and the home inspector said there might be a problem with the roof,” says Nina Chen Landes, a Realtor® with Avery-Hess, Realtors® in Tysons Corner. “The sellers had a contractor look at it, and they were told it wasn’t a problem. The buyers didn’t believe it but they wouldn’t communicate at all with us on what would satisfy them. It was a one-sided conversation and eventually the sellers just fixed something that didn’t need fixing in order to keep the contract in place.”

HELPING BUYERS IN A SELLERS' MARKET
In Landes’ listing, the sellers were concerned that starting over with a new buyer would be too stressful, but in today’s market most sellers believe they have the upper hand and are less willing to negotiate. 

Donna Henshaw, an associate broker with Avery-Hess, Realtors® in Tysons Corner, says Realtors® need to realize that winning in a multiple offer situation isn’t just about the highest bid.

“Make sure your buyers are working with a local, recognized lender.  In a multiple contract situation, other Realtors® know that if you’re working with a lender who has a good reputation and a good title company, you’re more likely to get to settlement than someone working with a large, impersonal lender,” says Henshaw.

Henshaw also recommends that your buyers make the strongest possible earnest money deposit.
“Legally it’s the same thing as a smaller deposit but psychologically it means a lot,” she says. 
Jennifer Walker, a Realtor® with McEnearney Associates in Alexandria, says she looks for ways to help her clients make a stronger offer that doesn’t cost them more money.

“I recommend having a ‘thumbs up or thumbs down’ home inspection in the shortest time possible, such as two days versus a week or more,” says Walker. “They can also do a shorter appraisal contingency of seven or 14 days if they don’t want to waive the appraisal.”

“Make sure if you accept an offer with an appraisal contingency that the buyers have the cash to make the transaction happen even if the appraisal is too low."

She suggests that buyers who can’t waive the appraisal contingency write into the contract that they’re willing to go to settlement with extra cash up to a specific amount above the appraised value if it comes in too low, such as $20,000. 

Liz Bucuvalas, a Realtor® with Coldwell Banker Residential Brokerage in Old Town Alexandria says, “The biggest problem in this sellers’ market is that you can tell buyers how to win any contract by removing all contingencies, but there’s a fine line between being able to do that and making sure that doesn’t come back to bite you later.” 

Henshaw recommends that buyers who want to offer an escalation clause agree to escalate by at least $1,500 or 3 to 5 percent above other offers, rather than a low set amount of $500. 

Other ways to make your buyers’ offer stand out is to match the settlement date that the sellers prefer and rent back the home for free or for a very low price, she says. 
A letter from the buyers to the sellers can sometimes make a difference, particularly if the sellers are long-term owners of the property.

“We don’t always interact with the buyers or the sellers on the other side of the transaction, so it can be helpful for buyers to put in writing why they want to buy a home,” says Cantrell. 

NEGOTIATING FOR SELLERS
While it may seem simple to represent sellers when they have the upper hand, Bucuvalas says that sometimes you have to convince sellers to decline a higher offer in lieu of a contract that comes in without any contingencies. 

“Make sure if you accept an offer with an appraisal contingency that the buyers have the cash to make the transaction happen even if the appraisal is too low,” she says. 

Landes says she suggests that sellers not accept the first offer they receive and that they wait to review offers all on the same day. She says waiting helps determine how committed the buyers are to the transaction.

“Ask your buyers how they would feel if they received the offer they’re about to make.”

Cantrell recently represented sellers who listed their house for $110,000 below what they paid for it in 2004 because the value had dropped. They received two offers in the first two weeks, each time about $20,000 below list price.

“I was a little worried about the property appraising for the full amount, but finally a third offer came in, again below list price,” says Cantrell. “When my sellers refused to counter that offer, the buyers came in at full price. The appraisal came in too low, but the buyers had already emotionally moved in to the house. They asked the sellers to pay $7,500 of the $15,000 difference between the appraisal and the contract price, but since the sellers were already bringing money to the table, they asked if they could just contribute $3,500. This was a tough negotiation, but because the buyers had an emotional tie to the house they agreed.”

PROFESSIONALISM TRUMPS EMOTION
Buffini says that the negotiating process can be emotionally taxing on everyone involved, which makes it crucial for Realtors® to remain emotionally rock solid.

“Purchasing a home is a life changing event for your buyer,” says Buffini. “There is a process you know well; support your buyers and work through it together.”

Sellers can be emotional, too, particularly if they’ve owned their home for a long time or are experiencing other personal stress related to the home sale such as a divorce.

“Buyers and sellers are extremely emotional, so it’s important that the agents stay professional,” says Deevy. “We’re third-party professionals for a reason, and we shouldn’t act as the messenger for our clients’ emotion.”

You need to figure out your strong point and your weak point and try to figure out a win-win situation from there, says Cantrell. 

“If the agent or buyers or sellers on the other side don’t want to do that, then you just have to do the best you can,” she says. “Sometimes it helps if your buyers try to understand the sellers’ attitude. Ask your buyers how they would feel if they received the offer they’re about to make. I think everyone sleeps better at night if you don’t take an adversarial approach to negotiating.”

WATCH YOUR ATTITUDE
When you project confidence you’re more likely to be respected by other agents.

“I had an agent call me and mumble and apologize for bothering me when she was making an offer on behalf of her clients, so I knew right away that she would be a weak negotiator,” says Deevy.
Deevy recommends taking a negotiating skills class or even getting a certified negotiations expert designation to provide the best possible service to your clients. 

Buffini says that individuals have different communication styles as well as different negotiating styles, so he recommends learning as much as you can about those styles. Once you know what type of negotiators you’re working with, you can adjust your style to get the result you want.

Differences in approach need not prevent a good result for both sides of a transaction.
“The most satisfactory negotiating experience is to make sure that everyone involved feels like it’s a win-win,” says Henshaw.

Top Tips For Masterful Negotiating: Practice Makes Perfect!

• Listen to what the buyers, sellers and agents are saying and how they say it.
• Understand each party’s motivations. 
• Talk on the phone or even better, in person, rather than relying on email.
• Understand your buyers’ ability and comfort level with removing contingencies.
• Make sure your buyers work with a good local lender and have a strong approval letter.
• Be confident and you’ll come across as a stronger negotiator.
• Take all sides into consideration instead of being adversarial.
• Take the emotion out of the transaction by acting as a third-party professional.
• Take a negotiating skills class.
• Practice your negotiating skills in front of a mirror or with colleagues instead of waiting until you’re with clients. 

Michele Lerner, a freelance writer based in the Washington, D.C. area, has been writing about real estate and personal finance for more than 20 years for print and online publications.