Effective negotiators are not born, they’re made. Even if you feel this isn’t one of your strongest skillsets, you can learn and improve your strategies and techniques to better serve your clients.
Coming to the table prepared and ready to bargain in good faith will not only result in satisfied clients, and help agents to land future referral business, negotiation skills are a top priority for home buyers. In NAR’s annual Survey of Home Buyers and Sellers for 2022, 83% of buyers listed negotiation skills as “very important” to their agent selection. It’s incumbent that agents become great negotiators!
Let’s dive into the best practices and some top tips for perfecting your real estate negotiation approach.
BATNA
Before you even write an offer for your buyer or discuss a seller’s reply to an offer on your listing, you should identify your client’s BATNA, or “best alternative to a negotiated agreement.” It’s crucial to identify every option available in the event things don’t go perfectly.
Preparation is key. Doing your due diligence in advance of the negotiation and having the facts on your side makes your case stronger. Understanding your client’s priorities, including a contract price that would be satisfactory, their needs in terms of the timing of the closing, and what other conditions are meaningful to them, will put you in the best position to help navigate the negotiation.
According to Harvard Law School, knowing when the parties will not come to an agreement and knowing exactly when to walk away from a faltering deal gives you a vital advantage and helps you keep your cool when it matters most.
Integrative Negotiation
Also known as interest-based bargaining, this tactic takes a positive outlook path that seeks to add value for both parties, so everyone leaves the table happy.
Many real estate agents assume that “fighting hard” for their clients means fighting hard against the other party. In truth, there are often situations where both parties want an earlier closing date or prefer a repair to an inspection credit.
Integrative negotiation is a more collaborative method that starts with identifying each side’s wants and needs. This leads to positive relationship building with you and the other agent that will serve you well in the future (a nice bonus!) Considering the why behind the demands will help you brainstorm and create a win-win outcome.
Silence is Golden
While building a rapport with your counterpart is essential, it’s also a smart move to talk less and listen more. Remaining calm and allowing moments of silence to happen naturally shows that you’re comfortable and in control of your emotions.
Empathy can be a valuable tool during negotiations. Many people don’t bother to truly listen to others, even when they’ve asked a question that needs to be answered.
When practical, let the other party speak first. Putting all your cards on the table up front will weaken your position.
Power of Persuasion
If you’ve never taken a psychology course or studied the best persuasive techniques, it’s definitely a tool you should acquire to help you be a better negotiator.
You should familiarize yourself with Dr. Robert Cialdini’s six main principles of influence and persuasion:
- Reciprocity
- Commitment and consistency
- Social conformity
- Authority
- The affect heuristic
- Scarcity
The affect heuristic refers to how people frequently let emotions overrule their common sense, which is never something you want to do at the negotiation stage of any deal. But prospective customers are much more likely to buy something from someone whom they like or who makes them feel good.
The persuasion principle of scarcity is especially relevant in the current real estate market — the number of available properties in the Chicagoland area is limited, so buyers will bend over backward to not lose the object of their desire.
Timing and Body Language
Comedians and performers know that timing is everything. It’s also paramount to successful negotiations.
While most real estate negotiations don’t take place in person, listing agents can often read the body language of prospective buyers. Before you tour a home with buyers, understand the optimal timeframe of your client. Is time on their side, or is there an element of urgency? If you’re not working on a tight deadline, then you have more power and more leverage in bargaining.
Moving to close the deal too early can make it seem like you’re conceding. But drawing it out too long can cause you to appear uninterested, which can provoke anger in the other party. Taking a strategic time-out will shift the momentum, give you a chance to rethink your approach, and give both sides a chance to take a calming breath.
Make Them Think It’s Their Idea
No one likes being pressured or feeling like they’re falling victim to a hard sale. Encouraging the other party to believe that they’re in control actually gives you the upper hand.
It’s also a rookie mistake to go into every negotiation with an adversarial mindset. Remember that most real estate ecosystems are not that large and you’ll likely have to work with these people again.
Instead, negotiate from a win/ win perspective. It’s in your client’s best interest (and your fiduciary duty) to identify value-creating opportunities for everyone.
The Power of Yes and No
Saying “yes” and “no” during the negotiation process actually has the exact opposite effect of what you’d expect. When buyers and sellers hear “no”, it actually makes you seem affirmative and dedicated to reaching an agreement.
Contrary to the lessons of improvisational theater, saying “yes” during a bargaining conclave frightens people and makes them feel trapped, and those who feel cornered stop listening and go on the defensive, which can tank a delicate negotiation.
The Bottom Line
As a real estate agent, you owe it to yourself and your clients to become a more effective negotiator.
Client satisfaction is the key to repeat business and excellent, lucrative referrals. Being known as a straightforward and honest negotiator will only enhance your reputation and your bank balance.
Working with a highly respected agency like Baird & Warner Lincoln Park will only enhance your credibility as a serious agent while giving you access to the training and tools to continue improving your skills. We’re intimately familiar with the unique Chicagoland market and what it takes to succeed here. If you’re interested in learning more about us, reach out today!