Posts Tagged ‘Negotiating’

posted by on Random (Un)Common Sense

“The seller countered at $435,000 and said that’s his bottom line.” Negotiate

Well, shucks. I guess the deal is done, then. The buyers said they won’t go above $415,000, so there’s no point in wasting any more time on this negotiation.

Uh, HUH?

Never, ever, ever believe that anything is anyone’s bottom line! Not saying that they’re lying or even that they didn’t mean it when they said “this is as low (or high) as we’ll go.”

They probably weren’t lying and they probably did mean it.

But that doesn’t make it true.

No one knows what the bottom line is until they reach it. Not the listing agent, not the buyer agent, not even the buyer or seller. And chances are that any proclamations of bottom line (or top offer) are thousands of dollars from what the seller would be satisfied taking or the buyer satisfied paying.

As the representative of the buyer or seller in a negotiation, never, ever allow the negotiations to die on your side of the table. Always counter a “final” offer, even if you “know” the parties involved are as low (or high) as they’ll go.

Because you don’t know. And, frankly, neither do they.

On a related note, I can’t tell you how many times I’ve seen an agent on a real estate reality show push her OWN client to accept an offer or counteroffer because “the other agent says this is their bottom line.” Nonsense!

Never, ever advise your buyer or seller client to pay any attention to such proclamations, and push them to accept a “final offer” just to save you the trouble of drafting up yet another counter-offer. If your buyer or seller wants to push a little harder, just write it up! I think you’ll be surprised (pleasantly) how many times a “dead” deal will come together if you don’t accept anyone’s “final offer!”

posted by on Random (Un)Common Sense

During a recent SWS Teleseminar show (Negotiate with Soul) a discussion arose as to whether or not a listing agent should “remind” the buyer agent of the buyer’s contingency deadlines. We didn’t exactly call it “reminding,” but rather “checking in” or “following up,” but to my ear, it’s the same thing as “reminding.”

For example, in Colorado, there is a loan approval deadline which somewhat functions as the Drop Dead date in a transaction. If the buyer does not have loan approval by that deadline (typically a few days to a week prior to closing), he can do one of three things. He can:

1. Terminate the contract and receive a refund of his earnest money, no questions asked, or

2. Ask for an extension of the loan approval deadline (which the seller has the option to grant or not), or

3. Do nothing.

Please note – the onus is on the BUYER to notify the other party if there is a problem with the loan. If the buyer does nothing, it is assumed that the loan is fine, and the earnest money goes “hard” – that is – if the transaction does not close on time, the seller has the option to keep the buyer’s earnest money. But NOT HAVING LOAN APPROVAL DOES NOT TERMINATE THE CONTRACT and if it still somehow can close on time, great!

So, back to the question, (assuming an agency relationship exists) should a listing agent remind the buyer agent about the loan approval deadline?

posted by on Random (Un)Common Sense

Negotiate

Yesterday, we did a teleseminar show in the SWS Virtual Studio about negotiating – specifically, negotiating on behalf of our buyers and sellers (as opposed to any sort of fee or commission negotiation). I was joined in the studio by Blake Farley, from Silver City, New Mexico and from the positive feedback I received on her presentation and brilliance, I’m guessing you’ll be seeing her on future shows – GREAT JOB, Blake!

The format of the show was that Blake and I took turns sharing our top ten favorite tips and strategies for keeping negotiations on track and civil… and, oh yeah, maximizing the likelihood that our client gets what he wants without any unnecessary drama, chaos or angst. At the end of the show, I asked the audience to tell me what their favorite tip(s) of the day was/were, and here were the results:

Favorit-est Tip #1: When negotiations get hot and heavy, withdraw. Dead silence from your side. Don’t tell the other agent you’re “thinking about it” or going to “sleep on it,” just stop all communication until the next day. Very unsettling to the other side, and keeps your client from getting carried away by the emotion of the negotiation.

Favorite-est Tip #2: Never believe anyone when they say “This is our best offer” or “This is our bottom line,” and related, never let the deal die on your side. No one knows what their best offer or bottom line is until they’ve either signed an agreement, or rejected one. When the other agent presents a counter-offer to you and tells you “this is the best we can do,” pay no attention. If your client still wants the house (or still wants to sell), counter back. More often than not, the negotiation will continue beyond the previously stated “best” or “bottom.”

Favorit-est Tip #3: Related to 2, never ask your buyer or seller for their bottom line or highest-and-best. If you do, you force them to commit to a figure and they might be uncomfortable down the road if they’re willing to go higher or lower. A side benefit to this strategy is that you won’t be accused of spilling the beans to the other side if, by chance, the offer or counter comes in at the exact figure they shared with you. If a buyer or seller tells you what their highest-and-best or bottom line is, act as if you didn’t hear them ;-]

Favorit-est Tip #4: Get everything in writing – no oral negotiating. When agreements are reached over the phone, something always comes up when it’s time to put the agreement on paper, creating unnecessary drama. It’s easy enough today to just “write it up,” and keeps everyone on the same page, so to speak.

(Tied for) Favorit-est Tips #5, 6 & 7: (Almost) always counter an offer, even on technicalities to keep the buyer from feeling he could have/should have offered less; as the listing agent, don’t remind the buyer’s agent of contingency deadlines (to protect your seller’s right to retain earnest money); and always remember whom you represent, which helps you be a stronger negotiator and not make an idiot out of yourself with your own client!

Other tips from the show:

  • Make the offer price/counter price “attractive” to the other side by rounding up or down (e.g. $279,900 versus $280,000)
  • When countering, use positive statements when possible – e.g. instead of “No termite inspection,” say “Buyer to pay for termite inspection.”
  • Realize that you can say NO – and that the other side sometimes fully expects you to.
  • Set expectations with your clients BEFORE you get to the offer stage (e.g. market conditions, communication, etc.)
  • Negotiate delayed possession for staged and owner-occupied properties, in case the loan falls apart at the last minute
  • Try to give the other side an opportunity to save face when negotiating – don’t reject a counterproposal outright – give a little bit, even a token amount or concession.

posted by on Random (Un)Common Sense

Thanks so much for all your responses yesterday to my blog entitled “Does arguing with clients sound like a good idea?”

As promised, here’s my take.

Our clients are intelligent human beings, capable of making their own decisions. Okay, so maybe some might be more capable than others, but all deserve our respect that they have thought thru their situation (after all, they have more at stake than we do) and reached a decision they feel works for them. That’s the first step – to SHOW our clients that we respect their intelligence and their right to make their own decisions. When you immediately “argue” with your client’s point of view or decision, this sends the opposite message.

Now, I’m not saying that you shouldn’t have an opinion or be allowed to voice one. BUT, if you don’t want to be accused of being argumentative, you need to take a different approach from simply saying “Are you sure you want to do that?” or “I really don’t advise that” or “I don’t think that’s a good idea.” Say something like that to ME, after I’ve given MY personal situation some thought and y’know what? I’ll dig in my heels and commit even stronger to my position.

You know what else? I think I’m a pretty smart cookie. I’ll bet you do, too. In fact, I’ll bet most of the people on the planet have a healthy respect for their own intelligence. Argue with me and guess what? I might think you aren’t quite as smart as I thought you were – after all – you’re arguing with ME and I think I’m right. What does that make you? Wrong… and kinda dumb. “Poor thing, you just don’t get it,” thinks me.

So, what’s the solution? Ah, GLAD YOU ASKED. Because that’s part of the solution. Wait for your client to ASK for your opinion or advice. Once they do, they’ll actually listen to it. If they don’t ask, they truly don’t care and any advice you give that is counter to their opinion will be discounted anyway. They’re the boss, after all, and if they want to kill their deal, it’s their choice. And it IS their choice (not yours)!!!

If you show respect for your client’s position and don’t argue with it, they probably will, at some point, ask you for your thoughts. At that point, you can give it, respectfully, all the while KEEPING YOUR PAYCHECK out of the conversation or your thoughts.

So, let’s take the scenarios presented in yesterday’s blog and see how you can respond without arguing:

Scenario #1: Your buyer wants to look for a home in a less desirable neighborhood so she can get more square footage. This is a no-brainer. Show her the houses. Let her do her own soul-searching. YOU can’t predict the future anyway, so who knows? Maybe it’ll turn out to be a great financial decision, maybe not, but there is NO room for argument here. Last time I checked, adult human beings have the right to live where ever they want, without getting permission from their real estate agent.

Scenario #2: Your seller is offended by a low-ball offer and wants to reject it outright. Obviously, we want the seller to counter any offer he receives, but first, we need to show support and be offended right along with him. He’s probably expecting you to argue with him and is steeled for it, so by not arguing right off the bat, he’ll relax. Once he does (if he doesn’t, you might need to let him sleep on it and re-group the next day), you could offer to draft up an equally ridiculous counterproposal  (full price, 21 day close, whatever) and see if he’s open to that. Then maybe you can encourage him to give a little bit so the buyer doesn’t feel like a total putz. But again, if he wants your advice, he’ll ask for it. If he doesn’t ask, he doesn’t want it, won’t listen to it and will just be annoyed by it.

Scenario #3: Your seller accuses you of underpricing her home when it sells on Day One. Okay, let’s imagine what’s happening in her life. She’s telling all her friends that her house sold in 24 hours and are they congratulating her? Nope. They’re telling her that her idiot Realtor underpriced the home. Yipes. Do you defend yourself? This is a tough one because every bone in your body is screaming to. But be careful. Your seller is expecting you to be defensive, so don’t be! Agree that the home might have been under market. Congratulate her for having such a nice property and working so hard to get it ready for market. Leave YOUR efforts out of it. If you schmooze her, she’ll return the favor. Argue with her and she’ll argue back. No fun.

Scenario #4: Your buyer decides to buy a townhouse, but you know that a single family home is a better investment. Another no-brainer. If she’s concerned about investment, she’ll let you know and you can share your thoughts. But show her the respect she deserves and let her make her own housing decision.

We are in a business where egos and emotions are involved in almost every decision. Acknowledge it, work with it, use it to your advantage. And… GET WHAT YOU WANT!

posted by on Random (Un)Common Sense

I like to negotiate. I think it’s great fun, especially when everyone comes out of the deal thinking they “won.” Of course, that’s not always possible, but it’s an added bonus when it happens.

Anyway, here are a few negotiating tips from Jennifer’s negotiateSoulful Toolbox…

1.       Never, ever call the buyer’s agent and ask how the inspection went. Let him come to you.

2.       Never, ever call the buyer’s agent ON THE DAY OF LOAN APPROVAL and ask if the buyer, indeed, has loan approval. Call the next day. (Know why?)

3.       When negotiations get hot and heavy… withdraw. Dead silence from your end. Let the other side wonder if they blew it with you. Overnight.

4.       When negotiating, try not to make the other side feel bullied or cornered. Build in a slight “putz” factor when you can to give the opposite team a way to accept without losing face. For example, if your buyer asks for a $2000 credit for repairs and the seller counters with an unacceptable $1000 credit, go back at $1,800 instead of standing firm at $2,000.

5.       Always remember that the other side, whether buyer or a seller, feels vulnerable as well, regardless of their stance during the negotiations.

6.       You can always say NO. In fact, the other side probably fully expects you to.  If they want to buy or sell, your saying NO won’t kill the deal. And sometimes, bending over backwards to make a deal go thru can actually do more damage than simply saying NO.

7.       Almost everyone likes to negotiate, regardless of any claims to the contrary. As a buyer agent, do not submit offers with the statement “This is our highest and best – take it or leave it.” It won’t work. If you’re the listing agent, always find something in an offer to counter. Both sides want and need to feel the thrill of a successful negotiation.

 

posted by on Consulting & Compensation

microphone

On Wednesday afternoon, I hosted a teleseminar panel discussion on the Art of Commission Negotiation. And yowsa! It was fantastic! If you missed the show, you missed a great one. If you ask me reeeeeeal nice, I might be persuaded to send you a recording of it.

Anyway, we had five guest speakers, including me, sharing our strategies for that sometimes-awkward commission negotiation conversation with a potential seller. We all had very different approaches, (but none of us advised the “whine your way to a commission” strategy where you basically tell your seller how little you end up with at the end of the day, as if he cares!)

For those who missed it, our five speakers and an overview of their philosophies were:  

Jackie Leavenworth, The Real Estate Whisperer: Comfortable scripts & dialogues, including “No, but thanks for asking. What other questions can I answer for you?” and “No, but thanks for asking. I used to negotiate my commission, but I found it didn’t work for me,” and “No, but thanks for asking, I run my business with integrity and decided that it’s not right to charge someone less because they’re a better negotiator than someone else,” and “No, but thanks for asking. This is actually your first test of my negotiating skills!” Jackie also refers to her commission as a “success fee” and takes the time to explain what that means.

Scott Nordby, Broker Owner of Innovative Real Estate Group: Asking the seller for his thoughts on what is important to him in a real estate agent. If the topic of commission comes up, Scott asks him what he feels is a fair price to pay a professional real estate agent. Most of the time, the seller responds with the figure Scott is looking for, but if he doesn’t, Scott doesn’t back down and is willing to lose the listing.

Loretta Hughes, Broker Owner of Exit Realty Fusion: Raising the total commission payable so that the buyer agent co-op is far above what most other agents are offering, thus encouraging showings. She explains to the seller that by netting a higher price (due to the increased activity), the higher commission they’re paying is offset – that is – the seller ends up with a higher net proceeds. She does not participate in the higher commission – she gives all of it (over and above her own normal listing fee) to the buyer agent.

Tupper Briggs, RE/MAX Top Producer: Tupper uses his prowess in the Evergreen market to demonstrate his value. He shows the seller, using hard figures from the MLS which are updated monthly, how his team sells homes far faster and for more money than the “average” Evergreen real estate agent. Thus, even if his fee is higher than his competition, the seller nets more in the end.

Jennifer Allan, Author of Sell with Soul (me): Being upfront about commission – getting it out of the way as soon as possible so as not to create an adversarial situation with a seller. When sellers ask what I charge, I either tell them or direct them to my website where it’s clearly spelled out. I also offer an option in fee structure – the seller can pay my full percentage at closing or pay me an upfront marketing fee + a reduced percentage at closing, thus sharing the risk.

Thanks to all who attended and a HUGE THANK YOU to the speakers!

posted by on Consulting & Compensation

Question

Got a question yesterday from an agent who was referred to a potential seller by an acquaintance.  However, the acquaintance warned the agent (let’s call him Sam) that the seller has a “friend who will list the house really cheap,” so Sam may not have a chance at procuring the listing.

Sam asked me how I would approach the situation – how would I respond if the topic of commission comes up in their initial phone conversation? And how would I go about persuading the seller that I’m worth my “full” fee and that the “friend” may not even be worth her discounted one?

Wanna know what I told him? Okay, twist my arm.

First, I always recommend that we be upfront about what we charge if asked. I don’t believe in deflecting the issue because it puts us in the position of being a salesperson instead of the professional advisor I feel we are. So, if Mr. Seller were to say “Sam, what do you charge to sell a home?” I’d advise Sam to answer the question without hesitation. No hemming, no hawing, no creative avoidance. Just get it out there on the table.

My fee is X% to sell a home, which includes the buyer agent’s fee of Y%”

If the seller responds with “Well, I have a friend who will do it for X-minus-2%…” Sam can say: “That’s great – and that might be the best deal for you. But I’d still be happy to get together and talk about your situation, so you can be sure you’re making the right decision. No pressure, I promise. And I’ll respect whatever decision you make.

Reverse psychology (“that may be the best deal for you“) works great here!

If the seller agrees to meet with you, that means he’s probably open to paying your fee, if you can prove you’re worth it.

And as you probably know if you read much of my stuff, that’s a BIG DEAL to me – actually being WORTH the fee you charge… and knowing you’re worth that fee. Getting the point of being and knowing you’re worth it might take some time and soul-searching, but it’s well-worth every minute.

(And by the way, BEING worth your fee has nothing to do with how much you NEED that fee).

Anyway, I digress.  Next question – once you’re face to face with the seller – should you address the issue of your competition’s lower fee head-on?

Whatcha’ think? (I’ll share my thoughts tomorrow.)

posted by on Working with Buyers

I just got through two tough inspections… Welcome BACK to Charming Old Denver real estate!

I’ve always worked in historic neighborhoods, so the ability to negotiate inspections has been a critical part of my success. And yeah, I’ve gotten good at it. If you’re interested, I’ll share some of my secrets with you…

First, ATTEND YOUR INSPECTIONS! I can’t believe how many agents don’t and I think that’s abysmal customer service. Yeah, I know the attorney-types tell you to avoid inspections like the plague, just in case you get sued as a result of being there, but to that, I say… baloney! I’d much rather take the chance of maybe getting sued (and in 12 years it’s never happened to me) than risk losing the loyalty of my buyer client by not being there (and remember, he’s the gatekeeper to all his potential home-buying friends).

Here’s why I think it’s important to attend:

  1. It’s hard to negotiate repairs found during inspection that you didn’t see firsthand.
  2. Your buyer expects you to be there and your credibility will take a hit if you don’t attend.
  3. It’s good customer service.
  4. When you’re new, inspections are an excellent opportunity to further your real estate education.
  5. You need to be able to recommend good inspectors to your buyers and if you don’t attend inspections, how can you judge?

Second… well, I’ll save the rest for tomorrow. Stay tuned!

posted by on Working with Sellers

Had one of those oh-so-fun aha moments yesterday.

I’m currently negotiating a book deal with a NYC publishing house (sounds glamorous, doesn’t it?).

Here’s the background. A month or two ago, I was contacted by a senior editor, let’s call him Bob (cause that’s his name). He wanted to talk to me about writing another book and publishing it with his company. He schmoozed me, flattered me, rapport-ed me. He called when he said he’d call and responded promptly to my emails. Bob is one heck of a nice guy. I sure like Bob and I can tell Bob likes me too. I’m really looking forward to working with Bob.

Then, all of a sudden, we’re talking money. As in, advances, royalties and publicity. Suddenly Bob is not my friend. Suddenly, Bob is someone I’ve never met. Suddenly, Bob no longer makes an effort to schmooze me, no, his emails have taken on a much different tone, a tone… interestingly…. very much like a real estate agent negotiating his commission (or, for that matter, list price) …

carHere’s the thing. Assuming Bob and I agree on the financial terms of our relationship (e.g. my $50,000 advance and 40% royalty – HA!), our relationship doesn’t end. At that point, we have to work together – closely – after all, he will be my editor. We’ll need to get along and trust each other. It’s not like a car salesman/car buyer relationship where the salesperson schmoozes, negotiates and then pretty much drops out of the picture. No, poor Bob is in the position of winning my trust, then negotiating against me, then needing my trust again.

The parallel really smacked me in the head. We real estate agents pursue sellers with big smiles and hearty handshakes. We pet the dog, ooh and ahh over the wallpaper and listen sympathetically. Then… when the conversation turns to money, what appeared to be the beginning of a beautiful friendship … is suddenly adversarial.

We get haughty, we get huffy (not you or me of course, but everyone else). We’re offended if asked to justify our fee and annoyed when sellers don’t trust our CMA’s.

Talk about a buzz-kill.

If we are successful in our commission and pricing negotiations, we are hired to sell the home. And, we desperately need the trust and support of our seller to our job right.

See the problem?

In my current situation, I really wish that someone other than Bob was responsible for negotiating my contract. That way, Bob and I could have continued our budding friendship and worked together happily ever after. But now… it’s clear he’s on the other team and I need to protect myself. Bummer. I’ll probably never feel as warm and fuzzy toward him as I once did.

It’s the same in real estate negotiations. It sure would be nice if all that great rapport we create during the schmoozing process could flow smoothly into the marketing process. But no, it’s interrupted by all the unpleasantness of negotiating commission and arguing about market value. And the relationship may never be quite the same.

Maybe this is just all part of the sales process, but it seems as if there oughta be a better way…

posted by on Random (Un)Common Sense

Reverse psychology works. I know it does.

I'm no expert (well, maybe I am, after all, I have a minor in Psychology from Southwest Missouri State University, are you impressed?), but as a student of life, I've seen it happen time and again. Specifically in two important arenas of my life… Love… and Real Estate.

This being a real estate forum, I guess I'll stick to the topic of The Power of Reverse Psychology in your real estate business. If you wanna chat about love, I'll meet you on a different forum with a glass of wine and a pint of ice cream.

Inquiring agents want to know… "What's the best way to convince a FSBO to hire an agent (preferably me)?" or "How do I persuade a prospect that I'm the best man/woman/child for the job?" Most of the advice provided involves beating clients and prospects over the head with a long list of "reasons" they "should" listen to you.

But think about it. When a sales-type comes at you with his practiced pitch full of "features & benefits", don't you tend to shift into defense mode, mentally arguing with him, point by point? After all, there's no way this salesperson is smarter or more informed than you are, so why is he standing right there telling you he is?

Brian Sullivan of Precise Selling calls this behavior "Contrarian." He defines "Contrarian" as "somebody disposed to taking an opposite position: somebody who is prone to opposing policies, opinions or accepted wisdom." The reason for contrarianism is that we (human-types) love our OWN opinions far more than we love anyone else's opinion. In order to connect with your contrarian customer or prospect, you need to let him make the statements of opinion (er, sorry, fact).

But enough pseudo-sales training from me; I KNOW I'm no expert there. Here are some examples of reverse psychology in action from the world of real estate:

When competing for a listing… You say:
"Frankly, any competent real estate agent can sell a home that's well priced and well presented, there's nothing all that special about me or my company. When choosing an agent, just go with your gut feeling – who you feel the most comfortable with and who seems to care the most getting your home sold.

When prospecting to a FSBO… You say:
"The market is strong right now, so I'm sure you'll be able to sell your home on your own. It's not rocket science, after all. But if you have any questions during the process, feel free to give me a call."

When working with a new buyer… You say:
"I have all the time in the world to help you to find the perfect home. I want you to be thrilled with the home you purchase and I'll be here for you no matter how long it takes."

When discussing market value with a seller… You say:
"If another agent thinks they can get you that price, I say, hire him! He may know something I don't about selling real estate in this market. I certainly don't want you to feel that you hired the wrong man for the job."

OR

"I'll tell you what. If you need that price to make selling worthwhile, let's wait a few months. Maybe the market will improve. I'll be happy to keep you updated on the neighborhood activity and when it reaches that level, we'll hit the market right away!"

When you acknowledge the intelligence and competence of another human being, she will automatically think you're just a little bit smarter than she initially suspected. But lo and behold… she's still a Contrarian, so you may find that she begins to argue with you anyway! And that's what you want!

For example:"I have all the time in the world to help you find you a home…"
Your Buyer's Response: "Oh, no, I want to find a home as quickly as possible!" (She said it, you didn't. It now becomes HER goal)

Or…

"If you need that price to make selling worthwhile, let's wait a few months…"
Your seller prospect's response: "Oh, no, I need to sell right away! How can I do that?" (Now, suddenly, you're the expert. In HIS opinion.)

It might be different if we were doctors or attorneys or such – after all (lawyer jokes aside), the general public has a great deal of respect for these professions. But let's face it. We're real estate agents. We're perceived just slightly above car salespeople. We're paid on commission. We are not, as a general rule, the most believable group of people on the planet.

Go ahead, argue with me… after all, it's human nature!

 www.sellwithsoul.com

copyright Jennifer Allan 2007