Negotiation: How it Works in a Real Estate Transaction
You’re probably familiar with the concept of negotiation. You most likely know that it’s an important part of a real estate transaction, but you may not be sure of the why or how.
Successful negotiation is getting more of what you want and less of what you don’t want. In a real estate transaction, negotiation takes place in both overt and subtle ways, brought to life with pricing, contract terms, dates, concessions, or repairs.
If you’re concerned that you don’t know how to negotiate in a real estate transaction, I have good news for you: It’s your real estate agent’s job to do so on your behalf! With this in mind, it’s important to hire an agent with strong negotiation skills, and one whose recommendations and guidance you can trust along the way.
Negotiation in a real estate transaction starts with figuring out how much leverage you have. In other words: What is your starting position?
Less leverage means less room for negotiation. For example, if you’re looking to buy a home and there are other interested buyers submitting an offer at the same time, you have little leverage, and your choice is to give the seller what they want or risk that another buyer will.
In another case, a buyer might be interested in a home that is overpriced and has been sitting on the market without activity for a period of time, indicating that you may be in a leveraged position, a great place to negotiate from in order to achieve your desired terms of contract.
Successful negotiation involves understanding both sides of the equation. It’s impossible to be all-knowing without clairvoyance, but as an agent, part of my job is to gather intel and find out everything I can about the situation of everyone and thing involved. This usually comes in the form of a phone call with the other agent where I ask specific questions and then report back to my client with my impressions and a recommended negotiation strategy based on our starting position and their end objective. You’d be amazed at how often other agents don’t take this critical step!
Negotiation continues throughout the entire transaction, from before an offer is submitted all the way up until the last signature at settlement. The manner in which one step of the process is negotiated can and will impact the next. Staying focused on the big picture and end result at every stage is mission critical. There are times when a little compromise can go a long way, and I always encourage my clients to imagine the thought process of their counterparts in order to find these leverage points!
These skills take experience over time to build and develop. I was not nearly as effective in the early years of my career as I am now, and even though I continue to hone my craft, the results that I get for my clients speak to my effectiveness as a negotiator.
Most often, a “perfect deal” doesn’t exist: The outcome will more positively impact one party and more negatively impact another. When buying, you deserve the benefit of a strong negotiator to help you save any amount possible through this process of spending such a large sum. When selling, you’ve spent years investing in your house—one of your largest financial assets—and hiring a good negotiator will make sure that you keep as much of that investment as possible.
Do you have reason to believe in your agent’s negotiation prowess? Any questions for me? Leave them below!