Real Estate Negotiations: A Zero Sum Game?

Real estate negotiations don’t need to be zero sum games – where one side’s gains equal the other side’s losses. In other words, negotiations don’t need to be win / lose or lose / win or lose / lose scenarios. The outcome should truly be win /win. ( Stephen R Covey’s fourth habit of highly effective people).

Add Value If It’s There

I’ve been involved in way too many negotiations in Durham County, Orange County, and Alamance County where I’ve had to stop and ask myself, “does the other realtor really want this deal to go through?”. In one such negotiation where I was representing the seller, the buyer’s agent flat-out told me their client had no interest in the detached studio in the back of the property. In fact, she said, her client will probably just use it as a spare room. As a result, the agent significantly downplayed the value of the building and consequently, offered a much lower price than the market value for the property.

Little did the buyer’s agent know, her client became a little too friendly with the neighbors during a second visit to the property and told them she and her husband were so excited to find this home as the detached studio in the backyard would allow the husband to continue his passionate pursuit of an old hobby that was placed on hold for a few years.

Many agents out there will give kudos to the buyer’s agent for not disclosing personal information about their client. I wholeheartedly agree. However, whether the buyer will make use of the detached building immediately or in the long term, or potentially never, there’s value in the building so let’s assign a dollar amount to it.

Agents Can Be Unreasonable

I’ve also come across negotiations where the seller on the other side was just so unreasonable. On one such occasion, I was representing an out-of-state buyer. After I formulated a detailed comparative market analysis, my numbers told us the seller was at least $30,000 overpriced. I freely shared my complete analysis with the agent in support of the accompanying offer and guess what? She refused to budge one dollar! I asked her if this all made sense to her and she was adamant in her belief she was going to fetch the asking price. Eventually, the home left the market unsold (aka expired).

Buyers, of course, can be unreasonable too. I’ve had buyers fishing for the deal of the century! They’d make lowball offers on multiple properties, including one of ours, in an attempt to pit the sellers against each other. There are measures a seller can take to counteract such behavior and if you’re interested, please feel free to reach out to me.

It’s All Wrong, But We’ll Take It!

I’ve also had a buyer’s agent, during the negotiation, tell me everything that was wrong with my listing: no garage, no bathtub in the owner’s suite, and too small of a kitchen. The only response I could think of at the time was, “I think you put an offer on the wrong home”.

Hot Market Is Not Win / Lose

Let me just clarify something here. Just because there’s a “feeding frenzy” in certain hot market neighborhoods where multiple offers come in at above list price, that does not necessarily mean the chosen buyer loses and the seller wins. It’s still a win /win since this is an example of market dynamics at work. If the buyer wants to “win” the property in this market, he’s going to have to bring the highest and best offer.

Other Agent Not Ready To Play

What happens way too many times than I care to admit, is the agent on the other side of the negotiation doesn’t actually know if the listing price is too high or too low. Truly, I’m ok with that – at least they’re honest and willing to learn. Either they ask me for my comparative market analysis or I will fully explain why the house is priced the way it is. Once we are all on the same sheet of music, the rest of the negotiation runs smoothly.

Here’s the bottom line, let the facts speak for themselves, let’s play honestly and fairly together, so we can mutually bring the buyer and seller towards the end goal of allowing them to move on to their next home: all in the spirit of a win / win outcome.

Photo by Michał Parzuchowski on Unsplash

#1 Lesson Not Taught In Real Estate School!

First you take (and pass) a real estate course specific to your state. Then, you schedule the real deal – a 3 hour test (in NC) that tests your knowledge regarding: Federal and state laws, commission rules, contracts, agency relationships, depreciation, appraisal methods, survey methods, net operating income, interest calculations, mortgage types and clauses, deeds, appurtenances, government police power, etc. etc. So much material, barely enough time.

With that being said, there are so many concepts and aspects of running a real estate business that are not taught in real estate school. I may have just surprised you by insinuating that you are in affect running your own real estate business. Yes, it’s your business and in the words of Robert Shuller, “If It’s Going To Be, It’s Up To Me.”

After all, once you got your real estate license, how did you see this whole real estate gig working out? Did you picture yourself signing on with one of the national brokerages and going to the office everyday as you did when you had a “real job”? You’re disciplined enough to show up early every day and be the first one to your desk every morning. Now what? Be honest. Did you even realize the job is 100% commission-based?

Well surprise! You have NOT entered the real estate business. You have entered the lead generation business. It truly doesn’t even matter what you are selling. Oops..another Freudian slip! You are a sales person whose primary job responsibility is lead generation. There, I said it.

Please don’t misunderstand me. You may be taking this as a negative and for the majority of Americans, it is a negative because they do not want to take responsibility for being in business for themselves. If that’s your attitude then don’t you think it’s better to find out sooner than later? If this sounds like you, then you probably do not want to be a real estate agent.

Ultimately, as a real estate agent, you are in business for yourself. And according to management guru Peter Drucker, there is only one true purpose of a business: to generate a customer. I rest my case, welcome to the lead generation business. Start generating leads my fellow real estate agents. More on this later.