Real estate negotiation sounds easy on paper, but in practice even small mistakes can sink deals. You need to understand psychology, strategy, and a shifting market to get the best outcome. Not easy!
Negotiating is an art, a skill and a science. In the world of real estate, understanding how to negotiate is a must. Before you approach the negotiation table, get familiar with these tips to win any negotiation in real estate.
Set Realistic Expectations
During negotiations, one of the most effective strategies I use is a combination of managing expectations and practicing discretion. For my buyers, I like to run through scenarios to anticipate the seller’s moves, staying one step ahead in the negotiation. I keep details about the buyer and seller to a minimum to avoid tipping our hand or becoming biased about the property.
Similarly, for my sellers, I prepare them for the reality of lower-than-expected offers and potential inspection issues, especially in this shifting market. I include these considerations in the net sheet to set reasonable expectations. This way, both sides are better equipped to handle the twists and turns of the negotiation process, leading to more successful outcomes for all parties involved.
Focus on Timing
When I got into real estate, it was explained to me that one of the most important factors in negotiating with buyers or sellers is the timing. Too fast and everyone feels like it was too easy; too slow and one side may lose confidence or get cold feet. The key to managing the cadence of a deal is communication. Let the other side know what to expect and when. Communicate with the other side—don’t just leave them in the dark for a day or two.
Learn What the Other Party Really Wants
Learn what the other party needs—not really why they are selling or buying, but what’ll satisfy them that they have a win-win sale. Ask questions and praise the good points of the property or the nice character of the buyers if you’ve met them. Put together the best deal so that the closing is smooth and successful. I’ve closed many deals using this mindset.
Here’s an example: I call the listing agent to say that we are writing an offer. Are there any terms the seller needs? Fast close? Contingency to find a new home? I don’t really ask why the seller is selling, but I will often pose a leading question to find out why they are selling (perhaps I see they’ve owned this home for many years via the title profile, or did they raise their kids in it? Or was this an investment rental?). I take this opportunity to tell the agent about my buyer’s story and the lender involved so far.
Let the Other Party Speak First
At first, never put all of your cards on the table. Many negotiators stick to the middle ground. Stay quiet, and let the other side speak first. Navigate from there. Once everything is on the table, express your figure. You can set it lower knowing what the potential middle ground will be. In this negotiation, you are already ahead.
Never Act too Excited
Every deal is important; however, hide your emotions. Don’t overshare in an attempt to make yourself look better. Talk less, and listen more. Silence is the loudest word. In between pauses of silence, the fear of losing the potential deal will intimidate the person on the other side of the negotiation table. This can be leveraged to the outcome of your choice.
Keep Your Emotions in Check During Negotiations
Emotion, especially anger, is a weakness at the negotiating table, and if you can’t find your poker face, buying and selling real estate is going to be hard for you. Don’t whine, don’t bitch, don’t pout, don’t curse, don’t get angry, don’t pace, and don’t storm out. Things happen. If you want to become a stronger negotiator, you need to learn how to keep your poker face—no matter what the other side throws at you.
Not everyone is as respectful as they should be. Know this going in and be prepared to let it roll off your back with a smile.
Don’t Act Like it’s Your Last Deal
Sometimes, brokers, sellers and buyers act like the deal in front of them is the last deal of their lives. Do not go into a transaction with this mentality. The negotiation table is not a battleground. Humility and empathy should never be taken for granted. If you are taking a hard approach toward the deal, the other side will become uncomfortable. Negotiating is about finding a win-win situation. Focus on listening to the issues at hand and offer solutions.
Base Your Negotiations on Market Value, Not Just Asking Price
My strategy is to calculate the value of a property or business. This, rather than the asking price, is the starting point for negotiation. It may require an offer above present market value in hot markets to get a home under contract.
Many people want to lowball, making an offer that will never be accepted. I advise against this, this might not only offend the opposing party, but they’ll simply pass on your offer. It does not reveal anything about the seller’s position. I like to offer just below the minimum the seller is likely willing to accept or slightly above the market value, but below the asking price. The seller is forced to decide to accept just a little less than their minimum but, if not, will be forced to counter aggressively not to turn away a strong buyer. The analogy I use is tennis: It doesn’t matter how hard your first serve is. If you do not get the ball in play, that first serve is wasted.
Arm Yourself With Data for Stronger Negotiations
The adage in real estate is location, location, location. When it comes to negotiation, it is data, data, data. Let the data drive your negotiations and decisions. Gather information and leverage it to your advantage. The key is to have more information than the other side.
The person armed with the most amount of information is more likely to win the negotiation. You should also have an understanding of the best alternative to a negotiated agreement. If negotiations fail, what are the other options for your buyer and seller?
Have Back-up Plan
Any negotiator worth his or her salt knows that you most likely won’t get the exact deal you or your client wants unless the market is heavily in your favor. So, always make sure that you have a backup plan — it helps you determine when to walk away and when to sign the dotted line.
To have a solid plan B, know what your client is and is not willing to compromise on. Also, try to figure out what the other party values most and what they will not budge on. Discovering this information early on will speed up the negotiation process by reducing the amount of the back-and-forth.
A good rule of thumb when considering your backup plan is that if your plan B is better than what is on the table, you shouldn’t take the deal. However, if the offer on the table is better than your plan B and original offer you should strongly consider it.
Master the 3 Ps of Real Estate Negotiation: Push, Pull, Persist
For negotiations, we follow the 3 Ps: push, pull, and persist. This helps us have options as the discussions progress or regress. For example, we push information, data, proactive help, understanding and listening. We persist, relentless in our pursuit of getting to yes. And we can pull: yes … pull the deal away.
Whether I’m selling a home or commercial property for $1 million or $130 million, the minute the buyer likes it, every other agent would run to write the offer. Sometimes being the boldest pays off with the biggest successes for your clients.
It’s important to remember that, in negotiations, the one with the power is the one who will walk away. So we can sometimes use ‘pull’ in our strategies. This works with buyers and sellers and in any market. In addition to that, it’s always good as a broker to demonstrate you don’t just want to rush to do any deal for clients—you want the best deal for them. So taking the deal away can be effective to create urgency for getting the deal done and for your relationships with clients as well.
Keep Records of Agents in Your CRM
Since listing agents can have very different negotiating styles, it’s crucial to keep notes on each listing agent we work with so we can adapt to their working style when we do another deal with them. Did they prefer phone calls or texts? Were they responsive? How long did they take to respond to your emails? This is all useful data we note in our customer relationship manager (CRM).
Negotiate Before Committing Anything to Paper
Negotiate deal points with the cooperating broker before taking it to paper. A counteroffer could get messy when there is a lot of unnecessary back and forth. If you are negotiating with an agent over the phone, it’s helpful to write up the contract as you speak to keep things more straightforward. Multiple counteroffers create confusion and make for a less-than-favorable real estate buying or selling experience. Keep it simple!
Present Multiple Offers in Person
Multiple offers can be a headache for sellers—make it as easy as possible for them. And look, it might be easy to just email over the offers to your sellers as they come in. But if you know this is a hot listing and you’ve got more than three or four good offers, set a deadline with your clients and schedule a time to sit down with them. We make a spreadsheet of the offers and the terms, and explain each of them to our sellers.
If you’re unable to do that, a Zoom meeting or a phone call is still better than a lengthy email chain with PDF attachments cobbled together. Share your screen or make sure your client is in front of their computer and able to walk through the spreadsheet with you so you can answer any questions and help them understand the offers.
Negotiate With a Win-Win Perspective
Many new agents make the mistake of starting every negotiation as if they were going into battle. Not only will this annoy the agent on the other side of the deal, with whom you will likely need to work again, but it can actually hurt your client’s interests as well.
Instead, learn to focus on solutions instead of turning everything into an adversarial crisis. Your clients and fellow agents will thank you. Be the agent everyone wants to do deals with, you’ll get a reputation in the industry by the way you work with other agents. How quickly you respond to phone calls, how you respond to emails or do you ignore them, whether you let people know things up front or you don’t, when you call are you pleasant to talk to, you ask great questions, you don’t make negative assumptions, you don’t jump to conclusions, you don’t stir the pot, you don’t ignite a flame out of something that’s not an issue, you don’t make a mountain out of a mole hill, you take mole hills and find solutions to make everything smooth. Be that agent that makes things smooth not makes things rocky. Be the agent that’s the dream to work with not the nightmare to work with. Your clients will be served better, you will make the deals go smoother and you’ll enjoy your life and your business a whole lot more.
Make Them Believe the ‘Yes’ Was Their Idea
No one likes to be coerced into doing something. That’s why smart negotiators often subtly encourage the other party to think they’re in control. A great way to do this is to offer them a quick out. Studies have shown that using affirming language like “You’ll probably refuse, but…” leads to increased compliance.
This is an example of how you can apply this technique in a negotiation with a seller:
“The buyer is asking for you to pick up the closing costs to seal the deal. You’re free to say no to that, of course, but would you be willing to consider it?”
Master the Power of ‘No’
In real estate, many agents underestimate the power of ‘no,’ especially while they’re under contract. I see this a lot with newer agents in their first few deals. It’s natural to worry about pushing back on clients, but they trust you to guide them through the process.
Let’s say you’ve got a buyer under contract. They want to request a new roof, but the inspection report says the roof is probably all right for another five to 10 years. Instead of automatically saying ‘yes’ to your client and potentially blowing up the deal, consider a strategic ‘no.’ You could counter by asking for a $10,000 price concession instead.
Offer the Buyer a Credit on Their Mortgage
Our current market is impacted by higher interest rates, which have decreased buying power. As a listing agent working with a buyer’s agent or buyer who is getting a mortgage as part of their purchase, one strategy is to offer the buyer credit they can use to buy down points on their mortgage.
A point may cost $10,000, but that $10,000 will offer compounded savings to the buyer over the term of the loan. It will position them to achieve a rate closer to 4% (depending on how many points are purchased), which will be a win in our current market where rates are hovering between 5% and 6%. Instead of going back and forth over the purchase price, change the conversation and repackage those dollars in a thoughtful way.
Use a Framework for Your Negotiation
In many real estate MBA programs, you might hear a concept called the four Cs. It’s easy to remember and applies to just about every transaction. It starts with a checklist to make sure you’re hitting every step in every transaction (including a follow-up for reviews once you’ve closed) for every transaction. Then, think about what your client can compromise on. Help them see what you have in common and where both sides just won’t budge. Keep this in mind to make things simple: checklist, common interest, conflicting interest and compromise.
Criteria: If you don’t yet have a checklist or a process for how your transactions should go, you’re doing yourself a disservice. There’s over a dozen steps for every transaction. Make a checklist that you use for every deal so you can eliminate potential potholes that might slow things down.
Common interest: Identify the mutual benefits. A small concession from you can lead to a much smoother transaction from the other party.
Conflicting interest: Knowing where both sides won’t budge helps you think strategically about moving forward. If a buyer’s lease is up next month but the seller isn’t motivated to move, you might find it tougher to move things along.
Compromise: Your expertise in real estate gives you the authority to find a middle ground. Remember that you’re the guide here. Sometimes that $400 bathroom fan isn’t worth losing the condo over. Help your buyer to see the big picture.
Live Conversation Beats Texts & Emails Every Day of the Week
I remember a transaction with an agent who returns all of my voicemails with text. I have the sense she is making a point that the new generation uses technology. I definitely get that, but I’d like to make a counterpoint: She is missing so much information by communicating only electronically. There is a natural back-and-forth in a conversation where way more information and understanding come out, and those things can be essential in getting to a win-win.
You might learn, for example, that a seller is very nervous because they are buying a home and trying to close both sales and move the same day. If you are in a multiple-offer situation, your client now has a card to play. Perhaps they can offer the seller a one-week lease after closing. This may win the day.
When Things Get Personal in Negotiations, Sleep on It
Brokers should not make negotiations personal. Both sides want to get the deal done. If it’s getting personal, I recommend slowing down the negotiation and communicating that both sides should sleep on it before moving forward.
Communicating and reminding the other side to not take negotiations personally is very important to keep both parties happy and interested in continuing. Focus should always be on the clients and not the brokers.
Boost Your Negotiation Capabilities With an MCNE Designated Agent
If you’re serious about boosting your negotiation capabilities, you might consider hiring a broker (or getting your own) with a Master Certified Negotiation Expert (MCNE) designation. The MCNE program consists of six training courses covering professional negotiation theory and techniques, as well as practical application to real estate negotiation situations. The Real Estate Negotiation Institute (RENI) is a member of the Harvard Program on Negotaiation and researches negotiation literature around the world to bring the best possible training to real estate professionals.
An MCNE broker will conduct your real estate negotiations professionally, skillfully and with confidence on your behalf. The resuts achieved by you and your MCNE broker will likely be among the best possible for your situation.
Trust should be earned, not lost.
This is a basic concept: Never lie. Lies will always be discovered, and you will be held responsible. Doesn’t sound like a good time? It’s not.
There is leverage in trust. Always do the right thing. Display trustworthy actions, and watch your negotiations work themselves out. Trust and negotiations work in tandem in real estate and beyond.
One Last Word…
Depending on who you negotiate with, be mindful of your voice, facial expressions, and body language. Many of our facial expressions occur subconsciously and we oftentimes don’t even consider them. However, our facial expressions almost always evoke a response in someone else’s mind. Our body language also evokes emotion.
Artful negotiation combines strategy, confidence, and a deep understanding of both market dynamics and human psychology. At the end of the day, you want all parties to come away from the deal feeling positive about their decisions.
When you’re ready to talk, please call, email or submit the form on the right.
Let’s work together to negotiate your next ideal investment!
