8 Real Estate Negotiation Tips Every Realtor Should Know
While someone who deals with a lot of high-end real estate can make hundreds of thousands a year, most people in the field fail soon. With 75 percent of realtors dropping out after the first year, real estate negotiation is the trick that keeps people engaged.
Here are five ways to set yourself up for a more rewarding negotiation.
1. Start with Some Market Knowledge
If you want to be an expert negotiator, you need some intimate knowledge of the market you're working in. You won't have a lot of room to negotiate if the market you're working in isn't robust. When you're looking to get a higher price for a home, you need to know what people want.
There are competitive markets and there are elements that offer you a competitive edge. If you're not in a market that's red hot right now, you can use some tools to try to attract more people to your home. With a few add-ons, renovations, or a clever way of marketing this home, you could attract much more attention.
Looking at your market, you might see a lot of one type of home and think that's how to market what you're selling. However, think about the terms of supply and demand. When a market is saturated with one type of product over and over, it's going to bring everyone down.
Instead, think carefully as to how you can pivot to ensure that you offer something truly unique to your customers. You need to be offering the basics of what everyone else is offering while also finding a way to stand out from the crowd. This is a tricky situation but important for brokers of all types to consider.
2. Learn Who You're Up Against
When you're negotiating with a broker or a buyer, you need to get to know who they are.
Start off with a character study in a general sense. When you're marketing any type of product, you need to start off with who your customer is, what they care about, and what they want from products like yours. Once you have a complete picture of who you're selling to, you have the chance to pivot your marketing toward them.
People are more willing to pay a higher premium for a product they're excited about. When you get them excited about what you're offering, you have the chance to get a higher price and therefore, a higher commission.
The buyer's broker is going to constantly ask the seller's broker all kinds of questions. They'll want to know if you have any offers. Since they don't want to waste their time or money by making an offer while there are others on the table, this is fairly reasonable.
However, there's a nosiness that goes above and beyond a typical buyer's behavior. Watch out for that because they might use that information to negotiate for something lower in the end.
3. Competitive Markets Require Creativity
When there's high supply in a market, it's hard to ensure that you're the one that's going to get the offers.
It's rare that there are multiple offers going on a house you're selling unless the market is red hot. You'll be competing with every other seller on the market unless you know how to stand out.
When you're looking at different bids, you don't have to sell to the highest bidder. If you're looking to get your seller a lot of money up front, you could go with the seller that has the highest down payment. If your buyer is willing to pay 35 percent of the price of the house up front, take the cash today rather than slightly more later on.
If your seller needs to make a quick sale, make everyone's life easier by closing the sale faster. This might attract buyers who can't afford to be without certainty for more than a month. While there aren't a lot of places that offer a lot of wiggle room for a realtor, there are ways to make the negotiation better.
4. Make It Personal
Many people take the concept of buying a house seriously. For most homeowners, it's the most valuable asset they have. If this is the case for the people you're selling to, show your respect for their transaction by being kind and open with them.
The more friendly you are up front, the easier it is to get them to agree to your terms.
Your home will stand out as one of the favorites when you strike up a conversation that feels sincere to the buyer. People want to be heard, they want their concerns met, and when you take them seriously, they'll give you more consideration.
Even if the home you're selling is out of the range of the people buying it, cutting them a deal that doesn't cut into your commission too much will feel personal. They'll trust you and be more willing to spend a little more than they'd bargained for because they know who you are.
5. Shine at the Appraisal
If you're looking to be able to stand your ground with the price you've set, you need to ensure that your appraisal goes smoothly. If the appraiser from the bank comes in and estimates that the house is worth 25 percent less than you've been trying to sell it for, good luck keeping your buyer.
People lose interest when someone they're buying from is disconnected from reality. We all have a price that we think something is worth and a price that we think we should get for it. Sometimes, those two prices live on different planets and if that's the case with your house, it'll be hard to sell it.
If your appraisal is high, you'll be blessed with a short negotiating period. However, if it's low, good luck standing your ground.
Real Estate Negotiation Isn't Easy
If you're in the midst of a real estate negotiation, you know how tense it can be. If you're not prepared for how it goes down, just know that you could very well lose your shirt in the process.
If you're looking to make this a business, check out our guide for branding yourself.