Agents come in all shapes and sizes. I find that each one falls into one of these three categories: Marketer, Administrator or Salesperson. The best agents are great salespeople and the reason for this is simple. You can easily hire out for marketing and administrative support. You can’t (or at least, shouldn’t) hire someone else to negotiate your contracts.
I wasn’t sure I wanted to post this since it could easily come back to bite me during future negotiating, but screw it - it’s good information. Here are the tactics I recommend to get a leg up during the negotiation.
Tips when Representing a Buyer
1. Fish for info from the listing agent - some agents are notorious for revealing way more than they should before an offer is provided. I recommend you call the listing agent before you submit an offer and ask these questions:
- Are there any other offers on the table or serious interest from other parties? This will tell you if you need to be aggressive and quick with an offer or are safe to take your time and slow play it
- Can the seller accommodate a quick closing? Regardless of when your buyer wants to close, ask this question. The listing agent will probably tell you if they already have a house, need to find one etc. You can use this information to your advantage by accommodating their closing needs.
- Have you received any offers that the seller has rejected? I don’t want to waste anyone’s time. Several times a listing agent will go right into past offers that have been received and give me valuable information to help me craft my offer.
2. Get to the seller’s bottom dollar before you get to your buyer’s top dollar - The goal in any of my negotiations is to get the seller to give me their bottom dollar price and let my buyer clients decide whether they are willing to accept it. Therefore, I have no problem submitting a low offer and encouraging the listing agent to provide a counter.
3. Offer higher, counter less - Some buyers love to start with a pretty low, insulting offer with plans to move up significantly if necessary. I find that negotiations work out better when the buyer offers a higher price but moves less during each counter.
Tips when Representing the Seller
1. Create a sense of urgency - when I get a call from an interested buyer’s agent asking if there is other interest (see item #1 under Tips when Representing a Buyer), it’s important that you give a response that will give the buyer a reason to act quickly with an offer but not scare them away with the fear of competition. Here is my strategy for accomplishing this:
- 1st - state that there is serious interest even if there isn’t. Don’t ever tell a buyer’s agent there is no interest in your property. It will give the agent or buyers the impression that no one else thinks your listing is worth buying.
- 2nd - reveal that another buyer is interested with a few key details to make your story believable. Some would call this a little white lie, I call it negotiating. My favorite line is “there is a young couple coming through with their parents for a second look.” This implies that the buyers like it and are simply seeking another approval before submitting an offer.
- 3rd - provide a deadline. If the agent calls on a Tuesday, I will add that this second showing is taking place on Thursday. This gives the current buyer 48 hours to submit a strong offer and have it accepted before risking going into multiples.
2. Get to the buyer’s top dollar before you get to your seller’s bottom dollar - As indicated above, if the initial offer is low, counter small amounts to try and see how much the buyer will come up before indicating that what they are offering is their highest and best offer.
3. Provide a concession free counter option - Today’s offers are loaded with closing costs, home warranties, title insurance premiums, etc. It’s common that my seller may come off $10,000 just by agreeing to the concessions however a buyer may only focus on the purchase price. I want the buyer to truly understand how much my seller is conceding so I typically respond with two counters. such as:
- Option 1: $250,000 sales price. Seller agrees to pay $5000 towards closing costs. $1000 towards a home warranty. $2000 towards title insurance.
- Option 2: $242,000 sales price. No concessions.
1. Butter up the agent - If you can build rapport with the agent, they will be more inclined to feel like you two are “working together” rather than facing off against one another. The other agent is more likely to show their hand and reveal details about what it will take to come to terms on an offer.
2. Two Counters and a Final - Negotiations can’t go on forever and I have found that between the opening offer and final agreed upon price, there are generally two counters from both parties. For example: as a buyer, if you’re opening offer is for $250,000 and you don’t want to pay above $260,000, I would recommend countering at $255,000 - then $258,000 - then staying firm at $260,000. Each counter gets small but still shows that you are willing to move before you hit your firm number.
3. Get the other party to sign off on the final terms first - This is super important. The last thing you want is to give the final say to the opposing agent. Who knows if they will sit on your signed terms for 24 hours or use it to shop around for a better offer. By requesting that the other party signs off on the terms first, it gives your client the final say in the matter.
As you can see, there truly is an art to negotiating in real estate transaction. Please note, however, that there is a fine line between “negotiating” and being a jerk/liar/scumbag. Don’t mislead people to the point where you cost an agent a commission or pull the rug out from under a buyer. Your reputation is more important than a commission.