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Real Estate Negotiating. It's not rocket science.

By Bryant Tutas

Real Estate Broker/Owner with Tutas Towne Realty, Inc and Garden Views Realty, LLC BK607690

September 04, 2009 10:29 AM

Hi folks. Let's talk a little bit about negotiating. Negotiating is one of the things I enjoy most about my job. I would be perfectly happy to never do anything but sit at my desk and negotiate deals over the phone.

Negotiating is an acquired skill that anyone can learn. It's one of those things that the more you do it the better you get. I also think everyone has their own way of doing it so I'm just going to try to explain what works for me and then you can tweak it or add to your current way of doing things so that it works for you and your market. And hopefully, you will be able to add some suggestions or techniques, in the comments, that will help me to improve. So here goes:

One of the first things I've learned about negotiations is that unless the offer is acceptable I always suggest to my Sellers that they counter offer. We rarely out right reject an offer. I've had offers that started out extremely low where the Buyers eventually came up. There are some Buyers who just have to get the low ball offer out of their system. It could be a cultural thing. It could be they have watched too much late night TV. Whatever the reason.....it's just an offer. Don't let the Sellers take it too personal and get upset over it. Counter it.

When I receive an offer on one of my listings, the first thing I do is call the agent and go over the offer with them. I do this for two reasons. One, I want to make sure I have the entire offer and I'm not missing an addendum that may have additional terms on it and secondly, I want to open up communications and get friendly with them. Why? Well, it's simple, they may tell me something that my Sellers and I can use while negotiating. You would be surprised at the things I've learned during the course of a conversation.

Next I call the loan officer or mortgage broker. Same strategy, ask questions and listen. You can find out quite a bit of information. But most importantly, I want to make sure the Buyers truly are qualified. You can usually tell if the LO is being truthful with you or not.

Now folks, I'm not working for the Buyer. I work for the Seller and my goal is to get as much money as I can for my Seller's property. There is nothing wrong with me asking questions. If the Buyer's side chooses to answer something they shouldn't, well that's their problem not mine.

Once I have taken these two steps, and I'm satisfied with the answers, I prepare a Net sheet and transaction outline for my Sellers. Now I'm ready to get with my Sellers and go over the offer. Initially I prefer to present the offer via Email or by phone. At this point in the negotiations I've just found it easier on the Sellers if I'm not burying them in paperwork right up front. I present the offer by using the Net sheet and transaction outline that I have prepared. I want the Sellers to concentrate on the things that are important to them not 10 pages of useless disclosures and addendums. We can go over that stuff later.

I suggest to my Sellers that they make a strong counter offer. We want the Buyer to be tempted to accept our counter. I also suggest they agree to as many minor things as they can i.e warranties, closing costs contributions, closing dates and the such. If the costs/terms are within reason, accept them. Give the Buyer the small stuff. It's easier to get a counter accepted if you are not changing or denying every little thing the Buyer is asking for. If the Buyer wants closing costs and warranties, these items are just reflecting in the counter offer price anyway......so why not leave them in?

Once the Seller has decided on a counter offer we make the changes on the contract and mark where the Buyer needs to initial. Now this step, may be a little controversial and some may not agree but here goes, my Sellers do NOT sign or initial the counter offer. I Email it to the Buyer's agent with no signatures or initials. "But Broker Bryant, why do you do that?" Well, let me tell you, I want the Buyer to commit before my Seller signs off on it. My Seller ALWAYS signs last.

We keep the property on the market and take showings and offers until the Buyer has agreed and signed and initialed everything AND put up his escrow deposit. I want my Sellers to be in a position to negotiate and accept another offer if one should come in that's better. I don't want the Buyer to sit on my Seller's counter for two days while they decide whether or not to accept it or counter it.

Also, NEVER give an ultimatum in negotiations. Don't say, "This is my Seller/Buyers final offer, take it or leave it." It slams the door shut on any further negotiations and it's not true. I can assure you, if my Seller comes back within $500, your Buyer will probably accept it. So just don't give ultimatums. Negotiate until the deal is accepted or dead and buried.

That's how I do it. Any questions or suggestions?

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Bryant Tutas
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Bryant Tutas

Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL

Selling Florida one home at a time

Karen Anne, My point was that there are no definitives in negotiating. Each deal is different. My post clearly states that this is the way I handle my business and that others need to figure out what works for them.

I believe your point was that I was "nuts" and that "Agents who are watched like a hawk, eventually get their wings clipped" as stated by Jim Hale but applauded by you. And of course your advice that "Some of the things suggested in this post do not make sense to most Realtors..." Which of course is a statement that has no backing at all. In fact out of 130+ comments only a very small handful thought it "didn't make sense".

So while my post and subsequent comments are designed to help my peers in their business, by getting them to think, yours were mainly to discredit the author.

Your constuctive opinions are certainly welcomed your destructive attitude is not. Does that make sense?

Sep 06, 2009 06:38 AM

"The Lovely Wife" The One And Only TLW.

President-Tutas Towne Realty, Inc. - Kissimmee, FL

Karen Anne...

We've had these discussions with you before. As I've told you in the past, if don't like what you're reading, it's best for you to scroll on.

You've made it clear, both now and in the past, you do not care for the way we handle our business. You've made it especially clear that our sense of humor is beyond your reach.

Do us all a favor and take a nice long walk. The exercise might help with that attitude problem that you have when it comes to BB and I.

We mean you no harm, we simply do not appreciate every attempt you've made to discredit us. I'll once again ask you to just stay away from our Blogs until you get over it. Whatever 'it' might be :)

TLW...ROAR!

Sep 06, 2009 06:50 AM

Debe Maxwell, CRS

Savvy + Company (704) 491-3310 - Charlotte, NC

The RIGHT CHARLOTTE REALTOR!

Hi Bryant! I've been following this post for a couple of days and am just now realizing that I didn't comment yet! I think that you and I had the same real estate negotiating professor! The ONLY thing that I do differently is respond to the buyer's agent with an email, stating the agreed upon changes that need to be made by the buyers, initialed and sent back to me so that we have only one document that has been faxed/scanned and is super clear for the attorney and lender use when we're ratified. I DO phone the agent and I DO phone the lender--where does it say in the COE that we are NOT to represent our sellers to the best of our ability and that, to me, is doing my seller a service that many listing agents overlook. I want to get to know the agent across the table from me before we sit at Closing and I want to see what their client's motivations, limitations, etc. are. For my sellers, they love it--perhaps the buyers have two small children that are the same ages as my sellers' children and that just gives everyone warm fuzzies. Nothing but GOOD comes from those two phone calls and I can tell you that there is not ONE agent in Charlotte NC who would not gladly work with me again. I do my best to make the deal work for my sellers but, I am respectful to the 'other agent' and I make their lives easier when doing a cross sale with them. I don't think any of them resent my initial calls or view them as breaking any sort of COE rule. Furthermore, my (as yours) style has salvaged many a deal because I handle negotiations this way and I think know my sellers appreciate being able to move on!

One other item of note, because I provide the email with the verbally agreed-upon changes to the Offer, that is a legal, binding form of written documentation. Therefore, future Offers that arrive before the Contract is ratified, are given to the Sellers but, are not entertained unless something should happen with the buyer--when the email has been sent to notify the other agent, my seller is committed to the terms of the Contract and will sign when the buyer sends back the clean, changed copy of the original, agreed-upon Offer.

Great post and frankly, I'm shocked at some of the members' negative, derrogatory comments--I guess as TLW has said before, in reference to the vid--you just can't teach FUNNY!

Hope you guys are having a great weekend...

Sep 06, 2009 09:33 AM

Mike Henderson

Your complete source for buying HUD homes - Littleton, CO

HUD Home Hub - 303-949-5848

You made me laugh and gave me a great tactic. I like the unsigned counter technique. I'm going to check with my managing broker to see if that is legal in Colorado.

Sep 06, 2009 11:56 AM

Anonymous

Paul "The Headless Negotiating Horseman" Slaybaugh

I like to place the horse's severed head in the sheets of the other agent right about the same time that our counteroffer is hitting his/her inbox. It gives me no discernible advantage. Just find it amusing.

Sep 07, 2009 11:34 AM

#136

Anonymous

Mary

Mike on #136 brings up a good point for all information on these blogs. Check with your broker before you do anything that other agents suggest you do. I hope my agents check with me.

Sep 07, 2009 12:13 PM

#137

Sergio DeCesar

Loss Negotiation Services - Naples, FL

C.D.P.E. FL. Licensed Broker

I'm sorry but I disagree with much of what this "infomercial" says. I have been a full time negotiator and facilitator for the last couple of years, all day, every day.

Maybe from the perspective of a real estate agent, some of this information is accurate but from an investor.broker/facilitator point of view it is simply fluff. Most real estate agents I know are out getting contracts and sales not spending 10-14 hours a day onthe phones trying to make headway with banks and lenders that are:

1-trying to get the most money out of your seller's pocket as well as the buyer's pocket to cover their loss.

2- Have no real concept of "market value" as you do and ___________(insert statement above).

3- Will actually lie about BPO and appraisal values.

4- Have no bones about cutting your commission down to $10 if they could.

My realtor partners bring their negotiations to me because they know I know how to manuever this mine field and traps of the lenders and I know how hard to push and I know the TRUE value of the real estate the lender is trying to offload for a premium.

Why is that important? Because the lower a value is, the better chance you have of selling it quicky and having it appraise out. If your sellers owe the lender $200K, and the current MV of that home is $80K but the lender wants $135K to settle, how much chance do you have of selling that home and having it appraise out God Forbid you need financing??? My experience has taught me how to convince the lender that it is really worth $75K or $80K. Thats the difference between a 15% National short sale Close ratio and my 85%+/- closing success rate.

Also, one last thing before I get to work.....the "highest and best " offer for a shot sale isnt always the highest "purchase price. Its the pric that thelender will accept AND not pursue a collection or deficiency against the homeowner. My job is to make sure the lender's terms are conducive with the sellers' tax situation and the fact that he doesnt have to spend the rest of his life with a collection agent calling his home at 8Am and 9PM every other day!!!

The mora of this story, Realtors market /sell real estate. If you have NOTHING going on in this arena then maybe you have nothing to lose but time becoming a "negotiator" with lenders. And there is a learning curve. Not all lenders are equal. Some, you do not want to deal with.

Find your self a good 3rd party negotiator, with a track record of more than 4-6 months and let him handle your "short sale" work while you do what you do best: selling and getting contracts.

Have a great day!

Sep 08, 2009 12:05 AM

Marty Erlandson

Erlandson Realty - La Crosse, WI

Thanks for the tips! This is a very useful article!

Sep 08, 2009 09:28 AM

Anonymous

Video was great! Love your humor! Great advice. I laughed when you said you have another video of your puppy kid pooping on another offer.. tooo funny!

Donna LaConte, REALTOR, Adams, Cameron & Co., REALTORS..... DeLightful DeLand, Sunny Florida.

Sep 08, 2009 12:42 PM

#140

Anonymous

Maria

Bryant: Your post #127 does little more than validate what Carol wrote in #123. She clearly wrote the EXISTENCE of offers is considered material and must get disclosed but she specified that no specific details are to get shared without seller's permission. So was your goal at #127 to prove Carol right because by my reading that is all you did. You found a section in support of her post #123 and as I am sure you read, your quote does not preclude the disclosure of the existence of other offers as reportedly required by NC law just the preclusion of the specific details therein without seller's approval. In other words, you proved her point about NC law. Maybe re-read what you posted again and review her post and then it should come to you.

Sep 09, 2009 08:42 AM

#141

Bryant Tutas

Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL

Selling Florida one home at a time

Hi Maria, If you read the CoE and NC law you'll see that you cannot disclose the existence of multiple offers without the sellers permission. I was just trying to get clarity. Carol is stating that you MUST disclose the existence of multiple offers regardless of whether or not the seller has given you permission to do so. Now maybe the law that states "Disclosure of offers prohibited" is ambiguous. However, in my opinion it's pretty clear.

No where in NC law does it state that multiple offers have to be disclosed. Unless of course I missed it. If that's the case I would love to be pointed to it so we can be sure.

Now if the law did not mention anything about dislcosing multiple offers then we have to go by our CoE which states we have to have the seller's permission.

REALTORS^®, in response to inquiries from buyers or cooperating brokers shall, with the sellers’ approval, disclose the existence of offers on the property. Where disclosure is authorized, REALTORS® shall also disclose, if asked, whether offers were obtained by the listing licensee, another licensee in the listing firm, or by a cooperating broker. (Adopted 1/03, Amended 1/09)

But hey I'm not in NC and I'm certainly not an attorney. I would just hate for someone to tell their seller they have to disclose multiple offers if it's not true. Wouldn't you?

Sep 09, 2009 10:16 AM

Patricia Beck

RE/MAX Properties, Inc., ABR, GRI, SRES - Colorado Springs, CO

Colorado Springs Realty

I think what you do with the sellers not signing the counter is a really good idea. Many sellers do get emotional and want to reject an offer outright but working with it by presenting a counter offer to the buyer is always best. This is really good advice for agents.

Sep 15, 2009 01:52 AM

Bruce Brown

Keller Williams Ottawa Realty - Ottawa, ON

Well, the law is clearly very different in various jurisdictions. An unsigned counter-offer is not worth the paper it is printed on in Ontario, and in fact, this practice if reported would be punishable.

The offer process IS part of contract law - the law does not only apply to the interpretation of an executed contract but to the process of arriving at a contract as well.

In Ontario, offers for REAL ESTATE must be in writing or they have no meaning.

There are many ways to keep the "upper hand" if so strongly desired upon making a counter offer as the Seller:

- sign at a price you're happy with so other offers are irrelevant

- give a very short irrevocable timeframe so you are not bound for long

But in any case, a solid blend of win-win consensus building with negotiating savvy is almost always going to get you further than half-handed techniques like not signing things that are supposed to be a serious step in the process.

You'd last about 10 minutes in our market with this tom-foolery.

The points regarding agreeing to the small stuff, probing for useful information from the other party - good stuff.

OH yah - on disclosure of multiple offers. In Ontario it is the LAW (not just ethical conduct) that multiple offers must be disclosed to all parties who have made an offer. Don't confuse that with disclosing the TERMS of those offers. In Ontario, the NUMBER of offers, and the identity of the BROKERAGE making each offer must be disclosed to each party. The number of offers could well impact each buyer's strategy, and the id of each Brokerage essentially makes it clear whether any of the offers is from the listing brokerage.

Oct 13, 2009 08:15 AM

Bryant Tutas

Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL

Selling Florida one home at a time

Now Bruce you just have to know I'm going to ask to see the law about revealing multiple offers. I find a law like that very anti consumer and it surprises me that there would be one. As a buyer or a seller I would probably choose to ignore it.

We have the Statutes of Frauds which basically says a contract related to real estate has to be in writing to be enforceable. This is course is talking about contracts NOT offers. A a contract can be verbal and still be valid it's just you won't have a leg to stand on if you have to defend it in a court of law.

There is always a point in every contract negotiation where we are dealing with unsigned offers. Some one ALWAYS has to sign last. My sellers just prefer it to be them. No biggie.

I'm serious about coming back and posting the law. I find the differences very interesting.

I appreciate you stopping by.

Oct 13, 2009 08:34 AM

Bruce Brown

Keller Williams Ottawa Realty - Ottawa, ON

Hi Bryant - I guess i should have known to quote the law the first time around :) Thanks for your detailed response - you've cetainly generated an interesting oncversation and you're right, the legal differences are fascinating. From Ontario Regulation 580/05 made under the Real Estate and Business Broker's Act, 2002; Competing offers 26. (1) If a brokerage that has a seller as a client receives a competing written offer, the brokerage shall disclose the number of competing written offers to every person who is making one of the competing offers, but shall not disclose the substance of the competing offers. Black and white, no?

Oct 13, 2009 09:52 AM

Bryant Tutas

Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL

Selling Florida one home at a time

Thanks Bruce. Why would they pass a law like this? Do you see this as something that would protect or harm the public? I guess I struggle with any law that tells someone how they must negotiate. Disclosing multiple offers can cause a good buyer to walk.

It also sounds like, from reading this, that it only applies to brokerages and not to say a seller selling without an agent. Is this true? And if so then this law is clearly to protect agents and not the consumer.

Oct 13, 2009 10:26 AM

Bryant Tutas

Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL

Selling Florida one home at a time

Bruce I just read this Regulation. Is this law or just a Code of Ethics?

Oct 13, 2009 10:33 AM

Bruce Brown

Keller Williams Ottawa Realty - Ottawa, ON

In Ontario, what used to be the code of ethics was written (modified and written) into a regulation drafted in 2002 and passed into law recently (I think it was April 2007 - can't recall the exact date it was enacted.)

It is law. There is no doubt at all of that.

The entire purpose of the Act (The Real Estate and Business Broker's Act) is to protect the consumer. In the case of disclosure of multiple offers you could argue for and against. A buyer who does not know there are other offers will often offer less than they would be willing to pay, and could easily lose the property. From the Seller's perspective, it also works both ways - buyers may offer more - or as you say, they may walk. It must be in the interest of allowing consumers to make choices based on knowledge. Much of the protective capacity of the Act is geared toward protecting the consumer against unethical behaviour of Agents obviously - so I would have expected something that ensures PROOF of other offers to avoid a Listing agent falsifying a multiple offer scenario. But interestingly, that isn't there. Mind you - if you're caught doing this you're toast - but there is no provision for proof. I think that this disclosure requirement is intended to be the proof - since we all do what is required of us by law.

And to answer your other question - yes, the Act regulates licensed sales representatives, brokers, and brokerages - it does not apply to private transactions. But that is not because they are trying to protect us from consumers - but the other way around. Consumer protection from each other is up to Contract Law.

Oct 13, 2009 02:21 PM

Floyd Magee

ERA Four Corner Real Estate - Farmington, NM

Fascinating discussion. I find myself wrapped up in the "no signed counter" right now in NM. My clients signed an unsigned counter offer from an REO service. A practice, shockingly I know, that I was not even aware of. An unsigned "in writing" offer?? Who ever heard of such a thing! Well, I guess that woudl be me now..

You know where this post is going of course. After we sent our SIGNED counter, the REO got another offer. So, here we go. That's why I'm on AR now, looking for answers.

I'm getting from half of the group that this seems like a fair, if not ethical, tactic. I don't know how you can counter an offer, in writing, not sign it, and then not expect to be held to it. The Buyer's could have lost out on another home, because they were "offering" on this one. What if the Buyer's signed the unsigned counter from the REO, made another offer on a second property, and then both seller's signed. What is the obligation of the Buyer?

Oct 22, 2009 11:20 AM

Anonymous

Kymberly Caldwell

Hello Bryant, great tips and very useful information. I will have to check with my broker here in Calfornia regarding this one. There is always a point in every contract negotiation where we are dealing with unsigned offers I am leary of this, but yes... Some one ALWAYS has to sign last. I do contact the lender and agent and yes they will sometimes put their foot in their mouths and tell too much information. Good for us and always good reading. Beautiful Sunny Southern California, Tri County Residential Real Estate

Dec 25, 2009 07:23 AM

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