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Real Estate Negotiating 101 - You Can't Manufacture Leverage

I had to spend a bit of time thinking about the subtitle of this post. I think this captures the essence of what I am about to cover here. These are by no means compreshensive lists, but I think they provide a good start. :)

Let me start by giving a few quick tips for listing agents:

If you have had a listing on the market for 6+ months, and you don't truly have an offer in your hand, don't try to convince me that you do.
Don't act shocked by my offer, or use phrases like "I had to use smelling salts on the seller" or "We were very surprised at the offer". Please just present it to your client and then get back to me.
If you list a home at a crazy-high price, be prepared to defend it and/or to explain to your client why EVERY offer you receive seems to be a lowball.
If you get an offer in the first week or so, push for the full asking price. You'll probably get it.

And now, for you buyer's agents:

If you are making an offer in the first week that a place is on the market, make it strong, unless the place is clearly overpriced.
If you have an option period (as we do in Texas), make sure you get the inspection done and all repairs negotiated during that time - you will lose a lot of leverage after that.
When your client has identified a house, and you are about to submit an offer, don't tell the listing agent that you have no other options. In fact, make sure your client has a second choice. It gives you more true leverage if the seller is unreasonable.
Make the assumption that the deal will work out during your initial offer letter/email. You can say, "I look forward to working with you on this transaction." or something similar.

No matter which side you are working for:

Try to remember that you are representing someone else and it's their money on the line. Try not to act too excited or tip your hand about a specific property. Rather than saying, "This is the one!", try something like "They have a strong level of interest, but we're still talking."
Never underestimate the power of simple friendliness and rapport - I will readily admit that, all things being equal, I would rather work with an agent who seems nice.

I hope this stuff comes in handy for you - some of it is common sense, and some of it comes from 13 years in the field.

Have a great week - thanks for reading!

Photo above courtesy of jk5854 via Flickr.com.

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If you're looking for a home in the Austin area, you can visit my primary Austin real estate website at www.austintexashomes.com. Thanks!

Posted by Jason Crouch, Broker - Austin Texas Real Estate (512-796-7653) on 10/11/2009 10:42 PM

Comments (73)

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Originally posted at: Cool Austin Texas Real Estate Blog : Real Estate Negotiating 101 - You Can't Manufacture Leverage

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73 Comments on Real Estate Negotiating 101 - You Can't Manufacture Leverage

OCT

I've seen agents show their whole hand very fast - even asking the other agent for advice. I know everybody has to learn, but it shouldn't be at your client's expense!!

Good tips. I am glad that I subscribed to your blog. Haris

I agree, working with a nice agent sure makes the process a lot easier for all involved.

OCT

Great advice and tips for sure! No matter what...think in the best interests of your clients!

13 years or 1 it is always good to step back and do the basics.

Good tips. A Realtor should be representing the buyer or seller. I still have trouble with an agent that is supposedly representing both in a transaction.

Jason - You could easily turn this into a series. I've seen so many huge mistakes being made and your experience outweighs mine, so my guess is you've seen some amazing gaffes.

Don't act shocked by my offer, or use phrases like "I had to use smelling salts on the seller" or "We were very surprised at the offer". Please just present it to your client and then get back to me.

Seller agent recently told me they were "shocked" our offer was so low (it wasn't that low, especially since it was way overpriced). They countered at full price. We made another offer slightly higher than our original, but more in line with the "correct" price. They balked. We walked. One weekend later, the home went through a price change. Lower than our offer. They missed out. My buyer was so frustrated that someone would do this. I was too.

Jason,

Great bit of insight!

I remain appalled at the idea of agents not presenting their offers to the sellers and their agent! This is just a predictable result of that lost bit of professionalism!

God help us the NAR doesn't!

Just call me old fassion.

Bill

Excellent advice. It is kind of like poker... "You got to know when to hold em, know when to fold em and know when to walk away and know when to RUN! "

Jason,

This is great advice. It seems like common sense to not compromise your client by tipping your hand. But, it happens all the time.

And the whole concept of acting professionally? Why is that so often such a mystery?

Jason, Good practical information. We in North Carolina are about to go to a new contract in January 2010 with an option period. How long have you had yours and how is it working out?

Nice is good and experience is great. You can almost always see through an agent that is bluffing.

Very well said. It makes the whole process a lot easier when you have someone that is not only nice, but you are able to reach. Its very hard and frustrating dealing with another agent that has another "full time job." Deadlines have to be met and they could care less because this is supplemental for them and not as important as their real job.

I hope you turn this into a series. I've been in the business almost 6 years and just when I think I've seen almost everything, I am proven wrong.

Have a great Monday

Nice post, Jason. I agree that a little restraint, and a lot of friendliness goes a long way.

But, based on your first bullet point, I was hoping to hear what to do with a listing that you've had for over 6 months, that's according to comps, priced well, but you're not getting any offers on. Any suggestions? (I can't get them to lower the price. They are already in the bottom one-third of actives in their neighborhood. And the property has been professionally stage.)

Jason - great advice. In Montana, we have the option to request to present an offer directly to the sellers with their agent. On a recent low offer, Kevin and his buyer did just that. Both sides realized that they were all working for the same thing and our buyer was able to get a great and popular home at quite a bit under the asking price.

Those are great pointers Jason. I agree... working with an agent who is courteous goes a long way. Nothing worse then working with a "know it all".

Kathryn - We have had option periods in Texas since 1998, I believe. I only worked for a year or two without them as part of the contract. Every single contract I write has one now, and I'm happy to have them.

All solid advice Jason...no matter what local market you're working in.

Well done my friend!

Matt & Kim - You both mentioned turning this into a series. What other topics would you like to see as part of that series. I'm game. :)

Marianne - It sounds like you just don't have enough demand in that neighborhood, which means it might just boil down to the location, which you can't change, of course. Have you tried offering a bonus to the buyer's agent? I have found that this will at least ensure that all of the qualified buyers looking in the area see the home. When I use this technique, I put it in the agent comments and in the field on the MLS. Just a thought - it might cost your clients less than a price reduction would have.

Jason, I had a listing agent recently ask me if her client's house was my buyer's first choice. I told her that it was in the top two to increase our negotiating position. It worked!

If you get an offer in the first week or so, push for the full asking price. You'll probably get it.

That is just what I needed to hear!! :) Got an offer on a listing that is "PRICED TO SELL". Offer came in first week. We came down to 95% of the sales price + warranty + throw in the fridge for free...and the buyers decided this was not the time to buy...or maybe they are off to find something else. Lots of traffic, so I am hopeful we will have another offer soon.

Hi Jason! EXCELLENT tips and I use each one of these! I have to say that my preference is to work with an agent who is pleasant is SO crucial--I have my favorites here in Charlotte and always hope and pray that one of them is the one at the end of the phone when I hear, "We've emailed you an offer!"

And, best of luck, Sonja--you'll get that second buyer soon!

Jason, excellent advice...as always! This is why YOU THE MAN! LOL

Jason, Great, easy to understand, practical tips. As a BIC, I plan to use this in my sales meeting this week. Thanks.

Last week, while negotiating, I (representing the buyer) asked the listing agent, "Will he come down more?" The listing agent actually said yes. Guess what, my buyers countered instead of accepting the first counter. They saved $10,000 because the seller's agent let me know they could. Oh, well.

Great tips!!! It also never hurts to hand deliver an offer to the listing agent.

Never underestimate the power of simple friendliness and rapport

So true! From my perspective, selling real estate is still about building relationships.

Jason -

As always, you have great points to make and you do so in the most straighforward way possible. Maybe when presenting an offer this should be part of my cover letter. Ummmmm.

Michael

Jason,

Great post. As also mentioned, I like to ask the agent a few questions. One in particular, "Other than price, what terms or considerations are important to your client?" If we can give them a closing date, or Title Company or other intangible at no expense to my side, it can soften the blow of a price hit.

My other pet peeve is, "This is my first, last, highest and best offer." I received this comment on a listing recently and found out this agent had said the same thing to another agent I knew, only to end up with 5 exchanges back and forth.

Dan

Jason, you keen insight into the concept of leverage from both sides of the transaction makes incredible sense. I try to remember that it is my client's money that is at stake. I work hard to create rapport with the cooperating agent. Things tend to go more smoothly that way and, hopefully, the next time that agent and I have the good fortune to work together, the cooperative spirit will continue. Besides, it's the right thing to do! A great blog!

Never underestimate the power of simple friendliness and rapport!

Wow... I think that one's just so darn important. It was worth repeating. (and I'ma gonna reblog you)

Jason - I think you could just cover examples of negotiations - even perhaps posting a scenario and taking comments then eventually giving your take on it. Of course, this might reveal some of your negotiating tricks of the trade, so in that sense it could be hard to do.

I see so many things when negotiating and I am a big fan of playing the opposite role with my clients so we can sort of run through the negotiation process. I find that when a buyer understands what a seller might be thinking and what they might be aiming for it helps them make good negotiating decisions.

13 years. Wow I didn't realize you were an old timer. Now is this your lucky year or unlucky year.

Jason - A superb post. Definitely part of the art of the deal. A good demeanor does go a long way

I had the same thing happen a couple of weeks ago with my new listing. 5 days after being listed, buyers offered 94% of asking price and wanted some of the artwork and a warranty. After a couple of decent counter offers, they walked and we haven't heard from them. In this market, in this price range, the first offer should be considered more carefully by serious sellers.

If you get an offer in the first week or so, push for the full asking price. You'll probably get it.

Sonja Patterson REALTOR for Cypress, Houston, Katy, TX (RE/MAX Realty Center)

Jason...

The important thing is to be honest and play it straight and that goes a long way if there are problems down the road!

Jason - These sound like some solid tips for new and tenured agents.

Jason - some pretty smart advice for agents on both sides of the. fence. Not sure what else I could add at this point.

Jeff

Sound advise!

It does get annoying when the listing agent says they have an offer coming in but dont...

It's good for seller's agents to remember that the whole point of listing is to sell...that's what your clients needs!!

Jason, I look forward to working with you on any transaction! I also believe in the friendly but firm school of thought but working at a company that is known for a lot of type A aggressiveness also has it's benefits and carries a certain cachet? No?

Great post Jason. And it needed to be said. I run into this kind of stuff all of the time.

Jason, I've brought you a good offer. I expect to hear back from you within 24 hourse.. :)

Jason, all good tips on the art of negotiation. The more you negotiate, the easiest it gets!

Telling the listing agent that the house is substandard and needs a lot of renovation, etc... doesn't really fly while actually making an offer.

great tips for a new REALTOR like myself. thanks for the post.

I must agree with you on this Jason. What great reminders for Realtors on both sides !

It's always nice to have an agent on the other side who is friendly and cooperative.

Jason,

And "all things being equal, I would rather work with an agent who seems nice" and (imho) one that we can count on to facilitate a transaction in a timely manner according with the contract.

OCT

Fair and balanced! :-)

Jason, First and foremost you want show that you are a a straight shooting, knowledgeable agent. Too many "screamers" out there who think they are helping their clients by being "tough" in all the wrong ways. I also try to keep those bridges in tact with the other agent. I have had the wheels fall off of a deal only to put them back on a month or two later when the other agent and client have time to reflect on the offer. Good post, as always.

Numbers do tell all. I still do not understand why listing agents list a home at fair market value when the home needs $20K in repairs. This is not 2005.

Jason as always you have great tips for the agents that haven't had much experience and good reminders for us old dogs.

Jason,

Your final point is right on the money. People like to work with good people. Develop a rapport with the other side, and it will work to your advantage.

Overly aggressive agents just end up losing deals, even when they are very close.

Brian

I've never used the "smelling salts with my sellers" line, but it might not be a bad idea to have some on hand!

This doesn't seems like anything that we shouldn't know, yet I've been through everyone of those scenarios. Ah, it brings back memories!

Good advice. The smelling salts hits close to home. I could care less that an unrealistic seller was shocked or appalled at my client's offer. We want to do business, and to rebuff people like that in this market is foolhardy.

Great advice. I think one of the last bullet points could make all the difference..."Never underestimate the power of simple friendliness and rapport" You never know when you might be working with the other agent again.

Yes, Yes, Yes and Yes.

The time for drama is well past - its so 2005 don't you think?

Jason: Your points are crisp and on point. Clients always come first. It helps if the agent the clients hired truly knows what they are doing ... understands leverage and negotiation .... many unfortunaley ... do not!

Jason - I too would rather work with an agent that "seems nice." Great points for both sides.

I love it. Great blog. Negotiating is my favorite part of real estate (along with closing ha). Neither the client or the agent should take offers personally in my opinion. It's simply business. If they like it great, if they don't then counter.

Hi Jason...seems you got a lot of readers here, you maybe hit a nerve or two..

With your Permission I'd love to use your Phrase "I had to use smelling salts on the seller". I would get some great responses from my fellow Realtor here...Like "Your Point Is"...present the offer we have several other homes to make offer on if these people resist...:O))

Great Heads up Post for everyone.

PS: I too Like to Work with Nice Agents :O)

When presenting an offer I remind the other agent that every transaction is a negotiation, so let's keep things moving along and that my buyer and your seller come to agreeable terms that satisfy both parties.

It`s tough to admit, but there are some agents I have met that I would be happy to never work with again. The funny thing is that we realtors are actually in a tightknit community and if you are rude, disrespectful, a liar, etc. in one transaction, the whole city will soon know. It`s unfortuante but true, a large part of our job is networking and that translates to eachtoher. Be kind and genuine in all of your transactions and your life inside and out of real estate will be that much smoother!

Great suggestions.

OCT

http://www.cacoastalhome.com/

Great tips..And simply a superb blog. It is really a pleasure for me to have a chance to see your blog and to know the tips.

An good agent can truely reduce your work,tension.And if you find that sort of kindliness in that agent then you would surely love to work him/her again. Its simple.

Jason, thanks for that tip. I've long realized that it's the area. I'll look into a Buyer's Agent incentive, and possibly a Buyer's incentive. Some seller's have been give away trips, or TV's and such.

OCT

D'oh! I always say "I had to use smelling salts on the seller" when I get a good offer on a listing!

So Jason, your advice is I shouldn't say that? Too old-fashioned? Too graphic? :)

Cheers,

Robin

OCT

Great tips for the Buyer and the Sellers side! Thanks for sharing with us! It will certainly come into use

Robin - Are you saying that you use it in a positive way? If so, continue. :)

If you only use it when you get a lowball offer, it seems super-obnoxious to me.

OCT

Good tips Jason. By the way, the "I had to use smelling salts on the seller" or "We were very surprised at the offer" is a negotiating technique called the flinch!

OCT

I find it's about respect and reasonableness. We mostly know what and where that is. As long as the parties are within this range there's hope and more importantly the possibility for progress. Beyond that you may be dealing with fantasy.

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