Real Estate Negotiation Strategies - Part 1

Real Estate Agent with Sand Dollar Realty Group, Inc. BK627826

“Negotiation” has been called the highest paying profession in the world.  That is not far fromPile of money  the truth. If you learn how to negotiate $20,000 off the price of a property on just one deal, think of how much time and effort it would take you to earn that kind of money at your job.  Negotiating is a learned skill that you and I do every day in all sorts of transactions.  Some negotiations are simpler and more natural like negotiating with your kids over chores or which movie to see.  While some are more complicated like the sale of an ongoing business or settling a lawsuit.

 A lot of talk goes around about win-win negotiating which sounds great in theory and certainly sounds warm and fuzzy.  However both parties winning seldom if ever happens in real life.  In life and in nearly all negotiations there are winners and losers.  The vast majority of the time, the seller wants to sell for as much as they can with the least amount of terms and contingencies possible and the buyer wants to buy at the lowest price with the best terms and contingencies as possible.  Somewhere there has to be compromise where not everyone gets exactly what they wanted.  So a great negotiator has to look at win-win in a very different way. They win the negotiation but make the other party “feel” that they won as much as possible.  In this series of articles, I will be going into detail on the art and skill of negotiating.  It is not the most exciting or sexy topic but like I mentioned before it is one of the highest paying ones there is. 

The best way to negotiate with someone is to do it in person.  The further removed you are from the other party the harder it is to successfully negotiate with them.  When you are face-to-face with the other party, besides the verbal negotiations you get to hear their various voice tones and inflections as well as watch all their body language.  Negotiating online and even on the telephone makes it difficult to impossible to pick up on these non-verbal communications which often comprise 50% or more of what they are truly saying.  I am certainly no expert on voice tones or body language, but I know it is much easier to tell if someone is nervous, angry, happy, sad, or even distracted when dealing with them in person.  In person you can look in their eyes and shake their hands which can go a long way to help sealing a deal.  If a person is avoiding eye contact or a hand shake then you know the negotiations are going to be that much tougher.  A person with a closed posture (crossed arms, crossed legs, hands in pockets, scowl on face) is showing signs that they are less agreeable than someone with an open posture.  A person leaning forward, nodding their head, and smiling is also showing more agreeable signs than someone sitting back and looking away indifferently.  A person that touches their face repeatedly is often conveying a sign that they are nervous or being untruthful.  But do keep in mind that not all body language is 100% accurate.  For instance, a closed posture might mean that someone is simply cold and someone touching their face could have an itch.  On the same note, you can use your own non-verbal communication and body language to “influence” the other party along with the words you are using.  I have had so many people say that a big reason they dealt with me was because they “liked” me and I gave them good vibes.  You can use your body language and voice inflection to further perpetuate those positive vibes in addition to the words you are saying. 

Next there are personality types.  Meeting in person with someone especially for some period time (say over a long lunch) allows you to gain some grasp on their personality.  Some people are outgoing extroverts (sanguines).  Some are quieter introverts (phlegmatics).  Some are analytical numbers people who dig into all the details (melancholies).  Some are pragmatic and straight to the point (cholerics).  Most people have one leading personality type but have some traits of the others.  But you will never know for sure if you do not spend a little time observing and getting to know them.  If someone is a numbers person, then you want to make sure to re-iterate the numbers to them and maybe even write up a net sheet and review all their mortgage paperwork with them in detail.  If someone is more of an emotional person, then you want to play more to those emotions and tell them how they will feel living nearer to their grandkids in California and out from under the burden of those big mortgage payments. There are whole books dedicated to non-verbal communication, body language, and discovering people’s personalities.  It is important to at least be aware of these things and then consider educating yourself on them in order to make you a better negotiator and people person.

Whenever you negotiate it is always best to try to get the upper-hand before the negotiations even begin.  In addition to being a scholar on body language and personalities, if you can create or give yourself any sort of personal “power” over and above the other person this can give you the extra leg up.  Power may sound like a bad thing because we have so often heard the phrase that “Power corrupts.”  However there are plenty of people that have power over others that are not corrupt at all – parents, teachers, and bosses all have power but most would not consider them corrupt.  These are legitimate leadership roles that wield some power over others and thus a stronger negotiating position simply due to the fact of the title.  Go into any bank branch and half the people working there are Vice Presidents or Assistant Vice Presidents.  Sure sounds good and gives them a lot more credibility with negotiations.  If you can give yourself a title like “Purchasing Manager,” it sounds a whole lot better than real estate investor or transaction engineer. 

There are also powers like reward power and punishment power.  Police officers, airport screeners, teachers, and even short sale asset managers wield some of this power.  They have the power to make your life good or make it bad just depending on how you deal with them.  Another type of power is that of expertise.  If you can be known as an expert or guru in a particular field, it garners you automatic respect and a leg up on other people.  Attorneys, doctors, and other professionals often use all sorts of complicated language that laypeople do not fully comprehend.  They put all sorts of designation letters after their names JD, DDS, ABA, GRI, PHP, etc. that people often have no clue what they mean.  But it makes them sound like they are experts in their field and surely must know more than you.  Charismatic power is another amazing tool.  Many politicians and religious figures have this.  They use their charisma to manipulate people in all sorts of ways both good and bad.  Charisma allowed President Clinton to still have strong ratings even after a nasty scandal and impeachment proceedings, and it allows Joel Osteen to pack tens of thousands of people into church to hear him preach.

There are some powers that anyone can use to their advantage in negotiating.  Situational power is an obvious one.  If your kids asked you for $20 for something they need 2 weeks from now, you might give them a hard time and lecture them about walking uphill in the snow to school when you were a kid.  But if your kids wait until 7:00am just as you are walking out the door to some important meeting, you probably will not put up as much of a fight.  The same goes in real estate negotiating.  How many times have you seen someone give away a $1000 concession at the last minute just to make a deal close that they never would have given away weeks ago at the beginning of the negotiations?  Another situational power is whose turf you do the negotiations in.  If you go to someone’s home and negotiate at their dining room table, you are on their turf and they have the “home field advantage” over you.  On the other hand if you can get them to meet you at your office, you have the advantage and have much more influence on getting them to sign on the dotted line.  (If you do not have an office, you could borrow one from your favorite title company or Realtor or even meet at your frequently patronized restaurant or coffee shop.)

You might say that all these non-verbal communications, body language analysis, personality observations, and power plays are all a bunch of manipulative trickery.  Maybe they are to some degree.  They can certainly help you fare better in your negotiations.  But more importantly keep in mind that you are not the only person negotiating.  The other side is negotiating with you and they might be using these exact same strategies in their favor against you.  This is why it sometimes pays to have an expert negotiator like a seasoned attorney or real estate agent in your corner when doing these deals.  In the upcoming articles, I will go into depth on various direct tactics and tricks that can be used to further advance you into a more successful negotiation. 

Comments (5)

Ronald DiLalla
Century 21 Discovery DRE 01813824 - Anaheim, CA
No. Orange Cty Real Estate

Hi Rob, like you stated there are winners and then there are losers.....I would definitely say that you are a winner...great post and thanks for sharing.

Nov 12, 2011 07:05 PM
Wallace S. Gibson, CPM
Gibson Management Group, Ltd. - Charlottesville, VA

Rob * I'm reading Richard Branson's autobiography.  He started his Virgin record shops by walking streets in heavy traffic areas of London where the building owners where the ground floor shop owners...he would negotiate personally with them for vacant space ABOVE their shop for FREE rent because his record buyers would bring business to their shops.....AWESOME negotiating tactic!

Nov 12, 2011 11:32 PM
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time

Rob. I agree that face to face can be beneficial for the reasons you mentioned. However I think this is only true for the less emotional negotiator. If a person is an emotional negotiator then they may very well do better to negotiate in writing or have a 3rd party handle the negotiations. Distance can keep them from caving in on their position and helps them to maintain strength. It's much easier to stand strong if you are NOT looking the other person in the eye.

So it really depends on the persons personality.

Nov 13, 2011 12:24 AM
Rob Arnold
Sand Dollar Realty Group, Inc. - Altamonte Springs, FL
Metro Orlando Full Service - Investor Friendly & F

@ Ronald.  Thanks for the kind words.

@ Wallace.  Nice to hear stories about creative negotiating.  I often go into a listing presentation and make multiple offers.  This is what I can do for $X.  This is what I can do for $X+Y.  Good to give people options.

@ Bryant.  This is a 3-part series that I am writing for Investors Resource Center investment club .  In the 3rd article I will get into the tactics of "higher authority" and "3rd party negotiator" .

Nov 13, 2011 05:00 PM
That's the best anwser of all time! JMHO
Nov 20, 2011 06:58 PM