Negotiating the Real Estate Contract

Negotiation is the process of communication back and forth in order to reach a joint agreement. There is no “one size fits all” strategy of negotiating a real estate contract. Many of our clients have been very experienced negotiators, and we have learned a great deal from them, as well as from books on the subject. We would like to share some of our thoughts on negotiating with you:

What do we want to achieve in a negotiation?

The best negotiators bring an attitude of high expectations to the table. They are hard on the problem and soft on the people. Letting the seller know what you need, in a clear and reasoned way, is the first step toward getting it. We try to keep all of these goals in mind:

Enable you to move into your new home.

Obtain the lowest possible price for the property.

Close within an acceptable time frame.

Solve any repair issues fairly.

Have no title, survey or loan problems, or solve any that do arise.

Develop a good working relationship with the seller.

Have no future problems after closing.

Is a cooperative or combative approach more effective?

Our experience shows that the cooperative style is the most effective and efficient way to complete a transaction. Professional negotiators usually try to preserve the relationship between the parties, and work together to resolve problems. The goal is not to reach an impasse in which neither the seller’s nor the buyer’s needs are met. Buyers sometimes submit a letter to the seller describing why their house is not worth what they are asking, pointing out deficiencies, etc. This almost always backfires, and starts the negotiation off with a defensive seller. It is best to anchor your price to the marketplace, while remaining very complimentary of their home.

How do you work with a combative strategy by a seller or agent?

The combative style is sometimes encountered. This strategy includes: negative comments, emotional statements, table pounding, threats to walk out, ego involvement, and stated positioning. Creative solutions and trade offs are not as likely to be found in this environment. Working with a combative style negotiator requires a considered approach:

Do not respond emotionally. An angry or defensive response will escalate the negotiation into a no-win battle.

Do not argue. Arguing usually positions them more strongly and drags the negotiation process off course.

Do not ignore their arguments or statements. Listen carefully, but do not accept or reject.

Firmly anchor pricing and other terms to outside data. Show that the price has not been chosen arbitrarily.

Reduce misunderstanding by following up with written summaries of discussions.

Do not allow hazy or unclear proposals to stand.

Offer some “wins” on some of the terms. Face saving is very important.

Look for ways to meet their underlying interests.

Remember that they may have a beautiful home that satisfies the buyer’s goals.

Is every point in the contact negotiable?

Yes. However, one of the most effective means of coming to an agreement is to rely on consistent standards or norms when possible. For example, it is common practice for the seller to pay for the title policy and for the buyer to pay survey cost. Using accepted standards prevents buyer and seller from haggling over every point. Working within the accepted “norms” for our area helps to legitimize offers, and focus the negotiation on just a few points. On the other hand, all the points in an offer can be used to help structure the deal. They offer trade-off opportunities for both parties to get what they want from the negotiation.

The value of trust in a negotiation cannot be overstated. Most people are fair minded and reasonable. They respond well to respectful treatment and to having their concerns heard. If the seller feels that the buyer and agent are acting with integrity, their attitude will be much more cooperative. Contract negotiation is a sensitive area, and anxiety can be high. The buyers may have had an unpleasant past experience with buying a home. The seller may be under pressure, with future plans at stake Acting with integrity does not mean that all “cards have to be put on the table.” It is not proper to discuss personal issues that affect the buyer, such as your financial ability or urgency to move in. It is valuable to develop rapport because trust increases your leverage. Here are ways:

Listen and understand what the seller has to say.

Express appreciation for the seller’s home, gardens, decorating.

Respond within a reasonable time to counter offers.

Reassure the seller of your ability to close.

Reveal some personal information about yourselves.

Finding common ground with the seller can be a very powerful tool in the event of multiple offers. I can think of several instances in which sellers selected their contract for very personal reasons. (The family reminded them of themselves when they moved in with young children years before. Or, they were both of the same religion. Or, the new owners would care for their gardens.)

Understand your leverage.

The more we can find out about the seller’s needs, the better chance we have to find solutions to negotiation hurdles. We will be able to offer information or concessions that appeal to the seller’s deepest concerns. Obviously, if the house has been on the market for 300 days, you have a lot more leverage than you would with a brand new listing. If their time frame is immediate, and you can meet it, you have some leverage. If they have multiple offers, you have very little leverage!

How much under list price should you offer?

Buyers usually offer less than list price, unless it is a strong sellers market. There is no standard percentage “under list price” that can be used. A market analysis will show recent sales for the neighborhood, which is the best way to establish the offer price.

It is usually counter-productive to offer so low that the seller will automatically reject the offer. This will set a negative tone, and may result in an emotional response from the seller.

What if we have a multiple offer situation?

Occasionally the seller receives more than one offer on their property. The Austin Board of REALTORS┬« has a policy that allows two options: disclosure to all parties that multiple offers have been received, or disclosure to no one that there are multiple offers. We prefer disclosure to all parties. However, the listing agent and seller will make the decision as to how they will handle offers. By simply disclosing that there are multiple offers, they are not “shopping” your contract. Shopping occurs when the seller discloses the terms of an offer to induce a buyer to submit a better offer. This can result in major distrust of the process by the parties, and the likelihood of loss of the buyers.

Usually the procedure is to notify each party that multiple offers have been received. Each party is then given the opportunity to raise or adjust his offer by a certain time. After that time, the seller is free to review all offers and choose one to work with. They are not obligated to choose the “first” offer that came in. The selected offer may be countered, or accepted as is.

Canned Sales Presentations Just Don’t Work Today

Flip charts and slides shows (“canned presentations”) make the best sales product or service promotions because, “a picture is worth a thousand words,” right? Well it depends!

Stanford University’s Research Institute’s VALS study (values, altitudes and life styles) lists five distinct psychographic categories (personalities) or buying decision-making modes. What the Stanford research means to you as a sales manager is that a given picture may not appeal to one or more of the buying mind-sets (Belongers, Achiever, Emulator, etc.) outlined in the study. Using a flip chart or slides as your primary presentation tool can cost you sales, especially if you just walk through each page or play each slide as an outline of your products or service’s features and benefits.

Flip charts and slide presentations must be generic by nature and rarely focus on a decision-maker’s specific needs except for a few slides or pages. From the Stanford research, using this selling approach means that you have one chance in five of appealing to your decision-maker’s primary buying mode depending on the layout and copy theme of the slides or chart.

Slide shows or flip chart presentations are valuable tools if used to highlight specific selling points–points based in the information that your staff members uncover from their in-depth probing (using a consultative selling system) of a prospective customer or client’s needs. The myth of using a “canned sales pitch” and the field-tested and proven selling methods to replace defective techniques are outlined in the “best selling” 101 Sales Myths manual published by The $elling Edge┬«, Inc. (http://TheSellingEdge.com/myths3.htm) The techniques listed are are based in a proven consultative selling process that eliminates most of the fear and pressure associated with traditional presentation approaches.

So Why Do Quadcopters Make Great Christmas Presents?

If you are looking for that perfect Christmas present this year for boys (and girls!) of all ages then you really should look at one of the many different choices of quadcopters and drones that are available today!

You really want that excitement and that sheer look of happiness when they open their presents Christmas morning and once they unwrap their new drone or copter… well, you will not have to wonder if you have got it right. The smiles and wide eyes will tell you clearly enough!

Why Quadcopters Make Great Christmas Presents #1:

Quadcopters are still relatively new technology, well, at least when we are talking about as a commercially available toy. Sure, they have been around for a little while now however up until recent times, they have been very expensive and not nearly geared and built as much for fun as they are today. What this means is that a new quadcopter is not going to be under every single tree so there will be quite a lot of uniqueness and also, envy from your children’s friends! It is probably also the very first time they have received such a toy and let me tell you, a drone or quadcopter really is a toy like no other!

Why Quadcopters Make Great Christmas Presents #2:

They appeal to all everybody and all ages too! Quadcopters are a huge amount of fun and they aren’t just for boys either! Girls also love being “pilots” and enjoying the thrill of commanding their drone either just around the skies or performing intricate stunts and manoeuvres. And these bad boys of the sky aren’t just for kids either. From as young as 7 years old right up to grandparents, there is a drone or quadcopter that will suit.

Why Quadcopters Make Great Christmas Presents #3:

There is an absolutely HUGE range of quadcopters for sale that will cater to any budget and also please the most demanding of “pilots.” From a small entry level quadcopter that can fit into the palm of your hand, right up to an incredibly advanced… and expensive version that costs more than the average family car! Want four propellers? No problem? How about an eight propeller octocopter? Too easy! Want a protective circular cage around your drone or maybe perhaps even in the shape of a fighter jet? There are so many different options available to you! Just go down to your favorite RC store, choose what you want and you are ready to go!

Why Quadcopters Make Great Christmas Presents #4:

These awesome machines are not only accessible to everyone, but they are easy to learn for everyone as well. You do not need to have any special skills or aeronautical experience but you will need some patience and of course, time to practice. Many of these models today are flyable right out of the box but as with everything good in life, you will need to practice and fully understand your new drone in order to get the most out of it.

It’s clear to see that I think quadcopters are awesome! So much fun, such amazing technology and many with brilliant features that allow extreme aerobatics, return to base features, and of course the ability to come with or add cameras such as GoPro’s which open up a whole new world of vision and experiences. And let’s not forget about the growing movement of drone racing! Now this really is an exciting new field!