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.

Presentation Folders

At the outset a presentation folder may seem to have a very basic use of carrying mails, handouts, business cards, brochures and other company materials but they have a far greater potential than their seemingly basic use. They serve as a great marketing tool to advertise your company and attract potential clients. This style of folder is a great tool to keep your documents safe and professionally organised. Don’t underestimate the value of presentation folders to build your brand identity. It could be simple, ostentatious, and humorous or any other way you’d like, but by using your own unique design you can create the right impact on your clients besides enhancing the identity of your corporate business.

Use of Presentation Folders

A Presentation folder gives you the scope to present your important company documents in an attractive and organised manner. What better way to present and build your brand and create an effective impression on your esteemed clients. Moreover you can use it to advertise and reinforce your company name and image and enhance corporate identity. So irrespective of the company you belong to, it could be financial institutions, Cellular communication, Charities, Churches, Credit Unions, Educational institutions, Entertainment, Law Firms, Physicians, Pharmaceutical Companies, Travel and Tourism sector and Event planners among others, you could use an appropriate folder to market your company’s product or service.

Types of Folders

Presentation folders come in a variety of styles that include 9″ x 12″ Pocket folders, Economy folders, Three panel folders, Reinforced Edge folders, Conformer folders, Legal size folders, Capacity folders and Small folders among others. Moreover you can customise your presentation folder with extraordinary designs and attractive colours and prints. You can use the front of the presentation folder to display the company logo while the website address and relevant contact information can be printed on the back. Don’t forget that you can use the inside pockets to reveal your company goals and motto.

Standard Folders

The standard presentation folder comes in a dimension of 9″ x 12″ with 2 – 4″ Pockets. It is a widely used and popular presentation style folder that can be used conveniently for almost all situations. You can add your own design on this folder and make it unique and original. This style of presentation folder is well recognised and used by Financial and Real Estate institutions, Media and Marketing agencies, Hospitality and Health care industries, Hotels and Resorts among many other systems.

Letter Size Folders

Letter size folders are a great way to represent your brand while at the same time organising your important letter sized documents in a methodical and professional manner. So in your next sales endeavour you can use these letter size folders to project a simple and straightforward business or an elaborate company, or any other way you’d like.

So whatever the style, design, material, size, format, colour you desire, you can exercise your option to personalise the product, impress your clients by communicating the desired message and present a professional image of your company with the help of presentation folders.

Creating Presentations

When asked to give a presentation, consider using the four P’s of presentation steps to help you with your creation. The four P’s are: Plan, Prepare, Practice, and Perform. This article will address steps one and two, which are about planning and preparing the presentation.

1. During Plan, you will consider your audience and why you are giving the presentation along with what generally appeals to them and why they may want to know about your subject. You will determine with the person requesting the presentation how much time you will have and what type of visual aids may be relevant and usable at the location of final presentation. You can find some hints in the Briefing section of the book “R.A!R.A! A Meeting Wizards’ Approach” that aids in development of planning questions to ask during this step such as:

  • When do I need to be there? Date of presentation with start/end times and location.
  • Who will be there? Description of primary audience and names of decision makers.
  • What will appeal to this audience and why do they want to know about this subject? Reason(s) presentation is necessary or relevant to this audience.
  • What types of supporting documents and audio/visuals are preferred by audience? Items such as projection or handouts that is preferred by or available with this audience.
  • How much of presentation time should be allowed for questions and answers at the end? Most presentations are followed by Q&A from audience to speaker and knowing the desired timeframe allows better time allotment of prepared speaking points.

2. Prepare your presentation by thinking about both the beginning and ending, and then add the detail in the middle that supports your strong start and end. Now that you know what to say and are aware of your visual aid limitation, think about how you can make the presentation memorable by developing any visuals that may accompany the presentation making sure their flow matches the presentation. When developing visuals, remember you don’t want people fumbling with handouts or noting spelling errors when they could be listening. When preparing, consider what the Presentation Plan form in the book “R.A!R.A! A Meeting Wizards’ Approach” suggests as possible outline questions for a briefing presentation:

  • Why are we here? Reasons presentation is necessary or desirable at this time.
  • What have we done? History, work, or statistics related to purpose or presentation.
  • What do we plan to do? Possible future outcomes or actions as result of presentation or decision to be made based on presentation.
  • What have we learned? Summary of presentation or recommendations.
  • What have we to share? Stories, statistics, charts, or other data to prove points.
  • What do we need? Resources to facilitate presentation and discussion or to accomplish actions.

With the Plan and Prepare steps, you have learned to ask questions to help you develop speaking points and visuals aids. To understand the Practice and Perform steps, see article on “Delivering Presentations”.