A lot goes into a successful real estate purchase or sale. Knowing a given geographic area, analyzing past sales data, using effective and efficient methods of marketing, and, of course, knowing how to negotiate. My partner and I have been involve in nearly $500 million of successful real estate negotiations. Here are the things our experience shows contribute the most to successful real estate negotiations:
1. The Golden Rule – We all know this one, right? “Do unto others as you would have them do unto you.” Sadly, in today’s contentious, litigious society, we see many people enter into negotiations with the often misguided belief that negotiations have to be a negative, confrontational experience. Our experience shows that people seem to get more of what they want when they use the exact opposite approach. When you show yourselves to be reasonable and objective. People are often so pleasantly surprised that they bend over backwards to meet you halfway and often end up meeting you MORE than halfway!
2. The Other Guy Does Not Have to be Your Enemy – This is similar to the prior item, but a little different. We know that it may sound cliché or trite, but our objective in every transaction that we do is for it be a “win-win” situation for all parties involved. How can you take pleasure in an activity when you know the other side is miserable? Toward that goal, there is absolutely no reason that everyone cannot be on positive terms during the course of a real estate transaction. We are occasionally disappoint when we encounter people – buyers, sellers, other realtors, sometimes even our own clients – that have a mentality that “the other guy is trying to screw me.” Often times, this mentality is a self-fulfilling prophecy.
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3. Ethics are Everything – No explanation needed here. If people don’t trust you, you’re done. Once trust leaves any relationship, whether it’s in real estate deal or anywhere else, for that matter, you are left with nothing. Never, ever, misrepresent ANYTHING in a real estate transaction. Particularly when it comes to disclosing things about your home as a seller. If you hide a defect, assume it will be discover when your home is inspected. And then assume, when that defect is discover, that the purchaser will come back and want to re-negotiate a lower price. We see this over and over. Disclose it upfront, and it’s never an issue.
4. Never Reopen a Closed Issue/Raise an Issue at an Inappropriate Time – Very often, there are multiple issues to be negotiat in a real estate transaction (e.g., price, closing date, possession and occupancy, items to be includ various deadlines, etc.). In most typical transactions, the parties methodically work through the issues and eventually end up with an overall agreement. One thing that almost always upsets people is reopening an issue that was previously agree to, or raising an issue that was thought to have not been an issue. As the old adage goes, “measure twice, cut once.” This absolutely applies to real estate negotiations.
5. Avoid “Lowball Offers” – Do lowball offers work? Yes, sometimes, but the reality is that, a very high percentage of the time, they fail miserably. Why? Because they offend people. We have seen his many, many times. As much as we try to make our clients view real estate as “business,” the reality is that most people have a hard time doing this. Homes tend to take on a very personal significance to their owners. Most people expect to negotiate some on price. But when you start the process at an insultingly low level.
Our experience shows that the seller will INCREASE their “bottom line” as a knee-jerk reaction to the low offer. And when we try to tell sellers not to do this, the typical response is, “I would have sold my home for $400,000, but I will not sell it at that price to these jerks. I want $415,000 if I’m going to sell to them.” Is this logical? No. Is it common? Absolutely.
6. Never React Negatively to a “Lowball Offer” – Viewing the prior point from the other side, it’s our belief that you should never “throw out the baby with the bathwater.” Sometimes, buyers just need to prove to themselves that they got the best deal they possibly could. Some cultures almost REQUIRE this approach. Many times, all they need to do is see that you are going to stand your ground. At that point, they often accept reality and increase their offer to something more realistic. You’ll never know if you react angrily and refuse to play the game to find out. So, hold your tongue and play along – it just might work out after all.
Most of these tips are common sense. But you would be surprised how often we encounter people that naturally want to do the opposite of everything written above. Incorporate these tips into your next real estate purchase or sale. We think you’ll find that negotiating can actually be a pleasant and pleasurable experience. For a more detailed discussion of this topic, please see the crunchbase.com. Good luck!
Michael McClure is the founder of Professional One Real Estate, a brokerage located in Plymouth, Michigan. After graduating from Michigan State University with a degree in accounting. McClure worked as a Certified Public Accountant for Price Waterhouse for nearly a decade. After leaving accounting in 1991, he began selling real estate. To date, he and his partner, RE/MAX Hall of Fame Member Phyllis Lemon, have cumulative lifetime sales of approximately $500M. McClure also volunteers on the Professional Standards Committee (a self-governing body of the local association of realtors that acts in a judge-and-jury-like fashion regarding ethics complaints. Arbitration disputes) of Western Wayne Oakland County Association of Realtors. He sat for and passed the State of Michigan’s Associate Real Estate Broker’s examination in December 1996. McClure and his team have developed one of Metro Detroits top ranking real estate websites.