Not one real estate agent in the country has ever admitted publicly to being a poor negotiator. We all claim to be experts. And most of those claims are based on agent experience developed between 2002 and 2007. Everything sold, no matter what. Boasts like, "I averaged 12% over listing price for my sellers," abound. Buyer agents claim that, "I got it for my buyers over 8 other offers," were pretty much the norm. But I don't think that this had anything to do with negotiating skills. A pleasant, professional appearance, a pre-inspection and a strong offer usually carried the day.

Let's take a rational look at negotiations to understand the process see if real estate agents are even in the game these days. There are two ways to negotiate. You can negotiate from a position or you can negotiate from merit. If, as buyer, you want to negotiate from a position you are essentially saying that you won't go over $xxx,xxx for that house. Your reasoning might be comps or condition. But you take a stand and see if the seller rolls over. If your agent has to deliver that message, or a message that contains the clause "only if," then you are in a fixed position and decrease your chances of making a deal. The message is, the buyer doesn't really care about the house; only care about getting a deal. The same rationale applies to sellers. On the other hand, if the offer has merit, if it explains your needs, your financial abilities, and if it assesses the situation rationally, then it's worth trying to find a way to understand the merit of the other party and determine if the needs of each can be attained.

Once you've established how you and the other members of the negotiation are looking at the situation, you will need to determine the style of each person who has something to say. The five basic negotiation styles consist of defeatism, accommodation, compromise, withdrawal and collaboration. Non of these styles is necessarily wrong, and it is important for an expert negotiator to recognize how these various styles are being used an any conversation.
Someone who uses the defeatism style is often perceived of as aggressive and as a bully. It is often used successfully when that negotiator discovers a weakness in the other party and tries to use it to their advantage. If such a person has a habit of using the technique, at some point they may make an error in evaluating the weakness of others and destroy the negotiation progress.
 If, at the beginning of a negotiation, one party adopts an accommodating posture, the others may see that as a weakness. This type of person, a person who doesn't want to make waves, would be wise to have a skilled negotiator on his side to help him keep his original objective in mind.

Some negotiators are compromisers. It often works well for each party to to give up something in exchange for something else. In some cases this can get confusing and again, one or both parties may loose sight of their original objectives.

For offers that are too low to start with, or counter offers that don't seek resolution other than in price, and usually the original price, some parties to a negotiation will just withdraw. Nothing stops a discussion faster than one party refusing to speak to the others. The final style of negotiating is for the parties to collaborate. It stakes a skilled negotiator to sincerely ask and discover what the opposing party really wants, and yet be confident enough to disclose the prime objectives and goals on his side. The result, when successful, will have one negotiator finding ways to teach the other to collaborate so that both parties reach their objectives.

My next post will deal with the emotional side of negotiations. When choosing a broker to work with, it is important for you to determine how he interacts with you. It may be a good indication of how he will represent your interests in the purchase or sale of a property.

I got an email from a buyer a while back. I had met him at an open house I was holding. It wasn't my listing and he acted like he knew more about the listing than I did. Maybe so. There is a lot of information out there. I asked if he wanted to look at some comparable properties. He said maybe.

I got an email from him a few days later. "How would you negotiate for me?" he asked. I could tell from talking to him at the open that he had read about the bubble and then the shadow inventory, and he was sure prices were going down more. He told me about how much less than asking other homes were selling for. So I pretty much guess that more than anything, he wanted the deal of the century.

I wrote back: There are two ways to negotiate. you can negotiate from a position or you can negotiate from merit. If you want to negotiate from a position you are essentially saying that you won't go over $xxx,xxx for that house. Your reasoning might be comps or condition. But you take a stand and see if the seller rolls over. That would tell me that you don't really care about the house, you only care about getting a deal. On the other hand, if the house has merit, if it meets your needs, if you can afford it, if there isn't any other property that meets your needs as well, for the same price, then it's worth trying to find a way to make the purchase work so that the seller's needs are met as well.

He wrote back: No, I want to know how you will make the seller sell at a lower price.

I knew the seller had received an offer at a lower price and it didn't work out. It might now and I would help the buyer with it, but it had to make sense.

I wrote back: It sounds to me like you are trying to defeat the seller. That is one style of negotiating. It will work if the seller and his agent are both accommodaters. They may just roll over, and give you the house for what ever you want. But they didn't to the last person. If both the seller and you were compromisers, we might reach agreement, but you would have to give up some of your desired features. I really don't know what they are other than a lower price than the home is currently listed for. On the other hand, with an offer too low, as you suggested you might make, the seller might just withdraw. We would go no where with this if the other party will no longer speak to us. I suggest we try to collaborate with the listing agent and the seller. We'll need to negotiate more after the inspection and possibly after the appraisal. Some how we can tweak their needs with ours, once I know what yours are. I need to know why you want this house so I can build a case for you. Or maybe, there is a better house somewhere else that will work as well.

Apparently this buyer, a buyer who wouldn't sign a buyer's agency agreement, a buyer who didn't seem to have needs other than to get a house for way less than the listing price, a buyer who is perhaps, not a buyer at all, didn't like my idea that we try to work with a plan that would accomplish the goal of closing a sale. He seemed to want a negotiator who would help him make it fail. I didn't hear from him again, nor did I pursue him as a client. I don't think he really wanted to be a homeowner. I think he only wanted a deal.

Recently in my office I listened to a story about a Buyer who had just missed out on the house they wanted to call home.  How?  They waited several days after the home came on the market and by the time they wrote their offer, someone else had beat them to the punch.  I think in today's market it is easy to over-strategize or get lackadaisical and forget one of the fundamental rules in real estate: "time is of the essence".

Even in today's slower paced market if you identify the home that fits you and your family, you still must move quickly.  If you are interested in a house, there is a chance that someone else may be too.  Often in today's market people hesitate to write an offer immediately because they do not want to pay full price.  I understand that.  However, if it is a home you really want, I would suggest writing your offer immediately.  Simply make the offer that you feel is appropriate for the home.  At a minimum, it shows the Seller your interest and raises the likelihood that you will be involved in negotiations on the home, even if there is another offer. 

If you decide to hold off on your offer and are willing to take the risk of losing the home to another offer, be sure that it is over a dollar value that you can live with if you lose the home.  If you are buying the home for the long term (as you should be) maybe a $10,000 to $20,000 reduction in price is not as important as getting the house that feels like home.