With higher mortgage rates, record low inventory, and a volatile U.S. economy, the 2023 spring housing market is expected to be more sluggish than usual.
As a result, listing agents would do well to hone their negotiation skills, which can help them secure more listings and generate more offers on their clients’ properties.
As a listing agent, you represent the seller in a real estate transaction. You help set the listing price, market the property, negotiate with buyers, and handle the contract and closing process. Having good negotiation skills can help ensure a smooth transaction for all involved.
So, here are 10 negotiation tips to help you succeed in the 2023 spring market:
Table of Contents:
- Manage Client Expectations
- Choose a Negotiation Strategy
- Arm Yourself With Data and Marketing Materials
- Negotiate in Person or Over the Phone
- Show Off Your Credentials
- Don’t be Afraid to Slow Down
- Know When to Say No
- Use Expirations on Counteroffers
- Connect with Other Listing Agents
- Develop a Winning Attitude
1. Manage Client Expectations
Before you can successfully negotiate with buyers, you must understand your seller client’s needs and goals. This is vital since you have a fiduciary duty to act in their best interest. Plus, showing that you understand what your client wants helps build trust, which can lead to repeat business and referrals later on.
To understand your client’s expectations, sit with them and actively listen to what they want from selling their property. This could include selling for a certain price and within a certain timeframe. There may be aspects that are negotiable and others that are “deal breakers.” Be sure to ask good questions to understand your client’s financial goals fully.
That said, you should also ensure your client has a realistic idea about the value of their home and what the market will bear. This can help prevent disappointment later from only getting offers below the client's expectations or with added contingencies.
To help manage your client’s expectations, consider establishing a bargaining range with them, i.e., the lowest price upon which they are willing to settle. You may also consider building in a budget for any repair contingencies buyers request. That way, you can adjust the listing price based on the response it gets while still staying within your client’s wishes.
2. Choose a Negotiation Strategy
Once you understand your client’s expectations, choose the best negotiation strategy for the situation. For example, in a seller’s market, you may want to pursue a more competitive approach to negotiating. You may want to try something more cooperative in a buyer's market. Most times, you’ll want something in between.
For a cooperative approach, try to maintain a win-win perspective. How can you offer the buyer what they want while securing what your client wants? For example, the buyer may meet your asking price if you include the washer and dryer with the house or agree to a quick closing date. Get creative and remember that anything is negotiable: the price, closing costs, closing date, home repairs, appliances, and furniture.
Another way to improve collaboration is to use affirming language. Repeat back what the other party says to demonstrate that you understand their point of view. Then add yours. For example, you might say, “Splitting the closing costs is a great idea. With that extra savings, maybe you can meet me halfway on the house price.” By first affirming the other person’s ideas, getting them to agree with yours can be easier.
For a more competitive approach, the most important thing is to know how to play your cards and never show them first. For example, you don’t want the buyer to know if your client is desperate to sell or not getting many offers. Instead, try to learn as much as you can about the buyer. Maybe they’re in a hurry to buy, or they’re in love with the property. The more you know about the buyer and the less they know about your client, the better deal you can negotiate.
Related to this point is the concept of leverage. You must consider your client’s best alternative to a negotiated agreement (BATNA) and the buyer’s. You can then use this information to leverage your position.
For example, if you give the impression that your client has many offers, the buyer may feel more inclined to agree to your terms. Alternatively, if you believe the buyer has few other options but to go through with the deal, you can be more confident about sticking to your terms.
Each negotiation strategy has its own pros and cons and will shape how people perceive you as a listing agent, which in turn helps you attract the clients that suit your style. So choosing the right strategy and approach will be crucial to your success as a listing agent.
3. Arm Yourself With Data and Marketing Materials
Having data to support your claims can give you a leg up in negotiations. So it’s important to arm yourself with information such as:
- How much the property is worth on the open market (aka its fair market value)
- What similar properties in the area have been selling for (aka “comps”)
- The number of active listings in the area (aka active listing count)
- The median number of days properties take to sell in the current market (aka “days on market”)
Additionally, make sure you have appropriate marketing materials in place, such as an accurate property description with high-quality photos (and videos) that highlight the home’s strengths, as well as the appropriate documentation to back up these claims.
4. Negotiate in Person or Over the Phone
You may want to avoid negotiating over email or text. Written forms of communication may require more back and forth and lack valuable information only transmitted through your body language and voice.
Instead, you may find negotiating in person or at least over the phone helpful. This will help you pick up on important social cues. For example, if the buyer negotiates with their arms crossed, they may be unwilling to budge on their offer. Or if they avoid eye contact, it may mean they aren't very confident in their offer, and you can probably get them to compromise.
Conversely, negotiating in person can also help you communicate more clearly and avoid a misunderstanding. For example, smiling and maintaining good posture can show that you are confident in your offer and mean business.
Ultimately, negotiating in person can help you manage expectations and find a solution for both parties.
5. Show Off Your Credentials
In conversations with buyers and sellers, find ways to mention your successes and experiences as a listing agent naturally. This can help build trust in you as a professional and position you as a leader during the negotiation process.
When it comes to converting seller leads into listings, make sure you have marketing collateral about your skills as an agent and the brokerage you represent. For example, you may want to invest in business cards you can give away or a website with testimonials from past clients.
6. Don’t be Afraid to Slow Down
At times, negotiations can get heated. This can happen for many reasons.
For example, the buyer may be scared to commit when mortgage rates are high, or the seller may have outdated expectations about what their home is worth. If tensions rise, don’t hesitate to slow down the negotiation process to allow emotions to settle and create space for compromise.
Selling a home can be personal. There are a lot of expectations at play, and agents are responsible for managing them. If things get heated for either party, let them sleep on it. This can help them gain a clearer perspective to do what’s in their best interest.
7. Know When to Say No
Don’t be afraid to walk away from a negotiation. This can be one of the hardest tactics to learn, but it can also be extremely powerful. When you say no to an offer, you communicate that you and your client know what the property is worth and expect to get the offer you deserve.
Of course, saying no has its risks. Your client may not get a better offer, so you need to get on the same page with them about what they are and aren’t willing to accept. For example, before rejecting an offer, you could ask your client how they would feel if you called them tomorrow to let them know the deal was off. Elated? Regretful? This can help you understand how enthusiastic they are about the offer so that you don’t pull the plug only to have them wish you hadn’t, which could hurt their perception of you and your reputation.
That said, it’s also important to educate your client on what their property is worth so they don’t accept a lowball offer they may regret.
Knowing when to reject an offer versus putting in a counteroffer is a delicate task, but it’s your job to do whatever is in your client's best interest.
8. Use Expirations on Counteroffers
Part of being a successful listing agent is not only selling your client’s property at a good price but selling it fast. For one, the seller may be in a hurry because they need to sell their house before they can move. But perhaps more importantly, the longer a listing sits on the market, the less desirable it appears, and the more likely you will have to lower its price.
To speed up negotiations, it can help to place expiration dates on your counteroffers. This puts pressure on buyers to decide quickly so you can limit how long the property sits on the market.
It’s also important to note that many potential buyers won’t even submit an offer if they know negotiations are already underway with someone else. This is another reason to put expiration dates on counteroffers—to limit the number of missed opportunities if the deal does not go through.
9. Connect with Other Listing Agents
Connecting with other listing agents can benefit your negotiation skills in a couple of ways: First, it can help you learn from more seasoned negotiators and identify best practices to adopt. Second, you can take note of other agents’ negotiation tactics to know how best to work with them on future deals.
To help you keep track of other listing agents (as well as clients, prospects, and other contacts), you may want to invest in a customer relationship management (CRM) software.
10. Develop a Winning Attitude
Finally, understand that negotiation is an art that requires practice and developing a winning attitude. This means staying positive, showing confidence, supporting yourself with data, not revealing too much about your client, understanding what the buyer wants, maintaining a win-win attitude, and knowing when to walk away.
As you practice implementing these skills, your negotiation skills will improve, you’ll build better relationships with other agents, and you will likely win more deals for your clients.
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