REAL ESTATE
NEGOTIATION INSTITUTE

When an aggressive low ball offer comes through on a real estate listing you represent, often the first reaction is for you and/or your seller to feel insulted.  Recognize that the low ball offer is typically just a tactic to see how the seller reacts.  The listing agent should pre-position the seller to expect low ball offers and not react emotionally, which is sometimes easier said than done.
 
The best negotiation defense to a true low ball offer is a credible list price that can be defended by the market data and/or logical reasoning.  A good “anchor” is credible, defensible, and has staying power.  Sellers who over-list their property invite more aggressive offers from buyers, and sometimes even a reasonable offer will then look low relative to the over-listed price.    

The seller has 3 basic options for a low ball offer: accept, reject, or counter. 

Accepting the aggressive low ball offer is not normally the logical choice.  There may be times when the seller is subject to extreme circumstances, but this is a rare exception.  Even if the low ball offer is accepted, getting to closing could still be difficult with all the negative emotion.

One way to reject a low ball offer is for the listing agent to communicate to the buyer’s agent, “My seller will respond to a reasonable offer from your buyer but not an unreasonable offer that cannot be supported by the market data.”  The low ball offer is still a written offer and often results in an acceptable outcome for both parties.  The seller’s agent needs to role model professional cooperation to set the tone for a reasonable exchange of counter offers in true real estate negotiation. 

Another way to reject a lowball offer is to ask for supporting data.  This puts the buyer’s side on the defensive and focuses the negotiation on credible market-based numbers.

Countering with a slightly lower price can be an effective approach as it signals that the seller is willing to negotiate, but not willing to give the home away.  The seller’s agent must communicate to the buyer right away that the low ball offer is not even in the realm of possibility to ensure that the buyer does not hold out false hope.
 
Whether you are in a buyer’s market or a seller’s market, your real estate negotiation should be based on facts and reason, not emotions and gamesmanship.

Ultimatums are a competitive negotiation tactic, and most real estate professionals have encountered them at some point in their careers.  Of the ultimatums in common use, “Take it or leave it,” is by far the most popular.  It is designed to cause discomfort and put the negotiation off balance.  The ultimatum can include a very short deadline or a particularly unreasonable price, and is meant to create a sense of panic through fear of loss.

An experienced negotiator knows how to handle the ultimatum tactic.  Less experienced negotiators may allow the ultimatum to throws them off balance – the desired effect.  The best reaction is often the hardest to summon:  relax.

Countering “take it or leave it” is no different than countering any other highly competitive negotiation tactic.  Start by calmly asking for the basis supporting the ultimatum.  Why is that deadline important?  What data has been used to set that price?  Gather information that will help you determine what is important to the other party, and continue negotiations to find other options that meet both parties’ needs.

It is possible that the other party might stick to the ultimatum and refuse to negotiate further.  IF that happens, and you have tried to be collaborative without success, you might need to issue your own ultimatum or simply walk away.  But WHEN that happens, you will know that you have tried to reach a mutually satisfactory real estate negotiation agreement without resorting to intimidation tactics.

The sixth and concluding article in the Persuasion Principle series, we turn to the Sound Logic Persuasion Principle. In real estate negotiations, the principle of sound logic notes that when people are uncertain about a decision, they will look outside themselves for valid reasons to support the decision.

Sound logic and reason makes sense to people. If it makes sense, then they are more likely to do what you ask of them. To help a potential client decide to sign with you, show that you have exceeded an industry average such as average sales price in your area. It will also make sense to the client that you are the right real estate agent for them if you can demonstrate that your real estate negotiations close in shorter times for higher prices.

A credible third party – particularly an authority figure – can help logic and reason seem that much more sound. Testimonials from managers or past clients are helpful to a new client looking for reasons to set a price or make an offer. Hearing that someone else used the same logic in their decision will make the buyer or seller feel more confident in their position.

All of the persuasion principles can be used for successful real estate negotiation techniques. Be sure to review all of the Negotiation vs. Persuasion techniques outlined in our blog for real estate professionals.