REAL ESTATE
NEGOTIATION INSTITUTE

Real estate negotiator . That’s really what you are. Your primary skill is influencing others to do or accept what you want or what your client wants. How many issues do you negotiate in a week or month? Let’s simply list some of the typical real estate negotiation issues agents face:

Agent to Broker (Owner) Commission splits Office space charges Advertising / Co-marketing / lead generation cost sharing Types of training and cost Office charges (fax, copies, forms, etc.) “Shoe” deals Joining brokerage Retention/staying at brokerage Health benefits Assistants Association fees Business cards Lock boxes Signs/Installation Answering service Computers Profit sharing Floor time Sign calls

Agent to Seller Listing Appointment Appointment time and location Where you sit during the appointment Discussion topics and order Getting Seller to hire you now Agency Election (Seller selection of Broker duties) Listing Agreement Type (e.g. Exclusive Right to Sell/Rent, Exclusive Agency, Open Listing, Net listing) Duration of listing Exclusive Period and not putting in MLS for period of time Access, lock box, and showing times Compensation retainer commission/fee including performance bonuses sales after expiration period List price How and where offers presented (in person by buyer/buyer’s agent? Written/oral?) Home preparation/staging prior to home going on market Marketing/Advertising plan (sign riders, flyers, newspapers, magazines, internet, etc.) Open Houses Home warranty offered to Buyer? Acceptance or rejection of Buyer’s offer or counter offer Multiple counter offers

Agent to Buyer Get Buyer to hire Agent Agency Election (Buyer selection of Broker duties) Buyer-Broker agreement Period of agreement Amount of compensation (including commission / bonus and who pays) Purchase after termination timing Retainer fee Home value expectations (features vs. price) Initial offer to Seller (including multiple offer situations) Accepting or rejecting counter offer from Seller Buyer inspection notice to Seller Lender fees Loan documents on time

Agent to Agent (Broker to Broker) Co-broke / Commissions Earnest money on contract breaches Recruiting Referrals Fees Communication requirements Mentoring / training agreements Joint open houses Responsibilities Prospect ownership Joint office sharing Joint assistant sharing

Rainmaker to Team Member Recruiting / hire decision Office space Supplies Copying costs Automobile expenses Fees Commission splits Bonuses Profit Sharing Cap splits Lead generation Rainmaker responsibilities Team member responsibilities / opportunities Team member training/mentoring Non-compete terms Responsibilities / Performance requirements / Expectations Benefits (vacation, health care, insurance, etc.)

Agent to Third Party Resources (Title Company, Lender, Home Inspections, etc.) Treatment of clients Co-marketing agreements Special client rates / fees (e.g. re-inspection fees for home inspection, title fee discounts) Reciprocal referral agreements

Agent Representing Seller/Buyer to Agent Representing Buyer/Seller Earnest money (Buyer; Seller?) Personal Property included or not included in sale Purchase / Sale price Closing date Possession date Financing Conditional loan approval timing Appraisal payment timing Who pays Buyer’s discount points Discount points shall not exceed amount Who pays ALTA lender title policy Who pays loan origination fee Who pays appraisal fee Seller payment of Buyer’s other loan costs Payments of assessments at closing Buyer’s Inspection Notice timing and Seller’s response timing Buyer’s inspection issues HOA assessments and transfer fees Home Warranty Termite inspection/treatment payment Contingencies Deadline extensions Title company Rentals Special access Upgrades Utilities First Right of Refusal Mineral / water rights Utilities left on for inspections/repairs Multiple counter offers Lot survey fees Environmental inspection fees Well inspection fees Septic inspection fees

Real estate agents negotiate very frequently as you can see. There are over 100 separate issues identified above and there are other issues as well. Conservatively speaking you will have thousands of individual, issue-specific negotiations over your real estate career. Wouldn’t it be nice if you could approach each negotiation as a well trained, highly skilled negotiator? Don’t you think your clients deserve a well trained, highly skilled negotiator? Corporate America spends millions and millions of dollars each year on negotiation training. The savvy real estate agents, who realize they are business owners also, invest in training to grow their businesses. A few dollars invested in professional negotiation training will earn you the best return you’ve ever had!

Real estate can be a wonderful and very satisfying career! Helping clients realize the American dream of home ownership is very satisfying and seeing that smile on your client’s face when his/her dreams are realized is priceless. There aren’t many larger dreams for our clients (maybe a LARGER home!).

The role of a real estate agent is to help clients achieve their goals. Sometimes the goals are more challenging than others and sometimes the goals are VERY, VERY challenging. However, in the end, helping the client get results is what the agent is hired to do. Clients who get the results they want (or more!) end up being raving fans  for their agent and often refer family and/or friends. Clients who do not get the results they want often move on to another agent. The slogan for agents is “Happy clients, Happy life!”

The fundamental skill used by real estate professionals to help clients achieve their goals is negotiation. Real estate agents negotiate for a living. They negotiate with their broker (e.g. commission splits, desk fees, administrative fees, ,etc.), with their clients (e.g. commissions/service fees, performance bonuses, retainer fees, length of agreement, list prices, offer terms, etc.), with other agents (e.g. referral fees, co-broke commissions, bonuses, etc.), with third parties (e.g. lenders, home inspectors, title companies, appraisers, etc.), and with other agents on behalf of clients (e.g. purchase contract, inspections items, closing dates, etc.). Every day is filled with one negotiation after another! And if negotiations fail, no one gets paid and disappointment and frustration flourish.

According to NAR statistics, Buyers and Sellers expect their real estate agent to be a skilled negotiator. So how do real estate agents get trained to become skilled negotiators? Since negotiation skills are not taught in real estate licensing school, agents have to look elsewhere to acquire these skills. Many, if not most real estate agents, never get formal or professional negotiation training. Traditionally, agents learn on the job  and/or talk to other more experienced agents to find out how to deal with certain situations. Sometimes this is effective but most often this is an inefficient and incomplete approach (plus the client is paying for the agent’s training!) to gaining professional-level skills.

Recognition of this critical skill for a successful real estate career is however growing. There is a 4-hour negotiation training module offered online by NAR (no credit towards any designation). A portion of one of the modules in the GRI (Graduate of REALTOR® Institute) training touches on negotiation skills. The Women’s Council of REALTORS® has a relatively new designation called Performance Network Management that includes a module on negotiation strategies and tactics. And now there is the CNE (Certified Negotiation Expert) designation for real estate professionals from Negotiation Expertise, a national negotiation training and coaching company serving the real estate industry.

Because negotiation skills are so critical and necessary in real estate transactions, the CNE designation was created to recognize agents who have taken the extra step to receive professional negotiation training. The designation shows advanced training and skill development in this key area, and clients can be much more confident in their agent’s ability to help them achieve their desired goals if the agent has earned the CNE designation.

For listing agents the fun is over. For buyer agents the fun is back! Inventories of homes are at an all time high. Buyers have several if not many homes to choose from. Homes are now taking longer to sell and it’s back to negotiating one offer at a time (if you can get one!). Your negotiation skills (or your influence/persuasion skills) are now more important than ever.

Negotiation is one of the primary skills in real estate. Think about all the different people you negotiate with frequently: other agents (referral fees, co-brokes, Rainmaker splits, contract terms on behalf of your client, etc.), your clients (commission rates, inspection items, staging issues, open houses, offer or listing terms, etc.), your broker (commission splits, desk fees, telephone charges, copy fees, advertising, etc.), and with other parties involved in the real estate transaction (lenders, title companies, inspection companies, etc.). How effective you are at influencing or persuading other people determines your level of success in real estate.

How good are you at negotiating or influencing others? Have you ever had professional negotiation training? Do you know the characteristics of successful negotiators? Can you ask questions different ways to get important information? Are you a trained negotiator who knows how to use influence principles and negotiation tactics skillfully to find a win-win solution? Can you deal effectively with highly competitive negotiators? Can you use proven persuasion techniques to increase your odds of success, or do you go by instinct and HOPE you will be successful? Do you use a planning tool to ensure success? Can you negotiate performance bonuses for your clients and yourself? Do you have specific techniques for dealing with deadlock situations? Do you know how to improve the chances of getting the lender to get loan documents to title on time? Do you know how to use emotions to influence negotiation outcomes?

Let’s look at a few influence techniques trained negotiators use to increase their odds of success.

The Principle of Self-Interest states “people are more likely to do something if they perceive it to be in their best interest.”  Your challenge is to show another party why it is in their best interest to do what you want them to do. Inherent in this principle is the understanding of what the other party believes to be in their best interest. You can find this out by asking the right questions of the other party to better understand their situation. Let’s look at the typical listing appointment. If you are the listing agent dealing with a Seller, you want to find out what the Seller’s needs and desires are before you launch into your listing presentation. By asking questions first you can then tailor your presentation to focus on and address the Seller’s real or perceived needs and desires. If the Seller is more interested in selling quickly, you may focus on how your marketing plan will expose their home to more potential Buyers, thus reducing the time to sell. If the Seller is against having a lock box on their house, you have to try to convince them that it is in their best interest to have one (e.g. to make it easier/convenient for Buyers to view their home.) What if the Seller wants to pay you a lower commission? First, you have to ask questions to understand why they want to pay you a lower fee (Do they think you aren’t worth that much? Do they have lower offers from other agents? Do they not have the money to pay you?) After you understand why they want to pay you a lower fee, if you don’t want to accept that lower fee you have to try to show them why it’s not in their best interest to pay you a lower fee. The focus here is always on the Seller’s needs, not your personal financial or economic situation (don’t say “I spend a lot of money on advertising so I need to charge a higher fee to pay for that advertising.”  Do say “The extra advertising and marketing we do helps us average a 2% higher sales price for you in half the normal time.” ). Skilled negotiators know that following this principle is key to ultimately satisfying the other party.

Another very effective persuasion principle is the Principle of Reason or Sound Logic. This principle states that “people are more inclined to do what you ask if you give them a valid reason .” Additionally, if you can use a credible third party reference or some acceptable standard of proof (e.g. social standard, industry standard, organization standard, etc.) you increase your odds of success dramatically. Using this principle to help justify your service fee, you might say to the Seller “Mr. Seller I have a track record of selling homes for a higher price and in a shorter time period than my competition. Here’s the data.”  (You should always be able to back up your claims whatever they might be!) As for the third party reference or standard of social proof, you might say something like “Ms. Seller, here is a Top Performer Award from my company and testimonials from past clients. You can see from these that I get top results for my clients and I will get you the same top results.”  If your Seller wants to ask top dollar for his home, you need to be able to provide credible, rational data to persuade the Buyer. If on the other hand your Buyer wants to make a low offer, the more “reasons”  you have for the low offer the better the odds of preventing a negative reaction from the Seller (once negative emotion is brought into the negotiation, your task becomes much more difficult!).

You can also try the Scarcity or Uniqueness Principle to convince your Seller or Buyer that you are unique and special and worth every penny you are asking. “Ms. Seller, I am in the top 5% of all agents in my company because I get top results for my clients!”  or “Mr. Buyer, less than 10% of all agents nationally have this designation and that means I am uniquely qualified to help you.”  If you can position yourself as special in some meaningful way (having the most tattoos of any agent in the Valley probably won’t do it!) you increase your odds of successfully influencing the other party.

Skilled negotiators also rely on the proven approach known as the Contrast Principle. In this approach you try to make what you are asking for appear very reasonable versus something else. For example you might say “Here are the 397 things I will do for you for the fee I charge.”  Then you pull out your long list of services to show what great value your client is receiving for your fee. Or you might say “I know you can get a lower fee elsewhere but what have you really saved if you get a 1% lower fee and a $20,000 lower price for your home because the other agent isn’t a trained negotiator?”  Your challenge here is to make the contrast credible. Here’s a non-real estate example. A teenager rings your doorbell and when you answer he says “Would you like to buy a $100 raffle ticket for a new car?” Most of us would say “No thank you.”  Then the teenager says “Well then, would you like to buy 5 $1 candy bars to help raise money for my charity?” It’s a proven fact that you are more likely to say yes to this $5 request after having said no to the $100 request because the $5 request seems more reasonable than the initial $100 request. Makes sense doesn’t it?

What happens if, after you use all your persuasiveness, the other party still wants you to do something different? If you know how to make and take concessions in your negotiations, you know that you never give without taking. For example, if you are asked to take a lower listing fee, it may be the perfect time to ask for a performance bonus in return!

As a well trained and skilled negotiator you will be able to do a much better job for your clients AND yourself!

In real estate, an agent negotiates all the time. You negotiate with your clients (e.g. retainer fee, length of agreement, service fee, bonuses, etc.), with other agents (e.g. referral fees and co-brokes), with third parties (home inspectors, appraisers, title companies, etc.), and most importantly, for your clients (e.g. price, allowances, contingencies, timing, personal property included/excluded, earnest deposit, payment of financing/closing costs, deadlines, etc.). Then when you become more successful you can even negotiate with your broker (e.g. commission splits, monthly fees, advertising costs, etc.)!

You have all these daily opportunities to practice your negotiation techniques and to hone your skills. Over time, you might get pretty good (of course training speeds the process and ensures you do the right things so you do get better!). But how do you really know how good you are at negotiating? How can you tell if you’ve agreed to less than what you should have? How do you know if you got more than the average negotiator? How do you know if you left money on the table or did so well you should get a bonus?

Here are some ways to tell how well you’ve done after a negotiation is over:

1. If you are the listing agent, call the buyer’s agent and ask casually “Would the buyer have paid more if we had negotiated harder?” If the buyer’s agent starts choking from laughing so hard, that’s probably a good indication you left money on the table.

2. If you receive 3 fake $10,000 bills in the mail from the other agent with a note saying “you left this at the closing table” then you probably could have done better.

3. If you have a “commissionectomy” performed (i.e. you sacrifice part of your commission to get the deal closed or to keep a client happy) prior to closing, you most likely could have done better.

4. If your client fails to give you their new phone number and returns your mail, you probably could have done better.

One way to know how well you did in a negotiation is to hire an impartial third party observer (who happens to be an expert negotiator!) who observes the entire negotiation and then gives you feedback on what you did well and how you can improve. Not very practical and probably a good way to eat up all your profits.

In the absence of an independent observer we are most often left to self-evaluate our own performance. This is very tricky to say the least! If you believe you are a good negotiator you will likely recall only the parts of the negotiation that prove what you believe to be true (known as confirmation bias). And as human beings we have a natural tendency to want to view our own experiences as fulfilling or flattering. So it’s not surprising that when we self-evaluate, we conclude we are better at something than maybe we really are.

But if that’s our only choice, then we need to prepare ourselves as best we can. Perhaps the best way to prepare ourselves to self-evaluate our own performance is to take training that will not only allow us to make a better determination of how well we did in the negotiation, but also enable us to do a better job for our clients (and ourselves). For example, if you have been taught how to explore the limits and boundaries of the other party, you will be better at determining how close you came to that limit or boundary. With professional negotiation training, you will be able to establish the other party’s upper or lower limits. You will know how to ask questions of the other side to zero in on what’s really important to them. If you are working with another collaborative agent (and you hopefully will be!) the two of you can explore potential options that will meet the needs of both parties. That doesn’t necessarily mean a 50/50 split. Power in a negotiation is seldom even. One party will normally get more of what they want than the other party. But in a successful negotiation both parties get enough of what they need and want to reach agreement.

Ask yourself this question: If I had to hire an agent to help me buy or sell my most expensive financial asset, wouldn’t I want (expect!) them to be a professionally trained negotiator? Your answer should be “absolutely!” And answer this question: Who does the negotiating in a real estate transaction? Answer: the agents! The clients set the terms and goals, but the agents are the actual participants in the verbal exchanges designed to influence and persuade. How do you know if you are using THE most effective influence techniques?

If you have never taken professional negotiation training you simply don’t know what you are missing. You basically have 2 choices: 1) continue along without taking any professional training and hope you are doing it right, or 2) take professional negotiation training and find out for sure. Which choice to you think your clients want you to make?

Negotiation is one of the primary skills in real estate. Think about all the different people you negotiate with frequently: other agents (referral fees, co-brokes, Rainmaker splits, contract terms on behalf of your client, etc.), your clients (commission rates, inspection items, staging issues, open houses, offer or listing terms, etc.), your broker (commission splits, desk fees, telephone charges, copy fees, advertising, etc.), and with other parties involved in the real estate transaction (lenders, title companies, inspection companies, appraisers, etc.). How effective you are at influencing or persuading other people determines your level of success in real estate.

How good are you at negotiating or persuading others? Do you know the characteristics of successful negotiators? Can you ask questions different ways to get important information? Are you a trained negotiator who knows how to use persuasion principles and negotiation tactics skillfully to find a win-win solution? Can you deal effectively with highly competitive negotiators? Can you use proven persuasion techniques to increase your odds of success, or do you go by instinct and HOPE you will be successful? Do you use a planning tool to ensure success? Can you negotiate performance bonuses for your clients and yourself? Do you have specific techniques for dealing with deadlock situations? Do you know how to improve the chances of getting the lender to get loan documents to title on time? Do you know how to use emotions to influence negotiation outcomes?

Persuasion principles don’t guarantee success but they significantly improve your odds of getting the other party to accept your proposal. Let’s look at a few persuasion techniques trained negotiators use to convince the other party.

The Principle of Self-Interest states “people are more likely to do something if they perceive it to be in their best interest.” Your challenge is to show another party why it is in their best interest to do what you want them to do. Inherent in this principle is the understanding of what the other party believes to be in their best interest. You can find this out by asking the right questions of the other party to better understand their situation. Let’s look at the typical listing appointment. If you are the listing agent dealing with a Seller, you want to find out what the Seller’s needs and desires are before you launch into your listing presentation. By asking questions first you can then tailor your presentation to focus on and address the Seller’s real or perceived needs and desires. If the Seller is more interested in selling quickly, you may focus on how your marketing plan will expose their home to more potential Buyers, thus reducing the time to sell. If the Seller is against having a lock box on their house, you have to try to convince them that it is in their best interest to have one (e.g. to make it easier/convenient for Buyers to view their home.) What if the Seller wants to pay you a lower commission? First, you have to ask questions to understand why they want to pay you a lower fee (Do they think you aren’t worth that much? Do they have lower offers from other agents? Do they not have the money to pay you?) After you understand why they want to pay you a lower fee, if you don’t want to accept that lower fee you have to try to show them why it’s not in their best interest to pay you a lower fee. The focus here is always on the Seller’s needs, not your personal financial or economic situation (don’t say “I spend a lot of money on advertising so I need to charge a higher fee to pay for that advertising.” Do say “The extra advertising and marketing we do helps us average a 2% higher sales price for you in half the normal time” ). Skilled negotiators know that following this principle is key to ultimately satisfying the other party.

Another very effective persuasion principle is the Principle of Reason or Sound Logic. This principle states that “people are more inclined to do what you ask if you give them a valid reason .” Additionally, if you can use a credible third party reference or some acceptable standard of proof (e.g. social standard, industry standard, organization standard, etc.) you increase your odds of success dramatically. Using this principle to help justify your service fee, you might say to the Seller “Mr. Seller I have a track record of selling homes for a higher price and in a shorter time period than my competition. Here’s the data.” (You should always be able to back up your claims whatever they might be!) As for the third party reference or standard of social proof, you might say something like “Ms. Seller, here is a Top Performer Award from my company and testimonials from past clients. You can see from these that I get top results for my clients and I’ll get you the same top results.” If your Seller wants to ask top dollar for his home, you need to be able to provide credible, rational data to persuade the Buyer. If on the other hand your Buyer wants to make a low offer, the more “reasons” you have for the low offer the better the odds of preventing a negative reaction from the Seller (once negative emotion is brought into the negotiation, your task becomes much more difficult!).

You can also try the Scarcity or Uniqueness Principle to convince your Seller or Buyer that you are unique and special and worth every penny you are asking. “Ms. Seller, I am in the top 5% of all agents in my company because I get top results for my clients!” or “Mr. Buyer, less than 10% of all agents nationally have this designation and that means I am uniquely qualified to help you.” If you can position yourself as special in some meaningful way (having the most tattoos of any agent in the Valley probably won’t do it!) you increase your odds of successfully influencing the other party.

Skilled negotiators also rely on the proven approach known as the Contrast Principle. In this approach you try to make what you are asking for appear very reasonable versus another option. For example you might say “Here are the 397 things I will do for you for the fee I charge.” Then you pull out your long list of services to show what great value your client is receiving for your fee. Or you might say “I know you can get a lower fee elsewhere but what have you really saved if you get a 1% lower fee and a $20,000 lower price for your home because the other agent isn’t a trained negotiator?” Your challenge here is to make the contrast credible. Here is a non-real estate example. A teenager rings your doorbell and when you answer he says “Would you like to buy a $100 raffle ticket for a new car?” Most of us would say “No thank you.” Then the teenager says “Well then, would you like to buy 5 $1 candy bars to help raise money for my charity?” It’s a proven fact that you are more likely to say yes to this $5 request after having said no to the $100 request because the $5 request seems more reasonable than the initial $100 request. Makes sense doesn’t it?

What happens if, after you use all your persuasiveness, the other party still wants you to do something different? If you know how to make and take concessions in your negotiations, you know that you never give without taking. For example, if you are asked to take a lower listing fee, it may be the perfect time to ask for a performance bonus in return!

As a well trained and skilled negotiator you will be able to do a much better job for your clients AND yourself!