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Persuade with CLASS

“I will only pay you a 5% commission” the seller said emphatically.

Now what was that technique I just learned?  Oh yeah – persuade with CLASS!

C larify

L ikeable

A cknowledge

S elf-Interest

S olution

“Ms. Seller, I’m curious – how did you arrive at 5%?”  Even though I felt defensive and mildly upset, I said this in a comfortable conversational tone.  I needed to clarify the real reason so I could deal with it head on.

“Well” said the seller, “I have interviewed 2 other agents and they said they would only charge me a 5% commission.  Why should I pay you more?”

So now I knew the real reason.  My competition was undercutting me.  To be more effective in persuading the seller to pay me a higher fee, I knew I had to get the seller to like me or at least to want to do business more with me than my competitors.  I remember from my professional negotiation training that to be likeable, I had to smile, be polite and respectful, be authentic, and be there in the moment with my client (not someplace else mentally).  It would also help if I could find something that we had in common and if I remained cooperative vs getting competitive.  So I said:

“I see.  I can understand that.  If I were in your shoes I would probably feel the exact same way.”  I also remembered that it is important to acknowledge the other side’s position when they are being reasonable (if they are being unreasonable I have to focus on the issue and not attack the person).  People want to be validated and acknowledging their position is also a cooperative vs. competitive approach.

I said “Could I ask you a question?”  She nodded positively.  “Do you agree that your primary focus should be on what you walk away with at the closing table?”  She said “Yes.”  And that was good because many sellers first focus on the selling price instead of the bottom line net profit.  Now she was focused on her true self-interest.

“When evaluating which agent can help you get the most at the closing table, you need to focus on three skills in your agent: 1) negotiating skills since your agent does the actual influencing and persuading of the other side on your behalf, 2) marketing skills since your agent must be able to get your home seen by all the buyers interested in a home like yours, and 3) market analysis skills since your agent needs to understand the market data to help get you the most at the closing table.”  This was my attempt at ensuring the seller clearly understand her own self-interests in evaluating which agent to hire.

“OK.  I see what you mean.” I could see the light bulb go off in my seller’s head!  Now I needed to show her I had the best qualifications and solution for her situation.

“As you can see I am the only agent you are considering who has professional negotiation training as evidenced by my CNE or Certified Negotiation Expert designation.  If you will allow me, I would like to show you my expertise in these 3 important skill areas and how my expertise has helped other sellers like you.”  Now I was prepared to offer her my “solution” to her problem.

When she smiled back and said “Yes.  Please do!” I knew I was hired!

 

For more persuasion and negotiation knowledge, please visit the Real Estate Negotiation Institute at www.thereni.com.

Identifying Value in a Negotiation

All negotiations involve multiple “value” elements.  The key to success is to first identify the value elements on each side and then “trade” value elements to reach agreement.

Easier said than done!  Why?  Because most negotiators don’t spend enough time identifying and truly understanding the value elements.  The trading part is easy!

A home buyer and seller were negotiating and after lowering the price somewhat, the seller finally said “I won’t go any lower.”  The buyer asked his agent to find out why the seller wouldn’t go any lower.  After several conversations with the listing agent, the reason was uncovered.  The seller wouldn’t go any lower because he wanted “bragging rights” for his neighborhood – meaning he wanted to be able to say he had sold at the highest price to date in his neighborhood!

This “value” element was very important to the seller.  In a negotiation, you can trade or exchange items of equal value.  Understanding how valuable something is becomes a key objective of the skilled negotiator so that equal value can be obtained in the exchange.  If the seller truly values his bragging rights (while still being realistic about the true value of the property), then the buyer should ask for something of “equal” value from the seller.  For example “My buyer will pay your seller’s price if your seller agrees to a 15 day close.”

You have probably heard that the best time to buy a car is at the end of the month.  This is usually because the car salesperson and/or dealer is trying to reach a goal or quota that carries some type of bonus from the manufacturer.  Car dealers may even “lose” money on an individual sale because the bonus will more than cover the loss.  So if your purchase happens to be key to achieving the bonus, you can negotiate really good terms for yourself!

So how can you identify the other side’s value elements in a negotiation?  Try these 3 approaches:

1)    Ask!  But first, tell them in general what is important to your side.  Role modeling the behavior you want from the other side increases the odds that you will get the same behavior in return.  As a buyer’s agent you might say to the listing agent “From my buyer’s perspective, price, closing costs support, and personal property (refrigerator, washer, and dryer) are very important in this deal.  What is most important to your seller?”  If the listing agent shares something like “Well, for my seller, price, closing date, and your buyer’s qualifications are key”, then you have a dialogue started where you can continue to exchange information and ask questions to determine the key elements of value.

2)    What if the other side won’t give you any information?  Suppose the listing agent simply says “Just submit your offer and we’ll respond based on that.”  Then you might try the “self-interest” approach.  The buyer’s agent could say something like “My buyer would like to submit the very best offer to your seller.  The more specific you can be about what is really important to your seller, the better the chances of my buyer meeting your seller’s needs.”  In essence, you are trying to educate the other side about why it is in their self-interest to share important information – it increases the odds of getting what you want!

3)    “Either/Or” Approach – If the other side still won’t open up, try asking simple “either/or” questions to get an indication of what is important.  “Would your seller prefer a quicker or longer closing date?”  “Would your seller prefer a clean offer or would they entertain an offer with closing cost support for the buyer?”  “Would your seller prefer to pay the buyer to do any necessary repairs or does your seller want to handle the repairs on their own?”  By narrowing the choices you give the other side, you can focus in on the true value elements.

Sharing your value elements and understanding the other side’s value elements helps establish the basis for a win-win outcome.

Negotiation Tactics/Approaches NOT (Typically!) Used by Skilled Negotiators

Negotiation Tactics/Approaches NOT (Typically!) Used by Skilled Negotiators

  • “I won’t let my client agree to that.” (Who is the real decision maker?)
  • “Because.” (No Logic or Rationale. Giving good reasons increases your chances of persuading effectively.)
  • “I don’t care about your client.” (Skilled negotiators know they have to adequately satisfy the other side to reach agreement.)
  • Sloppy Offers/Counteroffers (as in incomplete documents which creates doubt on the other side)
  • Communicating Only or Poorly in Writing (Written negotiations get the poorest results and the most threats/ultimatums.)
  • Ignoring Connections/Similarities (People like to do business with people they like and something you have in common may be THE factor to close the deal.)
  • Not Making Concessions Properly (Name your concession and take something of equal value in exchange.)
  • Not Building Trust (Building trust leads to more information being shared.)
  • Not Exploring Options/Alternatives (Identifying options that work for both sides is the art of negotiation!)
  • Low Ball/High Ball Offers (You risk insulting the other side and bringing negative emotions into the negotiations.)
  • Not Respecting Cultural Differences (Shows lack of understanding and respect)
  • Not Respecting Generational Differences (Shows lack of understanding and respect)
  • Not Being Flexible (Often leads to deadlock or no deal)
  • Letting Price Override Other Issues (Focus on Value not price or cost)
  • Not Knowing/Using BATNA (BATNA defines walkaway power – Know it!)
  • Intimidation Tactics (Competitive tactics that destroy collaboration)
    • Silence
      • Not Responding or Stonewalling
    • Staring
      • Threats/Ultimatums
    • Bullying
      • “How long have you been in the business?”
      • “How dare you!”
      • Rudeness/Offensiveness/Insults
  • Not Trying to Build a Relationship (Shows disrespect and arrogance)
  • Not Caring about Your Reputation (Could truly hurt your business and results)
  • Not Using Proven Persuasion Principles (decreased the odds of success)

What an AWESOME Feeling!

Breakthrough!Getting a call from someone in your sphere of influence about a listing opportunity really gets the adrenaline pumping! An alumni from Bill’s college (he had graduated 22 years earlier than Bill) had called saying he was interviewing agents to list his house. The seller had agents booked at 10 AM and 11 AM this coming Saturday, and had asked Bill if he wanted a 9 AM or a 12 noon appointment?

Bill remembered the instructor in his last negotiation training class had discussed this situation. The instructor had said if he thought there was a reasonable chance he could talk the seller out of interviewing the other agents and hiring him right away, he would go first in the interview process. If however, he thought the seller would follow his process and conduct all the interviews, he would go last so that he could ask the seller what the other agents had offered and be in a position to offer something more competitive if he wanted to. Bill thought the latter choice made sense in this situation so he called the seller back and selected the 12 noon booking.

Bill had a first-class listing presentation put together from many different resources. It included comps with color charts and graphs, examples of past listings, past client testimonials, cross-agent testimonials (this was another pearl from the negotiation class he attended), an interview form to help find out what was really important to the seller (also from the negotiation class), and a Listing Agent Negotiation Workbook Bill had purchased from the negotiation training company. Most importantly, Bill had included NAR information about where buyers look for homes which was linked to his marketing plan to show the seller he could find the buyers who were looking for a home like the seller’s.

Bill showed up at 12 noon and after a tour and some small talk (which included some discussion about their alma mater to build a connection with the seller that other agents did not have), Bill launched into his interview with the seller. The interview was designed to find out many things about the seller, including his motivation, his past experience with agents, what he expected from his new agent, and more. Bill already knew from his research that the seller had been on the market for 18 months with two other agents and in his judgment the house should have been sold already. Inside he was angry that the seller had received such poor service from the other agents. Bill was a professional who took pride in his industry.

After the 15 minute interview, Bill could now focus on what the seller had told him during the interview. The seller had just been through 18 months of increasing stress and frustration with two other agents. But Bill showed the seller he was different right off the bat by interviewing and really listening to the seller. The “spotlight” started on the seller and stayed on the seller during the entire process (another negotiation technique he learned in the class). Bill also had some impressive tools the other agents did not have. His comparative analysis of the seller’s home was more thorough and professionally presented. His section on what resources the buyers use to identify homes to look at was something the seller had not seen before. And then Bill’s comprehensive marketing plan hit all the resources except TV and radio advertising. Bill could tell the seller was impressed. When Bill showed his seller the Listing Agent Negotiation Workbook Bill knew he had closed the deal! What an awesome feeling!

When Bill received his commission check of $9000 for the sale of this home, he calculated that he had achieved a return equal to 30 times his investment in the negotiation training class he took just a few weeks before. Now that was a smart investment! And he was sure there would be many more closings!

Take your career to the next level with professional negotiation training!

Using the Flinch Negotiation Tactic

In professional real estate negotiation, the flinch negotiation tactic is a physical reaction to communicate shock, dismay or disbelief at what you just heard. Sometimes it is involuntary; your mouth falls open. But often this negotiation technique is more about communicating a message of exasperation.

The flinch negotiation tactic can be fun, with a wide array of responses from involuntary to comical. Besides the mouth falling open various widths, there can also be a closed mouth grimace, bug eye or squint eye, or head flinch. There is even a full body flinch where you might fall on the floor.

Since the flinch negotiation tactic is a physical response, it does not work well in written or email communication. It can sometimes be accomplished over the phone. For example, you might pound the phone on the desk or the wall, then pick it back up and say, “I am sorry … I was so surprised that I dropped the phone.”

When the flinch negotiation tactic is used towards you, the best counter is to be ready to have some fun! Flinch back. Dramatically. Declare a flinching contest to see who can flinch the best. State the obvious, “Oh, I see that you are working on your flinch. Keep working on it!” Hopefully laughter can diffuse the moment of shocked response and allow you to get back on track presenting the facts that support your position.

Some professional negotiators are just waiting for you to flinch so that they can have some fun at your expense. With that in mind, be cautious if you employ the flinch negotiation tactic. You might just find yourself feeling silly.

If you are on the receiving side of the flinch negotiation tactic, bear in mind that embarrassing the opposing negotiator is likely to invoke a hostile response. It might be laughed off now, but beware of a simmering resentment that could crop up at an inopportune time.

The Personal Obligation Negotiation Tactic

The personal obligation negotiation tactic can be a persuasive tool in professional real estate negotiations.  When used correctly, it has the effect of making the opposing party feel as though they “owe” you something.

Most people feel an innate sense of obligation to return a favor or kindness that was done for them.  In real estate negotiations this can work in your favor.  If you have made a concession on one item, it can help create a pressure on the other side of the table to give a concession in return.  To emphasize the obligation, state something similar to, “I have worked really hard on your behalf to get the other side to agree on this, so the least you could do is go and work very hard with your side.”

If the opposing party is not reciprocating a personal obligation, then a more direct approach can be employed.  “You told me your client wanted X and I got it after long, hard work.  Now you need to get your client to agree to Y.”  This type of statement more clearly defines the expectation of give and take in the negotiation.

When you are faced with the personal obligation negotiation tactic from the other side, the most effective counter is to bring attention to the fact that this negotiation is business, not personal, and therefore no reciprocal obligation is warranted.  “Let’s take the emotion out of this and focus on business.  It was right that your client agreed to X, so it should not have been that hard.”

The personal obligation negotiation tactic can be an effective means of gaining a concession, but it does mean that you will have to concede a point first.  Since the basis of this negotiation technique is about balance, take care to choose your own concession with a value that appears balanced to what you are seeking.

The Ask Why Negotiation Tactic

In professional real estate negotiations, the ask why negotiation tactic is the bedrock of good negotiation skills. It helps identify areas of real issue, puts the spotlight on the specific problem, and lets both sides work towards a resolution. It can be – perhaps should be – used in almost all negotiation settings. Most successful negotiations have less to do with how vehemently you argue than with how well you prepare beforehand. Asking why will allow you to use your facts and preparation to head off unreasonable objections.

The ask why negotiation tactic identifies and helps resolve the true concern – because sometimes the true concern is not obvious. As an example, consider the seller that states, “I will not sell for less than $450,000.” When asked why he may reveal something like, “My brother says I would be a fool to sell for less.” So the issue is not really price, it is the embarrassment or ridicule that this seller might feel having to face his brother. By countering with facts, “Your brother might not have seen the latest statistics for sales in your area …,” you arm the seller to face the brother while you also move a long way towards countering the objection on price.

The best counter to the ask why negotiation tactic is to answer the question with a question. This can often deflect the attention to a different topic. For example, if you wish to pay only 5% commission to the other party, the ask why tactical response you expect is similar to, “Can you tell me why you feel strongly about that?” To this you might counter, “So you are saying that you will not take it at 5%?” This places the focus on the other party rather than on the percentage.

If the ask why technique goes back and forth too many times, it defeats its own purpose: to bring to light the real issues to be resolved. The solution to that is to … yes … ask why.

The Recess / Walk-Out Negotiation Tactic

In professional real estate negotiations, the recess or walk out negotiation tactic is a threat to break off the negotiations and imply an end to all discussions. When the walk-out negotiation tactic is employed, one party leaves the room in protest of the terms or concessions being discussed. The insinuation is that the point being debated is so off target, so offensive, that it will not be discussed now or ever. The party leaving hopes to be called back, thereby shifting the balance of power to their side of the table by forcing an abrupt, significant concession in order to keep the deal on the table.

The recess negotiation tactic is almost always a bluff, and can backfire on the party using it. This tactic signals a desperate attempt to gain leverage in the face of a stalled negotiation. If the opposition does not call them back, there is no feasible way to restart the negotiation without admitting the bluff and the balance of power immediately shifts to the other side of the table. You may try to return in a “Columbo” fashion, meaning, “Oh, by the way, there is just this one more thing ….” But often that attempt falls flat and you would have to give the abrupt, significant concession that you were hoping to gain from the other party.

Unless you have a good enough second alternative or truly do not care about losing the deal on the table, the walk-out negotiation tactic is just too costly. In the desperate attempt to gain power, you could end up losing more power than you could have gained.

The most effective counter to the walk-out negotiation tactic in real estate negotiation is to let them go. You could issue a minor threat as they walk out or try a “Columbo” yourself, but the emotions are often too piqued for that to be effective. Wait to see if the other party comes back, because if they do it will probably be on their knees. If you cannot afford to just let them go, then wait a day or so and make a phone call similar to, “A new idea has occurred to me ….” If a little time has passed, this new idea can be received without either side of the table losing face.

Using the Emotion Negotiation Tactic

Few situations are as frustrating as a professional real estate negotiation that is going around in circles with no end in sight. All reasonable attempts to move through the contract points are met with evasions or outright ignored. Your opponent may be stalling or using the back burner negotiation tactic for reasons that you cannot see. To stop the pointless waste of time, you might use anger to make the other party change their tactic. Anger as an emotion negotiation tactic has the power to get the attention of the other side of the table.

The emotion negotiation tactic can effectively counter other negotiation techniques, too, such as good cop / bad cop or artificial deadlines. Anger or other strong emotions can signal to the opposing side that you are tired of playing games, and that you expect to see some true progress right away. It will imply that you are very near to walking out completely if your client’s concerns are not addressed in short order.

The best counter when the emotion negotiation tactic is being used against you is to stop negotiations until no further displays of emotion are made. You might even call for a recess or simply walk out. Let the other agent know that you will not be continuing any negotiation until some emotional order has been restored.

If recessing or walking out is not practical, trying remaining silent. Silence is an effective negotiation technique, followed after several moments of pause with a statement such as, “If emotions are going to be out of control, then we will need to reschedule for a later date. My clients and I simply will not be treated disrespectfully.”

The emotion negotiation tactic can sometimes leave the other party too stunned to continue amicably. Use it sparingly, and only when necessary to abruptly change the direction of a real estate negotiation.

The Broken Record Negotiation Tactic

With so many details part of a professional real estate negotiation, it can sometimes be necessary to repeat a request for clarity or inclusion. You want to make sure that your client’s interests are accurately represented in the negotiation. But what if the opposing side of the table deliberately “forgets” to include your request or address your client’s concerns? With the broken record negotiation tactic you should continually repeat a request or condition for emphasis. Just like … well … a broken record.

By stating and restating the condition, you signal to the other party that you will not let this point fall through the cracks, that this negotiation point will not go away without being addressed directly. In difficult situations, you might even consider stalling negotiations on any other points until this one item is settled. Doing so will elevate this one item as the most important on your side of the table, and will make it the anchor point for all other negotiation concessions to be built around.

When the broken record negotiation tactic is being used against you and your clients, the fastest way to move past is to address the issue head on. Directly ask why the matter should have that much importance. Use the discussion to explore options for meeting that demand while still preserving balance in the negotiation.

For example, if the broken record point is about price, then try countering with the “all I can afford” negotiation technique. This leads easily into the speculative discussion where different outcomes and what-if scenarios can be explored casually until more common ground is reached.

Repeating the same request again and again can be a useful real estate negotiation technique. But to be truly effective, do not use this tactic too often. We all know that a true broken record gets annoying quickly, and annoyance will not support a well-rounded, professional negotiation environment where genuine consensus gets reached.

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