Strong negotiating skills have always been a prerequisite to a successful real estate career, but this year they’re truly make or break. Sellers, more discerning than ever, are prioritizing agents that can fight for and close on above-market deals. Buyers, worried about record-low housing inventory, are seeking representation from those who can help them avoid a protracted bidding war, waiving an inspection, or other drastic concessions.
As such, any agent without the tenacity to negotiate on behalf of their clients will find themselves at a significant disadvantage in securing new business. However, those who go above and beyond and earn a reputation for upholding their fiduciary duty are likely to see a boost in positive reviews, organic search rankings, referrals, and advertising efficacy.
Here’s how to make sure you’re the hard-nosed go-getter today’s clients want.
When Representing Buyers
Negotiate from market value, not asking price
With demand as it is, any sellers’ agent worth his or her salt will jack up a property’s asking price in an attempt to squeeze every last dollar they can out of a listing. Why wouldn’t they? It’s a sellers’ market; they have a degree of control they haven’t had in decades.
But while they’re certainly entitled to ask for whatever they want, that doesn’t mean it should be the default starting point for negotiations.
When bringing an offer to the table, start with what you believe to be fair market value. Don’t lowball; you’ll likely be wasting your time and undermining your client’s credibility as a buyer. Instead, frame your negotiation as an earnest attempt to strike a fair deal for both parties. With any luck, you’ll push the seller to accept an offer (rather than gamble for a better one on the open market) or make a fair counteroffer so as to not turn your client, a serious buyer, away.
Your client might end up paying more than market value, but chances are it will be considerably less than if you began your negotiations at an inflated asking price.
Include an escalation clause
If a bidding war is inevitable, give your buyer an opportunity to win out by including an escalation clause in your offer. Tell the sellers’ agent your client is willing to beat any written offer by X amount up to Y amount. So, for example, the clause could read: Client is willing to pay $10,000 higher than any written offer, not to exceed $700,000.
Try to have your buyers meet the sellers
Admittedly, the pandemic has made this strategy a bit more difficult than in previous years. However, we advise you to make every attempt to arrange a digital or socially distant meeting between your buyers and the sellers.
Why? It’s human nature. If a seller doesn’t meet any potential buyers, then all they have to go on is the offers themselves, which means inevitably they’ll select the highest bid. But when a seller does meet buyers and can put a face to an offer, they’re likely to make a decision that is not entirely based on dollars and cents. After all, who wouldn’t want to help out the nice young couple looking to buy a home before starting a family?
Use Homesnap to know who you’re up against
Other third-party real estate marketplaces obscure listing agents. Homesnap, on the other hand, allows agents to look at the professional profile of any listing agent.
Simply navigate to a listing within Homesnap, click on the agent’s photograph, and you’ll see a rundown of the agent’s contact information (phone number, email address, business address) and listing history. Use this information to your advantage in preparing for negotiations.
Has the agent closed on many above-market deals? Well, now you know you might be in for a bit of a fight and should prep your buyers about escalation clauses. Have the agent’s listings lingered on market longer than expected? Maybe, then, an aggressive and fair offer can help you scoop up the property faster. Any little piece of information helps.
When Representing Sellers
Always say no at least once
The current market means you’re in control. While your client may receive an initial offer that is more than satisfactory to them, advise them to reject it.
Buyers in this market expect to enter into prolonged negotiations and to increase their initial offer. It’s a consequence of such limited inventory. Any first bid is likely an attempt to get the conversation started. Hold firm and counter aggressively.
Start a bidding war
Following a few days of advertising your available listing (and hopefully after promoting it as a Coming Soon), schedule an open house and refuse to listen to offers until after the in-person showing takes place. With such drummed-up excitement, buyers will expect to face some competition. You’ll likely receive more aggressive offers, which you can then play off one another.
Put an expiration date on any counteroffers
The market is moving fast and the potential for any number of offers is great. When a counteroffer is outstanding, a sellers’ home is effectively off the market, preventing them from receiving additional offers. That can be a big disadvantage in this market.
So let a buyer know your seller is looking to close quickly. Place a deadline on any counteroffer. The deadline shouldn’t be overly aggressive and risk turning off the buyer, but it should also convey that you have other options available.
A ticking clock can go a long way in securing a deal.