Are you asking the right questions in your Real Estate Negotiations?
As a real estate agent and a professional negotiator, I like to think of information as the most valuable currency in a real estate transaction. I trade the information that I already have for new information I can use. The information that I already have can’t make me any smarter, so like an old shirt I no longer wear, it costs me nothing to give it away. I like it even more when I can use the old information to gain new and valuable information. Most agents don’t make this connection.
In a society where information flows so freely, people often forget just how valuable information is! Even those that understand the value of good information can become confused as to which information is of value. We use our powers of discernment to determine which information we want to dismiss, and which information we use to guide our decisions.
- The value of information can change.
- Make sure you know what information is actually valuable for your clients.
- Negotiations are a calculated exchange.
Choosing the right strategy for your negotiation
The value of information can change dramatically based on an individual’s circumstances. For example, a teenager washing dishes with both taps wide open and spewing does not value water the same way they would if they were on a deserted island without access to fresh water.
If you’ve been around a while in business and negotiating, you have likely heard the old adage, “He who speaks first loses!”. In my experience, real estate agents LOVE to talk. If you were to ask them about the weather, they’re probably going to vomit up every issue they are having with their marriages, kids and clients. If you ask them something specific about a property, they are highly likely to give up the ghost entirely.
One of my favorite things to do at the outset of a negotiation is ask an open-ended question like, “Are there any issues with the property?” You wouldn’t believe the responses that question will incite. The correct response to that question is to guide the asking agent towards the Seller’s Property Disclosure and then stop speaking, but – that’s seldom what actually happens.
Negotiations are a strategic and calculated exchange of information. This makes the information itself the most valuable currency in real estate transactions. If you don’t have a strategy, then you’re not negotiating. The key word to remember here is exchange. You shouldn’t be giving information if you aren’t getting any in return. The idea is that you want to give away useless information in exchange for useful information.
Differentiating between useLESS information and useFUL information
So, how do we define useLESS information?
Useless information is any detail that cannot be used against your clients within the negotiation. UseFUL information is the opposite. The trick here? Knowing which is which. (Most agents have a hard time grasping this). Remember – you’re dealing with the most valuable currency in a real estate transaction here, so you want to make sure you have the most useful information. The best way to illustrate this is to give an example of how this plays out in real time.
In this scenario, we have the the sellers of a property and a buyers agent. The buyer’s agent will be asking all of the important the and valuable questions to help them get that critical piece of currency in the transaction.
This is how it should look:
Source: The Steve Laret Team, Vanguard Realty Alliance, LLC
Now, the next scenario is how it typically ends up looking. This is the same scenario but we’re switching roles and representing the buyers.
Source: The Steve Laret Team, Vanguard Realty Alliance, LLC
You may be reading this and thinking, “what’s the harm in giving me all that information?” Well, remember – information is currency. In fact, it’s the most valuable currency in a real estate transaction. I now know that the sellers need to settle on this in order to complete their purchase. This means that they don’t get what they want on the other side unless they come to terms with us. As a result, they’re coming into this highly motivated. This gives my clients far better leverage to craft an outcome that is disproportionately in their favor.
The sellers of the property that these clients are buying will also have a heightened motivation since their next home will be hanging in the balance. This means that everyone in this deal has a lot more riding on its success than my clients do. If things don’t work out the way my clients want them to, we can simply move on and buy another home without incurring any collateral damage. Everyone else involved isn’t losing just one deal, they are losing two.
Using information as leverage
Beyond the opposition’s heightened motivation, this information exchange also tells me that time will be an important factor in the deal. In other words, the sellers need to be able to meet their contractual obligations on the home they are purchasing and therefore, will have to move through things in a timely manner. If they’re unable to do so, they will not only need to renegotiate our timeline, but they will also need to ask the sellers of the home they’re buying to do this as well. This puts them in a precarious position.
Anytime that you’re “asking” for something in a negotiation, it’s an open door for the opposition to ask you for something in return. Remember what I said about information being an exchange? This can be money, time, possessions, you name it. They can ask for anything that they want in exchange for making the concession you are asking for. The best position you can put yourself in, in any negotiation is one where you do not need anything from the opposition. The moment that you start asking and needing, you’re at the mercy of the opposition in the negotiation.
The scenario above is but one of many in which agents believe they’re just giving away information in the spirit of cooperation and coordination. In reality, what they’re actually doing is completely eroding their clients’ leverage in the negotiation. Again, they don’t even realize that they’re doing this but it happens all the time.
Choosing an experienced negotiator is paramount in a real estate transaction. One who is capable of recognizing and capitalizing on these swings in leverage can earn you tens if not hundreds of thousands of dollars over the novice. We’ve got a great team of expert negotiators ready to use their information currency to your advantage. Schedule a free consultation with us here.