By Marylyn B. Schwartz, CSP
RISMEDIA, October 2008-Whether the task at hand is achieving the release of hostages, getting a fugitive to surrender or ensuring that the buyer has the best chance of getting all the appliances included with the transaction, Roger Dawson (rdawson.com,) international negotiating expert and author of the indispensable guide for would-be negotiators, Power Negotiating, is the preeminent expert.
The limited national buyer pool is hampered by tougher mortgage qualification requirements and economic challenges in selling a current home in order to purchase another. The agents representing these buyers can ill afford to lose even one sale. On the other side of the coin, when bringing a home to market, the goal is not listing it but selling it in a reasonable amount of time. These buying and selling realities take skill, stick-to-itiveness, knowledge and negotiating ability on the part of the sales professional to effectively navigate the pitfalls. In this interview, Dawson offers some key advice for the novice as well as the pro.
Marylyn B. Schwartz: Lots of circumstances within the industry are going in the right direction, but there is much room for improvement and work to be done. What mistakes are agents making when discussing market conditions with potential purchasers/sellers?
Roger Dawson: Agents should never assume that the primary reason a purchaser purchases is downstream profitability. Making a good investment matters. However, people buy a place that they want to make their home. If the agent believes that getting the buyer a “bargain” is his/her primary objective, then that thinking sets the tone, consciously or not, for upcoming negotiations. The agent must consider every aspect of his/her buyer’s decision. These aspects are often more important than money. They include social status, schools, commuting, religious beliefs, etc.
MBS: What I hear you saying is that there are kinds of currency other than money. What motivates one person will not necessarily motivate another.
RD: That’s exactly right. Of course, if the client you are working with is an investor, different motivations are in play. Investors are concerned with net operating income. Investors make unemotional purchases. Your “family” buyer needs his/her agent to ask the right questions that unearths his/her/the family’s core needs. The investor makes “cerebral” decisions while the family buyer has issues closer to the heart. With the non-investor the agent must learn to paint a compelling picture of the lifestyle the buyer hopes to achieve.
MBS: There is one common complaint that comes up no matter where in the country the agent is doing business. Buyers seem to have the impression that no matter what the list price might be, they are going to make a much lower initial offer. Preparing buyers for realistic negotiations is tough. In reality, there is little that buyers today cannot find out on their own. What they need us for is our ability to negotiate an acceptable transaction for them and make it happen within their timeframe. How would you advise agents to ensure these objectives are achieved?
RD: It goes back to understanding the needs of your client. It is impossible to move a person toward a final resolution if you are not on the same wave length as they are. There are a few things that agents should never do when negotiating. For example, saying, “Yes” to the initial offer. If the agent is representing the seller, even if the initial offer is a good one, it is unwise to jump to acceptance. Take some time to respond, negotiate smaller items, move the offer price slightly, etc. The idea is to let the offering party sense that they were part of a win-win negotiation rather than having ended up paying too much. No matter how on-track the offer and list price may be, whenever an acceptance happens very quickly, it leaves the offering party thinking they could have done better.
Warren Christopher, President Clinton’s Secretary of State, said, “It’s okay to get upset when you’re dealing with people as long as you’re in control and doing it as a specific negotiation technique.” There is a time to move in the other party’s direction and a time to hang tough. Knowing when each is appropriate is tantamount to achieving the desired outcome.
MBS: That begs a follow-up question. When you are representing the seller and the property receives a good offer quickly, it inevitably leaves the seller thinking that it was listed too low. In reality, it is more likely that the agent did his/her due diligence and got it right. How would you prepare a seller for the possibility of a quick sale?
RD: Ask the seller, “You are serious about selling, aren’t you?” Let them know that you earn your pay by bringing them a ready, willing and able buyer and then negotiating with that buyer for an acceptable outcome. The agent’s job is to market to the real estate community. Those agents have buyers ready to act and make a quick decision. The key is to market correctly in order to find that ready-to-go buyer before someone else does. There can be nothing to gain by missing an opportunity no matter how soon it arises.”
MBS: What are the “musts” of skilled negotiators?
RD: Always ask for more than you expect to get. Henry Kissinger, President Nixon’s Secretary of State, said, “Effectiveness at the bargaining table depends on your ability to out-state your initial demands.” Being able to maintain an environment where the other party feels they are not being taken advantage of or duped is crucial. Power negotiating is win-win negotiating. In a sense, one would strive to be an egotistical negotiator. That is to say, one who is proud of his/her ability to negotiate and in the end have both parties willing to do business with the other again. Remember, negotiating can be and often times should be an emotionally charged process. When an offer is made that is not acceptable, the receiver of that offer must know how to “flinch.” Showing shock and surprise is effective in the right doses. We are a visual society. Think 9/11 or Katrina… If one is always passive during the process, there is little room for creating concern or fear that the negotiation will fall apart.
MBS: As I listen to you talk about this, it is apparent that we undoubtedly have, on occasion, done the wrong thing when negotiating. It seems that there are important “power plays” that must be brought forth at the correct times; neglecting to do so changes the balance of control quickly.
RD: Power comes from having alternatives. The number-one, most effective pressure point comes from being able to convince the other side that you are prepared to walk away. This is developed by creating alternatives before you start negotiating. For example, at the time they make an offer, the buyer’s agent might tell the seller’s agent that the buyer was pleased to find this home and two others that they like almost as well. While this home has the most favorable amenities, the others were very close seconds. This will leave the seller’s agent feeling concern and perhaps set the stage for a non-combative negotiation. Using the walk-away gambit effectively is what separates a skilled negotiator from one who is not.
MBS: When is the right time to start negotiating?
RD: We are always negotiating. From the moment we begin working with our clients we should be posturing and preparing for the offer stage. Determining the list price, marketing fee, term of agreement, etc. are all negotiations. These are good places to hone skills. When we educate our buyers and sellers, we are doing the best leg work for the offer process.
MBS: Is there a definitive time to walk away from a negotiation?
RD: Taking an overpriced property would be one place to draw the line. Doing so lowers the agent’s standards. We must always maintain a consistent set of values while conducting business. Look at how the public views flip-flopping politicians…not favorably. We are drawn to individuals who are flexible when it is appropriate, yet stand strong and demonstrate integrity when necessary. Set high standards; live within them.
MBS: Great advice for life in general, Roger. We could have gone on much longer, as negotiating is such a hot topic for agents today. It is the cornerstone of bringing a property to close. You have many great articles on your website, and anyone who wants to pick up where we left off will find a wealth of knowledge there. Thank you for sharing your wisdom.
Marylyn B. Schwartz, CSP, is an expert in real estate and corporate sales training/management and team development. She is president of Teamweavers and a trainer for Leader’s Choice.