Real Estate Rules Can Lead to Lower Sale Prices (No One Wants That!)
The truth is that most homeowners undersell their houses by tens to hundreds of thousands of dollars because owners have no sales experience, don’t understand negotiation tactics or real estate contracts and options and this is why an experienced, informed, and certified real estate professional is needed.
The normal “rules” are designed with everyone but you in mind. Your professional Realtor® knows the ropes and demonstrates the confidence you want in a smart negotiation. Here are just a few things you should expect to see from a professional–things you may not have even considered.
A Real Estate Escalation Clause
A what? An escalation clause. An escalation clause is used in buyers’ offers for real estate to improve the buyer’s chances of succeeding against competitors’ offers. The clause automatically increases the purchase price the buyer is offering in order to beat competing offers without overpaying for the property.
This clause is sometimes included in real estate purchase agreements, particularly in situations where there is a lot of interest in the property. As the name suggests, it’s a clause that allows buyers the opportunity to escalate, or increase, their offer on the home in order to beat out the competition. Every time you make an offer on a home, you’re taking a gamble. If your offer piques the sellers’ interest, they might be willing to negotiate with you.
However, if the sellers feel that your offer is too low, or otherwise unrealistic, they might choose to simply not respond at all. You can rest easy knowing that sellers can’t just use an escalation clause as an excuse to make you pay a higher sale price. When the contract asks for “proof of a bona fide offer,” it means that the listing agent must be able to prove that another offer came in with a purchase price higher than your original suggestion.
Assess the type of negotiation & identify value-creating moves
Three guidelines are useful in value-creating negotiations. First, capitalize on differences. By making tradeoffs on their different preferences—a process known as logrolling—negotiators gain more of what they want by giving away something they care about less.
Second, Ask questions and share information. Negotiations often break down because the principals remain focused on their stated interests, such as a lengthy closing period. Your Realtor® should be able to break through such impasses by asking his or her counterpart lots of questions to identify those underlying interests.
And third, negotiate multiple issues simultaneously. Your Realtor® will ask the other party to agree that nothing is settled until everything is settled, a mindset that will encourage you to look for trade offs across your different preferences.
This last point leads directly into the next skill possessed by your Bay Area Realtor®.
Win/Win is a winning perspective from which to negotiate in real estate
Buying or selling a house is the most expensive financial transaction the majority of people will make in their lifetimes—so it makes sense that both parties want to come out the winner.
The win-win negotiation is an art form. In real estate, a win-win negotiation is a careful exploration of both your own position, and that of your opposite number, in order to find a mutually acceptable outcome that gives you both as much of what you want as possible.
If you both walk away happy with what you’ve gained from the deal, then that’s a win-win! Your Realtor® knows how to take issues and focus on solutions instead of turning everything into an adversarial crisis.
Real estate rudiments of persuasion
A fascinating article a few years ago in Forbes magazine lists 21 components of persuasion. (https://bit.ly/3j0HgPo ) For the purposes of this article, we will focus on just a few.
- Don’t waste your time with people who cannot be persuaded. There are plenty of people out there who can be.
- That said, persistence pays. The person who is willing to keep asking for what they want, and keeps demonstrating value, is ultimately the most persuasive.
- People tend to be inclined towards reciprocity if they feel they are getting something of similar value.
- Create scarcity. If you want somebody to want what you have, you have to make that object scarce, even if that object is yourself. Antiques, artworks, and trophy properties are all examples of scarcity persuading people to act.
- And if there were only one operative suggestion to make about the negotiating process, it would be that opportunity favors the prepared negotiator. Meticulous preparation allows for effective persuasion.
And speaking of persuasion . . .
A Bay Area professional Realtor® will have the data together before even walking into a negotiation. What kind of data? How long has the property been on the market? What is the average market time for homes like this one? What else is on the market? What is the cost per square foot? How does that jive with comparables? What are the taxes? What are the HOA fees?
the word No
Some people will tell you to avoid anything negative. They will tell you that buying and selling homes and that sentiment often plays a huge role in what is lurking in the shadows of a negotiation and of course there is tremendous value in that kind of insight. Other people will suggest avoiding direct answers such as “yes” or “no,” and recommend instead a series of alternatives. That too has its place. But in the final analysis, there are situations where the best option is to simply smile and walk away. Always smile.
BATNA – Best Alternative to a Negotiated Agreement
It is defined as the most advantageous alternative that a negotiating party can take if negotiations fail and an agreement. In other words, a party’s BATNA is what a party’s alternative is if negotiations are unsuccessful. List all possible options. Then rank those options. Establish a reservation point. That is the point in the process where you realize that your BATNA is better for you than the present status of the deal in process.
Meet the sellers in person!
You’re likable and the seller might be too. You won’t know unless you actually step up and say hello. You may find that the way the seller feels about you and your Realtor® goes a long way towards getting what you want out of a negotiation.
There are, as we said, lots of aspects to a successful real estate negotiation. Your Bay Area Realtor® will be an expert of all the ones mentioned here. . . and more.