Real Estate Round-Up: N is for negotiating
Last updated 6/2/2021 at 5:25pm
The real estate market is on fire! There are very few homes for sale, so negotiating the best terms for our clients is the single most important asset an experienced Realtor brings to the transaction. Negotiating exists at all levels of the transaction. The principals make all the final decisions, but truth be told, an effective Realtor negotiates not only with the other Realtor, but with the principal they are representing.
If principals had the information available, and the experience to determine what all the data means, then there would be no need for Realtors. But simply having a ton of data doesn’t provide a principal with the tools they need to be able to negotiate the best “deal” for themselves.
The inventory of homes is down 13% year over year, but closed sales are up nearly 10% year over year, and pending sales are up over 18% year over year. Those are crazy numbers. The average price of a home has climbed nearly $100,000 since January. This kind of data makes negotiating complicated. Price is important, but there are many additional subtle terms that can secure a home for a buyer or satisfy a seller, beyond the desire for the highest price.
Let’s talk about buyers. If a buyer wants to secure a home, and they aren’t represented by a savvy, skilled negotiator, they will probably find themselves always on the short end of things. Exceptions can happen; even a blind squirrel can
find an acorn. But I haven’t heard of any of those exceptions this year. Sellers want the absolute best purchase terms they can possibly get. But this is where the rubber meets the road. As I have already stated, price isn’t the only thing that can be negotiated to provide the seller with the best terms.
If price is the only thing that matters to a seller, a Realtor who is a skilled negotiator will have a tool belt of experiences to help their buyer offer the highest price for the property. I’m not going to give you all our secrets, but suffice it to say,
that there are ways to secure that home, even in a competitive market.
The negotiating really begins between the Realtor and their client. A Realtor who represents a buyer must negotiate with the buyer how to “work” the process. Initially buyers are resistant to some of the tools available to help them secure a property, mostly because they aren’t frequently used by the majority of Realtors.
If you’re a buyer, you must find a Realtor who has those tools and knows how to use them. Not all Realtors are created equal. They all take the same classes, and hold the same license, but that is where the similarity ends. Remember how Bruce Bochy built baseball teams with older, wiser, more skilled players? That skill got the San Diego Padres to the World Series in 1998.
That same skill won three series games over San Francisco to get to the World Series. Experience, knowledge, and superior skill is paramount.
When we represent buyers, the very first thing we do, before we show them any property, is sit down with them to discuss their end game. Why do I call it the end game? Because that is what you need to focus on. The path to that end game has many strategies. This Realtor begins the negotiation with the buyer to help them have realistic expectations of the process and the strategy to move through that process. This conversation is a negotiation with the buyer.
As with all negotiations, if the buyer wants to win all the points along the way, they ultimately won’t win the end game.
There must be an understanding between the buyer’s Realtor and the buyer, of terms that should be negotiable, and what should not. Negotiating away terms that provide perceived value to the seller, is not a natural thing to do. It can feel like you’re losing. The buyer’s Realtor needs to negotiate those terms first with the buyer, so they fully understand them, and then negotiate those same terms with the seller’s Realtor.
Once the buyer has full buy-in, their Realtor has the job of negotiating with the seller’s Realtor. Confidence in the benefits of the offered terms, makes negotiating those terms much easier. Think about it this way. Have you ever purchased something from a street vendor in Mexico? You may or may not have needed the item, but through persuasion, another word for negotiation, the vendor helps you realize why you want or need the item. I hope you’re laughing, because that is what really happens when you buy from a street vendor.
In our family we have the understanding that when we are crossing the border to return home, you cannot even make eye contact with the street vendors, because if you do, they will sell you something. They are great negotiators, and once they know they have your attention, they will succeed, and you will buy something you may not need or want.
I know negotiating the purchase of a property is a much larger purchase, but the same principles apply. If I am confident of the value of the terms of the offer for the buyer that I am representing, I should have success negotiating those terms
with the other Realtor. It’s a little bit of human nature. We all want success. Most people don’t like conflict. If there is a successful path to reach a mutually beneficial end game, with little or no conflict, you have successfully negotiated.
Next week, I will talk about what negotiating looks like from the perspective of the seller, their Realtor and the buyer’s Realtor. This is the stuff that gets me excited. Negotiating is the core of the value of a Realtor. Looking forward to helping you negotiate your best purchase.
Kim Murphy can be reached at [email protected] or 760-415-9292 or at 130 N Main Avenue, in Fallbrook. Her broker license is #01229921, and she is on the board of directors for the California Association of Realtors.