5 Tips for Real Estate Negotiation

Negotiation of any kind is a skill in and of itself, and like anything, some people have a natural affinity towards it and others would rather run the other direction and never look back. For those who love the art of negotiation, just the mere thought of it can practically turn them into a haggling expert. Whereas for the rest of the population just the thought of it fills us with dread, the fact that our own money is at stake makes it even more difficult despite the fact that we could save ourselves a bundle! As if the act of negotiation wasn’t difficult enough for some, add the market dynamics into the equation and you’re left with a complex aspect of real estate that most people would rather forget altogether.

If you fall into the latter category of the haggle-haters, don’t despair! We’ve got a list of 5 tips for real estate negotiation to help take the pressure out of haggling and will ultimately help you protect your interests, your cash, and your sanity.

1.  Build a solid arsenal of reliable information.

It is absolutely essential to be prepared for any negotiation and to arm yourself with a large resource of information to ensure a better result. Aggressive negotiation is never about guessing the “right move”, and is always about knowing the right move for the situation, as you should be the expert. Make sure you are very acquainted with the real estate market in your area, which includes:

-       Knowing what similar homes have recently sold for

-       The average margin higher or lower than the asking price

-       The average length properties are on the market in your area

You can also use your agent to help you ascertain more information about what is important to the other party. By reaching out to the other agent involved you may discover that moving quickly is more important than securing the best price. Not all agents will divulge this information, and they’re certainly not obliged to, but most will do so often in the interest of securing a favourable deal.

Likewise you should consider giving your agent the go ahead to disclose what is important to you, if the opportunity arises. Be clear about what your own priorities are, including your top and bottom line and be very careful when tempted to waiver from your own priorities as this will leave you feeling dissatisfied with the negotiation. Be firm about what is really important to you.

2.  Reframe the negotiation as a problem-solving challenge.

Gone are the days when negotiating was a two-way power struggle between the buyer and the seller. Now there are often several other factors to consider including the buyer, seller, and often the banks (on both sides). More often than not, the banks will dip their toe into the negotiations by way of adding their own guidelines that impact the terms of the deal. There are any number of possibilities that could arise when the banks get involved, so to save your sanity it is better to approach any negotiation as a way to solve a problem – that problem being the various needs of the many parties involved. The solution? Meet as many needs as possible without sacrificing your bottom line.

3.  Control your thoughts, manage your mind.

There is little point in purchasing a home that you don’t really like or strongly love, BUT you must remember that when it comes to negotiation that the party who is least attached to a particular outcome generally has more bargaining power, simply because they have less to lose emotionally.

If you find yourself in a multiple-offer situation or a sale in which you might only have one chance to make an offer, it often makes more sense to set your sights on a reasonable offer price based on how much you want the home, or subsequently how much you don’t want to lose it. When you are emotionally attached to a home it can often be very difficult to think subjectively on this matter. The more you have your heart set on something and you see the negotiation going south, the more likely you are to panic and either throw money at it in order to sway the negotiation in your favor, or cave in on other points that are really important to you.

Save your sanity by speaking to your agent about what is actually in your power to negotiate in the first place, and leave the rest aside. There is no point in emotionally exhausting yourself trying to negotiate things that are not (and will never be) on the table, such as the bank’s bottom line, repairs on short sales, etc. Find out what is negotiable from the start and negotiate only those points, and try to remain as neutral as possible. Remember knowledge and control is power when it comes to the back and forth of real estate negotiation.

4.  Reducing time pressures reduces stress.

When you are pressured by a deadline, you may feel more inclined to take the “easy road” or make a decision based on emotion, especially when it comes to something as primal as shelter. Don’t be tempted to make or accept a questionable offer simply because you are faced with the prospect of having to move before a deadline. If a deadline date is looming and you feel you may be attracted to needless compromises for convenience, it is better to take a beat and re-assess. Would moving to a short-term rental property or setting up a Plan B living situation really be that inconvenient? It could save you hundreds if not thousands of dollars on your sale and you’ll be left with the peace of mind that you stood firm on the points that were important to you.

5.  There is a difference between acting quickly and acting impulsively.

Time is always an issue when it comes to real estate, and generally the faster you are able to move the better. However, that said there is a big difference between acting quickly and acting impulsively. When time is of the essence you should have a clear plan in place to move quick enough to get results but not so quickly that you revert to acting impulsively based on your emotions.

When find the house you want make an offer, and likewise when you get an offer or a counteroffer, respond to them. But remember if there is no clear and quick response, you can take the time you need to make the right decision. Be calculated about when to move quickly and when to take the extra time as you never know when another party might show up to change the bargaining dynamic. This comes back to being prepared for the negotiation…when you are prepared you are positioned to act quickly and strategically rather than impulsively.