3 Myths About Negotiations with SPG Managing Principal Sheena Saydam
There are a lot of misconceptions about what it means to be an exceptional negotiator. I want to dispel these and explain why it's so important that when you hire a real estate agent, you hire a truly experienced and knowledgeable negotiator.
When I got into real estate nearly a decade ago, I'd just left a position where I trained parents on how to advocate for their children's healthcare on the Hill. I was also fresh out of grad school where I'd analyzed case studies related to protracted international conflict and learned tactics that American negotiators were using successfully against terrorists. We took part in simulated war games and studied game theory - one of my professors was a colleague of the late great John Nash. Entering real estate at that time was straight culture shock.
In my first real estate "negotiations" class, the "expert" led with a highly aggressive and intimidating approach to getting what you wanted. At one point, he leaned his entire body deep into the personal space of one of the female agents to get his point across. I knew that that theory had worn out its use (and welcome) and I walked out before the class was finished.
So, what does a strong negotiator look like? With so much confusion about what a great negotiator is, I figured it would be helpful to share some insights from our experience successfully negotiating hundreds of real estates transactions.
Myth #1 - You need a bulldog.
You certainly don't want someone who isn't going to bat for you, but a bulldog? I don't think so.
Whenever someone tells me that they know this agent is a "bulldog" or a "fierce negotiator," I know that we've got the upper hand. That person who prepares for every objection, ready to go to war and then dominates the conversation (much like the guy in the story above) isn't showing strength; instead, they're showing weakness -- they have little self-control and have no interest in taking the time to actually understand the needs of the other parties to the contract. Sure, these tactics might work every now and then (heck, even a broken watch is right twice a day), but don't rest your confidence in an arrogant agent who claims the other side as their target - that approach is, quite simply, mediocrity in action. An expert doesn't need the bravado or the intimidation; the expert is calm and focused and doesn't require intimidating tactics. Myth #2 - As a buyer, starting significantly below the list price will help me pay less in the end. Especially in a seller's market, you could end up pay significantly less with this appraoch - nothing, as a matter of fact! Of course, that's because most sellers will simply reject the offer outright. Or, and just as common, the seller will respond with an offer just a hair below list price -- they're responding in kind -- after all, you just called their baby "ugly." Remember, this is just the start of a 30 day negotiation -- if you are able to get to another round of negotiation, it could be a rather painful 30 days. Don't forget that when we're negotiating homes, we're dealing with humans, who are emotional; there's often sentimental value attached to one's home (so, different than, say, car sales) and there's also the desire to get every single penny out of the home -- kind of obvious, right? And yet, some buyers and their agents take the approach of "They paid a quarter of this when they purchased it thirty years ago, so clearly they don't need to sell for this high." Put yourself in the seller's shoes -- would you take less than market value on your home just to be nice? Would you accept a discounted offer on your home because it appreciated over time (As if one should be penalized for this)? Of course not. Sometimes buyers say "Well, I know it's really low, but we might as well try." Starting out a negotiation on a home with an anchor that is so low that it doesn't make any sort of rational sense can set you up for a challenging and expensive ride because the seller rarely forgets the first insult; come home inspection, appraisal, and anything else that might come up, there won't be a lot of desire to make repairs, adjust the price, or address any other concerns that the buyer might have. Please note, that I'm writing this in the head of a strong seller's market. Myth #3 - The uber-confident "neighborhood expert" is who i need in a negotiation. I once had a broker at a fancy firm boast that he could "walk into any property in DC and tell a person what the place was worth. I also competed against a so-called "neighborhood expert" in Alexandria, who had sold quite a few homes in that particular neighborhood, but his average yield on list price was seriously low -- and the pricing analysis he provided was no more useful than what one might find googling nearby home prices. Clearly, these agents are not doing their homework; and their clients are ultimately the losers. Especially in our area, inventory can be quite varied, which creates complexity in evaluations. Also, markets change, and sometimes quickly. Therefore, a careful examination of your particular micro-market is needed in order to create a smart, definitive opinion of value for your home. And, this is the bedrock of additional critical negotiations once you go on the market. Imagine you're selling a home and your agent hasn't provided supporting evidence and analysis to determine the best list price; they just claimed to be the "neighborhood expert," maybe threw a few comparables your way and threw out a figure. What does a conversation with a buyer agent look like who has a buyer for your home? Your agent "Yeah, trust me, I sell here, it's worth the list price -- maybe more." If you do get under contract, there's also nothing but a gut instinct to support the price when the appraiser visits. A great agent negotiator is a student of their market and is able to support their position with objective analysis. As one of my favorite and most successful agents in the country once said, "A great agent in Arkansas could sell a home in Alaska for top dollar as long as they have carefully studied the market."
For better experienced, skilled negotiation, give us a ring.