As FORCE agents, we’re called upon to manage the sales process from one end to the other seamlessly.
Once we are (apparently) finished with purchase negotiations, we are faced with the home inspection component. If not handled correctly, all the work from the purchase phase will disappear… and so will the deal.
Buyer or Seller… Which side are you on anyway?
For buying and selling, our roles are clearly different. It’s important to see yourself in the “other person’s shoes” so you can help balance the equation. There are many strategies on both sides. We will deal here primarily on the seller side.
50 Shades of Negotiation
Negotiating is clearly a human event, with ego and emotion often playing in. To be successful, take a step back and have an objective look at the specifics and players. There’s no single or best approach. Here’s a high-level view of some negotiating personalities for quick reference:
Competitive style negotiators (I Win/You Lose) are seen as more aggressive and may be singularly focused on the battle, even if the war fails. Giving in to this style will only bring more concession requests. This posture can be useful, however, if a resolution must be immediate.
Accommodating style negotiators (I Lose/You Win) are concerned more with relationships. They are at a disadvantage when paired with competitive styles. They tend to give larger concessions.
Accommodators are liked by the opposite party for obvious reasons.
Avoidance style negotiators (I Lose/You Lose) are generally passive-aggressive. They really dislike conflict. This style can appear as stalling.
By not answering directly, it leaves the other party to fill in the blanks.
Sometimes this style can be used to let hot parties cool down.
Compromise style negotiators (I Win/Lose Some – You Win/Lose Some) really just meet you halfway. It’s a quick haggle, and then split the difference. Some would argue that the compromising style is not really negotiating, yet this may be the style we see most commonly.
Collaborative negotiation (I Win/ You Win) is sometimes confused with compromise. Win/Win is pure craft that makes sure both parties meet their needs and creates as much value as possible within the framework of negotiation. This approach requires more time investment to find innovative solutions, but if your relationship and market reputation are important, this is the style to use.
Acting overly accommodating and compromising can leave money on the table and leave a sense of “loss” for your client. Acting too competitive and rigid can blow the deal altogether. Once you understand the basic styles, you can grow into a collaborative type. With collaborative style, you can mix other styles at the appropriate times to achieve a successful outcome.
Putting It Together–Retail and REO
In retail home sales, the buyer has his or her inspection and then typically forwards a list of repair demands. These can be agreed to, denied, or credited as a purchase discount. If you are aware of the styles thrown your way, you can maneuver with greater success. Some of the demands may simply be “throw away” negotiation items. Step back and help the seller decide which items to deal with.
There are differences in repair negotiation when working REO assets.
First, a discussion should occur with your asset manager regarding condition at time of sale. Many times, the subject property is sold in as-is condition and the lender is not making any repairs. If so, it’s much better to frame this before you enter negotiations. By either posting in MLS (if allowed) or by indicating terms to buyers’ agents, you will keep the sale moving quickly.
Understanding the terms of condition is important because it dictates financing. A property that needs major repair to structure or mechanical systems will not qualify for FHA funding. The first-time, owner-occupant may be the dominant purchaser type in your area.
Renovation financing may then be more appropriate. When determining pricing strategy with your asset manager, it’s important to set proper expectations based on your market. Clearly, there is a difference in positioning as a retail offer with all types of financing available and an investor offer that will be cash with little concern about property condition and sold as-is.
Although we see a “tale of two markets” (retail and investor), there is more movement now towards a hybrid zone where minor (and sometimes substantial) repairs may be made to accommodate all types of financing. This opens assets to all types of buyers, arguably to help with neighborhood stabilization.
These decisions are made by your client, but you are their eyes and ears on the street to help direct them and manage their expectations in your local market.
In the end, be prepared and listen. Negotiation is a high-level sales event and really is about understanding people. Having professional negotiation tools will only make your life easier and your clients happier.