Why So Many Agents Fall Down Before the God of Commission Cutting
Do you know the value you bring to a real estate transaction? Could you easily justify your 6% commission to a skeptical buyer?
Often, real estate agents don’t know the value they bring to a transaction. They underestimate their worth. They dread the “C” word. They worry someone will figure them out.
So, when commission is mentioned, they throw themselves at a buyer’s feet and say, “How much?”
Over dramatized, I agree, but close to the truth. Especially in this wonderful mortgage meltdown we seem to be having.
Knowing the value of what you bring to the table is essential if you want to overcome any objection to a 6% commission.
With that in mind here are five simple reasons to justify your commission:
1. Without a professional, sellers may not sell as quickly. This is critical if they have a deadline or contingency clause on another house.
2. You are an objective, seasoned negotiator. You bring an emotional, clear-headed stability to the table. You are able to see the whole picture and you might pick up on advantages amateur negotiators would miss.
3. You know competent home inspectors, architects, contractors. You’ve been dealing with these people for years and know their work well.
4. You will list their home on the MLS–a privilege granted only to real estate professionals. And the MLS means nationwide exposure.
5. You will advertise and promote a seller’s home on the internet in newspapers, magazine ads, brochures, the MLS and on your own web site. To do this themselves would be costly.
Listen, the point is to distinguish yourself as an expert in the art of buying and selling a home. Educate yourself. Designate yourself.
Lawyers command enormous fees for a reason: they are experts. Surgeons are the same way. It’s not enough to say that you passed your state exam.
You have to define some skill you bring to the table that any hack on the street couldn’t bring. And once you define this for yourself, learn how to articulate it with pose and clarity.
Finally, have the courage to walk away from any deal, especially if someone insists you cut your commission. This attitude alone will make you a powerhouse, profit-making real estate professional.
Then, believe in yourself. Wholeheartedly.
How to Overcome a Stand-Off with a Buyer
Most Realtors haven’t been in the business long enough to see anything but a boom market, and the current slump is new to all but a handful of veterans.
This means buyers and sellers are negotiating this rapidly changing market with the advice and guidance from agents who may not be terribly familiar with the current landscape.
Just for sake of clarity, here’s a snapshot of the current market: home-buying activity has slowed, consumer debt is rising and some houses are sitting on the market longer.
What about you: is this bear market new to you?
Your Greatest Challenge
One thing is for certain: it is a buyer’s world. In fact, buyers are able to make requests that would have been laughable two years ago. Requests like picking up dog poo, removing goldfishes from aquariums, even babysitting rats. [Have you had any absurd requests from buyers or sellers?]
Of course, the biggest demand buyers are making deals with price. And sometimes in a negotiation over a home, the price appears to deadlock progress on buying a home.
This is your biggest challenge. Here’s how to deal with it.
Overcome the Stand-Off
Pretend your buyer categorically says, “I’ll be willing to buy this home but I absolutely will not pay more than $304,000 for it.”
Now, the house is listed for $369,000 and you know from comps that the home is already priced low. You know that your buyer could easily afford a $400,000 home. He’s just playing hard to get. You also know that the seller will not budge either.
An inexperienced agent may look at this situation and see it as deadlocked, the negotiation stalled, the deal maybe even dead.
The veteran knows better.
The veteran says, “I understand how you feel about price, but let’s just set aside that issue for now and talk about some other issues that are important to you.”
Here you go into the particulars of the home that you know the buyer values: school district, short drive to work and cul-de-sac, for instance.
The idea is to try to establish common ground and gain momentum on the little issues. Great negotiators know that big issues become more flexible when you find some common ground on the little issues.
Once you establish those little issues and get your buyer excited about agreeing with them, your buyer is then in a better state of mind for negotiating that price he said earlier he would not budge on.
Where Agents Fail in Stand-Offs
The inexperienced agent thinks he has to deal with the major issues first. He thinks, “If we can’t agree on the big issues, how do you think we are going to agree on the little issues?”
This is like tackling a giant’s chest instead of going for his ankles or knees. You’re just going to make him mad instead of appealing to areas you just might have a fighting chance.
And it goes back to my earlier point: people are more likely to yield on the big issue if you’ve established some momentum and common ground.
That momentum is key to breaking that standstill.
Obsession: A Painful Lesson in Options
When it comes to personal freedom among the citizens of the world’s countries, Americans tend to stand apart.
Germans, for example, are willing to obey strict building codes to preserve the historic beauty of their cities.
Canadians are willing to accept stricter gun control laws for personal safety.
Americans, on the other hand, have an incredible desire for personal freedom, no matter how destructive it may be.
We have a tremendous desire to feel free; we don’t want to feel like we’ve been outmaneuvered and only have one choice
left open to us.
The Lesson
That’s why when you are in a closing situation you should always give the other side two options from which to choose.
The key to the Two-Options technique, however, is that both options must be acceptable to you.
You say, “Well, Jack and Jill, I don’t think that there is any question that you should buy this home…the question becomes, how do we work it out so that you can live comfortably with the investment?”
“Let’s take a look at these two different financing plans and tell me which would be best for you. One is a…”
The takeaway lesson here: never back anyone into a corner by saying, “Take it or leave it, they won’t reduce the price.”
Chances are they will probably leave it.
The Pain
Then again, I’ve been in positions myself where I got it into my head that I had to have something. And I wouldn’t budge. Later I regretted the decision.
Have you ever done that?
And have you ever been in a situation where you saw a client who was hooked and it was obvious no amount of reason could persuade them differently?
At that point, are they truly free?
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Essential Crazy Wisdom
In 2002 I read a book called Essential Crazy Wisdom by Wes Nisker.
In that book Nisker draws from the philosophies and religions of the East and West to discover the madmen, dreamers, and unconventional wisdom seekers who turned wisdom and used it in an intrinsically contrary way.
Their wisdom at times stood completely off the scales of normal human judgement. Dangerous, you might say, but these off the wall thinkers produced some of the most powerful ideas in history…
Just think what a little crazy wisdom then could do for your real estate business.
That’s why today I want to show you how crazy wisdom can be used in negotiation.
Overcome the Stale, Lifeless Routine
First, Nisker talks about the idea that it is impossible sometimes to see the very nature of the shape of box if we are completely inside of it.
In real estate, especially if we have been in the business for a number of years, sometimes our ways of negotiation or mediation or conflict resolution become stale or lifeless. We often hit a point of where we lack creativity to solve problems.
Or, we get completely stuck doing the same thing over and over again that handling the testy seller this way doesn’t get results.
In a situation like this, it’s best to bring in a third person who has a fresh view of the situation. Or, simply allow some time to pass, whether its just one night or one week. Breaking away from the situation allows you to gain a new perspective to it when you return.
Get a Lobotomy
The second notion of crazy wisdom applied to negotiation is that of gaining many perspectives.
Go to a new place. Hang out with different people. If you’ve been a member of your chamber of commerce for 15 years, consider becoming a Rotarian or Shriner. Consider visiting a new church.
Better yet, hang out with people you wouldn’t normally get along with. Whether they have opposing political, social or religious view. Find out how they think. See life how they live it, how they move in it, how they view it.
If you have a buyer who is fussy about details and your not, try to step into his shoes and see where he is coming from. Understand why he is fussy about details. This will allow you to gain a new perspective, an understanding of that person. You are tyring to disrupt your normal pattern of seeing things. You are giving yourself a healthy lobotomy.
And once you see things differently, once you understand that person, you will empathize and find almost magically the negotiations getting back on track.
In the long run, taking yourself out of your comfort zone might sound crazy, but it will make your wisdom wiser, deeper, wider. It will make your negotiations more fulfilling, satisfying and rewarding.
The End Is Not What It Seems
Another way you can apply crazy wisdom to negotiations is the idea that agreements rarely end with a verbal or signed contract. In a lot of ways, there is much more negotiation to do on the other side of the negotiation.
This is the idea of the end actually being the middle. It means that even though the ink has dried on the contract, your work has really just begun. You, my friend, have to keep many of the details of the home selling or buying process moving, post-contract.
That Is Blasphemy
At one point in his book Nisker quotes the British playwright George Bernard Shaw: “All great truths start as blasphemies.”
This is true, isn’t it? Think about negotiations.
Typically, early in talks parties treat each others truths with scepticism and sometimes scorn. But as trust builds these truths are generally accepted and creatively built upon to produce a new, until then unheard of solution.
Or parties don’t build upon these truths and eventually the talks crash and burn.
The lesson here: build trust with people and eventually your truths on both sides will come to life and create something that neither of you could have created on your own.
Finally, crazy wisdom shows up in simple questions.
The Scientist Who Asked Simple Questions
Nisker noted that Albert Einstein was infamous for asking simple, near-childlike questions. But the questions cut through the smog. They got to the heart of the matter. And quickly. Think about children.
They question everything. And as parent at times you find yourself wondering, “Why do we believe that? Why are things that way? They don’t have to be that way, do they?”
Simple questions are not offensive, but in the same sense very potent weapons. So learn how to frame simple questions that get to the heart of the situation, and you can keep negotiations effecient and effective.
Now, get out there and apply some of this crazy wisdom to your business and life. Then get back to me and let me know if I’m off my rocker with this stuff or not.
Here’s to your success!
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Stephen Covey’s Top 7 Tips for Listening Well
“Just as the deepest hunger of the human body is for air, the deepest hunger of the human soul is to be understood.” Stephen Covey
Whether you are mired in closed door negotiations over the value of a piece of property. . . interviewing a star agent who you want to join your team. . . sitting in the home of a seller during a listing appointment. . . or simply enjoying dinner with your spouse, listening to another person until he or she feels understood is the equivalent to giving that person air. . .
And could mean the difference between a successful or disastrous conversation.
On the average, studies show that 75 percent of our waking hours is spent in verbal communication: 30 percent in talking, 45 percent in listening.
But the average person is a “half-listener,” retaining only about 50 percent of what he or she hears immediately after it is heard.
And many people, while outwardly listening, are inwardly preparing a response. And this often is a reason that a lot of conversations fall apart mid course.
But good listeners, on the other hand. . . power negotiators. . . generally follow a consistent set of guidelines or skills, that allow them to hold together even some of the more volatile negotiations.
Some of these guidelines are listed below:
1. Good listeners use their thought speed to advantage. They constantly apply their spare thinking to what is being said:
- Are the speaker’s facts accurate?
- Do they come from an unprejudiced source?
- What are the speaker’s motives?
- What has the speaker left out?
- Is the speaker dealing in facts or inferences?
- Am I getting the full picture or only what will prove the speaker’s point?
2. Good listeners try to find something interesting in what is being said, something that can be used to help create a new idea or solution or be used in some other way.
- What is the speaker saying that I need to know?
- Is that really a practical idea?
- Is the speaker reporting anything I don’t know?
3. Good listeners avoid getting too excited about a speaker’s point until they are certain they have heard it through and understand it.
4. Good listeners concentrate and instinctively fight distraction. They close a door, turn off the radio and interrupt only when it is necessary to clear up one point before proceeding to another.
5. Good listeners focus their attention on a central idea or theme. This helps them to remember the facts cited.
6. Good listeners restate and summarize the speaker’s point of view. They also look into the speaker’s face and maintain eye contact.
7. Good listeners enable the speaker to express what the speaker has in mind and thus make the speaker more able to give listeners the information they need.
[Adapted in part from Covey’s audio program Living the Seven Habits and the books The Power of Words, by Stuart Chase (possibly out of print?), and Are You Listening, by Ralph Nichols and Leonard Stevens.]Stalling and Concessions: a Hard-Tactic Even the Easy Going Can Use
In the spirit of what we are doing here at the Real Estate Marketing, today I want to share with you a negotiation technique that I see happening more often I think than necessary.
Not always in the real estate arena: I’ve seen it with clothing salesmen. I’ve seen it with an acquaintance trying to sell his business. I saw it once with a simple street peddler in Dustin, Florida one summer.
But because real estate is my main focus, my life so to speak, I’ve of course seen it a lot in this business. And like I said: I think it’s unnecessary.
I’m not absolutely sure why it happens, but I have some hunches: desperation and fear.
Go ahead and read the remainder of this post and afterwards let me know what your thoughts are.
Salespeople are typically short on patience when they smell a deal in the air. In fact, sales trainers sometimes teach that if you do not strike while the iron is hot, you might lose the deal.
But impatience may encourage a real estate agent to make unnecessary concessions.
Knowing this, a savvy counterpart might stall for time… trying to make the impatient negotiator nervous and more willing to make trade-offs.
Imagine an investor offers a FSBO $100,000 for his home.
Over the next few days, that investor calls two or three times to ask what the FSBO thinks of the proposal.
The FSBO never calls back. He’s stalling, hoping the investor will make some concessions if he feels she isn’t offering a particularly good deal.
In fact, the FSBO might be doing business with a competitor the investor thinks, and gets nervous…
Although she is not sure if the FSBO has even had time to review any of her proposals, the investor leaves a message that her “numbers are ballpark, based on the information given, and there is room to negotiate.”
And this is exactly what the FSBO wanted.
The moral?
Never discount a price before your counterpart tells you there is a need to do so. Never make a concession until it is apparent the other side wants one.
Your best bet: wait patiently for a reply. And do not call over and over again. You’ll look desperate.
So, tell me: why do you think real estate agents–salespeople in general–do this?
And when it comes to negotiating, do you look forward to the conflict or do you shy away from conflict?
What do you think of the idea of stalling?
Is this particular technique something you’ve used in the past? If so, were you successful?
Is it something you would use in the future?
Looking forward to hearing from you!
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10 Ways to Becoming a Better Negotiator
1. Negotiate.
2. Negotiate more.
3. Negotiate even more.
4. Negotiate with the clothing store clerk, the garbage man, the mail carrier.
5. Negotiate with your broker.
6. Negotiate when you don’t want to.
7. Negotiate when you want to.
8. Negotiate when you know you can get something better, bigger, faster.
9. Negotiate everyday.
10. Always negotiate.
How to Stop the Buyer from Grinding Away at You
Imagine this:
Let’s say that you have sold your client’s house, and the buyers agent asks you if his clients could move some of their furniture into the garage three days before closing. Although you wouldn’t want to let them move into the house before closing, you see an advantage in letting them use the garage. It will get them emotionally involved and far less likely to create problems for you at closing. So you’re almost eager to make the concession, but…
Before you do anything, remember this: no matter how small the concession someone is asking you for, always ask for something in return.
Say to them, “Let me check with the family and see how they feel about that, but let me ask you this: If we do that for you, what will you do for us?”
Roger Dawson calls asking for something in return the Trade-Off Gambit.
One of three things is going to happen when you ask for something in return:
1. You might just get something.
2. By asking for something in return, you elevate the value of the concession. When you’re negotiating, why give anything away? Always make the big deal out of it. You may need that later.
3. It stops the grinding away process. This is the key reason why you should always use the Trade-Off Gambit. If they know that every time they ask you for something, you’re going to ask for something in return, then it stops them constantly coming back for more.
In addition to using the Trade-Off Gambit, as I said in a previous In The Zone article, “lean on the Higher Authority to deflect pressure from yourself. Continue to position
yourself as on the other person’s side and any negative emotion will be directed away from you.”
Negotiating Successfully in a Buyer’s Market
After 40 years as a student of real estate negotiations, Bob Russ has learned that success in a slowing real estate market requires paying greater attention to negotiation skills and summarizes how to unlock the door to successful negotiations in six keys.
One of the programmers responsible for building the original versions of the browser you now know as “Internet Explorer,” Eric Sink, says “Negotiating from a position of real need is a bad, bad situation.” A buyer’s market could throw you in a position of bad need. So be cautious.
In a Harvard Business School Working Knowledge article, James K. Sebenius describes a better way to negotiate by using a tool called “backward mapping.” Preparation is the theme here.
Marcie Geffner gives us six tips and suggestions to turn negotiation into agreement. Priceless tips on how to move to that coveted “Yes.”
And broker Elizabeth Weintraub shares her ideas on how to write a successful purchase offer in a buyer’s market and then explains what a real estate counter offeris and why sellers and home-buyers bicker back and forth.