I was talking to a For-Sale-By-Owner (FSBO) the other day who was trying to sell his condo in Reston. I asked him what he expected from an agent (if he were to hire one), and he told me, “I think the main thing an agent will do for me is marketing the place.” While marketing is certainly one criteria that you should consider when interviewing agents, it is probably the least important. The number one most important reason you hire an agent is for their negotiating skills.
In This Article, You Will Learn:
- The benefits of third party negotiation
- How to determine if your real estate agent is a good negotiator
The Benefits of Third Party Negotiation
There are two main ways in which hiring a third party negotiator is beneficial. First, a great real estate agent negotiates real estate transactions every day and understands the nuances of each transaction and of each party to fully negotiate the best outcome for you. The average person buys and sells every 5-7 years, making real estate negotiation a one-off event. Would you rather have someone that negotiates once every 5 years (i.e., YOU) or someone that negotiates every day helping you get the best possible outcome on the most expensive asset you’ll ever buy or sell? Yeah, you think you got a great deal on buying a car by negotiating the dealer down by a couple thousand dollars? On my last transaction, I was able to get a buyer to pay $35,000 more than the next highest buyer. That is why you hire a professional real estate agent.
Professional real estate agents who are skilled negotiators also understand when and how strong to push the other side without making the other side angry or walk away from the table. For example, I represented the seller on a townhouse in Alexandria. The buyer’s initial offer was $505,000 with $10,000 in closing costs. After talking with the buyer’s agent, I could tell that they were willing and able to offer much higher, even though they weren’t necessarily saying it outright. Ultimately, I sold the property to the buyer for $525,000 with $2,500 in closing costs, which represented a $27,500 swing from their initial offer. And I truly believe this was the absolute most they would have paid without walking away from the deal.
Second, real estate transactions is a very emotional process for many people. For sellers, it is the home they have lived in and taken care of for years, only to have another person come in and point out everything that needs to be fixed. I learned this the hard way when I had to sell my own condo. I was already an experienced real estate agent, but also a first time home seller. When the buyer came back with all of these repairs, I was so upset and I did not want to give any money to the buyer for repairs. My husband asked me, “if this was one of your clients, what would you tell them?” And honestly, I would have told them just to give a credit and move on. So that’s what we did and we closed on the deal. I look back and am so grateful I didn’t get in my own way and make the deal fall apart! As the old saying goes, “A lawyer that represents himself has a fool for a client.”
So how can you tell if an agent is a good negotiator?
Like any good interview, ask them situational questions and see how they respond. For example, I would ask them a question like “What would you do if we got a really low ball offer on the house?” or “Tell me about a time where you handled multiple offers.”
I’ve seen three basic types of agents in terms of their negotiating skills:
The “I have no negotiation skills” agent – This may be a new agent or one that doesn’t do many deals each year to have the skills to actually negotiate the best outcome. Often times they see themselves as purely “transactional agents” – like a processor or paper pusher to get the deal through. These agents typically don’t give advice, they only relay the message to the seller and then waits for a response. You may hear them just say “I would tell you the situation and let you decide.” While the decision is ultimately up to the seller, they do not give any advice on what the best course of action would be.
The “I don’t like conflict” agent – This agent does not like to negotiate hard and often will try to come up with a win-win situation for both the buyer and seller. While it is great to have a win-win situation, the avoidance of an uncomfortable situation can ultimately hurt you as a seller. You may hear them say “Well, since you mentioned the lowest you’d be willing to take was $X dollars, why don’t you go ahead and accept that offer.” This allows them to avoid negotiating all together. Instead, you want an agent that has assessed the buyer’s situation to determine how much more the buyer would be willing to pay, not how low are you willing to go.
The “professionally, skilled negotiator” agent – This is your ideal agent. She will make sure to get all of the information regarding the buyer and the buyer’s situation to determine if this low ball is really someone that will come up in price, or if it is truly a low ball offer. She will give you advice on your possible options, what she views as the best option or decision, and then talk with you through any questions to help you reach a decision. I like to lay out all of the options for my clients from least aggressive to most aggressive along with the pros and cons of each. Then my seller can truly make an informed decision.
While there is no question that marketing is an essential component to a real estate agent’s service, it ultimately isn’t the more important service that they offer. Skilled third party negotiation is where an agent truly earns their commission by often negotiating more money (often more than their commission) for the seller than what the seller can get themselves.