7 Tricks Real Estate Agents Use When Negotiating

While you might not necessarily be doing any of the wheeling and dealing at the negotiating table when buying or selling a home, it’s still interesting to know how your real estate agent handles these talks in order to get their clients the best deals possible. In fact, one of the many reasons to hire a real estate professional is to have them negotiate for you.

This is an art form that’s not always easy and takes some amount of experience and training to nail down. That said, there are a few tricks that agents often employ to seal the deal, and here are a few of them.

1. Using Market Value As the Starting Point

Rather than using the asking price as the starting point, savvy buyer agents will calculate the true value of a property. Many sellers purposely price their homes over what the current market value of their property actually is. At the same time, many buyers attempt to lowball sellers, which often sends the deal nowhere, particularly in hot real estate markets.

In seller’s markets, buyers may want to offer slightly over the present market value in order to get the seller to accept, even though the offer price may be under the listing price. Offering just under the minimum amount that the seller is probably willing to accept is a better approach than lowballing in an effort to snag a deal. This will often coerce the seller into making a decision to accept an offer that’s only slightly under what their minimum is.

The idea is to engage the seller and get them to be a willing participant, and oftentimes lowballing too far will just kick buyers out of the game.

2.  Add an Escalation Clause to the Offer

If you’re on the buying end of a real estate transaction, you may want to consider including an escalation clause in the contract. An escalation clause is often used in scenarios that can possibly lead to multiple offers and is intended to eliminate most – if not all – of the competition. These clauses state that the buyer will pay a certain amount of money above the highest offer that the seller receives and usually includes a cap.

An escalation clause can help give you the best chances of winning a bidding war if you ever find yourself in one, which is pretty common in many sizzling markets across California. Basically, you promise to pay an ‘X’ amount more than the highest offer (but not over a certain amount). Sellers are often intrigued by these types of offers and are obviously more willing to keep buyers in the game as a result.

3. Making it a Win-Win Situation For Both Parties

Rather than going into a negotiation as a fight to see who can come out with the best deal, savvy agents create a situation that makes it look as if both parties are coming out on top. Buyers and sellers who go into a negotiation looking to squeeze every dollar out of each other can hurt each other’s position. Instead, striking a deal that leaves both sides satisfied is the best way to go.

4. Negotiating Over the Phone First

Many times it pays for agents to negotiate over the phone first to discuss pertinent points of the deal with the other agent before bringing the negotiations to the table. This can help start the process and get both parties on the same page before meeting in person and can help avoid much of the back and forth bantering. Too many counteroffers can confuse the situation. Instead, keeping things as simple as possible is the best way to go.

5. Giving Something to Get Something in Return

Sometimes it pays to offer up a little something in order to persuade the other party to sway in your favor. This is especially helpful for sellers and works by throwing in a little something to sweeten the deal and get buyers to meet them where there want to be. For instance, sellers can offer to pay down part of the closing costs, buy down the interest rate, provide an allowance for improvements, or throw in some furniture or other goodies as an incentive for buyers to keep their offer price higher.

6. Stay Somewhat Aloof

In a buyer’s market where there is plenty of supply to go around, buyers can use the strategy of being somewhat nonchalant about the whole thing, making sellers feel as though they’re possibly interested in other homes. With this strategy, it’s important for buyers not to let the sellers think that they’ve fallen for the home and that there are other properties out there that they may have their eye on.

7. Use Exclusions as Negotiable Items

It’s common for appliances to “automatically” be included in a real estate deal, but there’s no rule that says washers and dryers, for instance, should necessarily come with a home. Rather than including them in a deal, list items as exclusions and use them as negotiating tools instead in situations where a couple thousand dollars will mean the difference between a deal or a dud. 

The Bottom Line

Savvy real estate agents have a number of tricks up their sleeves when it comes to negotiating real estate deals. That’s exactly why it’s incredibly useful to have one in your corner. And the more deals your agent has on their track record, the more experience they have at the negotiating table, which will work in your favor when it’s time to strike a deal.