Preparing Your Client to Negotiate on Short Sales & Other Transactions

Posted on November 29, 2012 by David Compton

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In this period of tumult and uncertainty in the market, agents are continuously being admonished to pay more attention to their role of negotiating for their clients for the best possible outcome that favors their interests.  To do this effectively, it might be worth taking a look at how you prepare your client for the possible outcomes and evaluating you and your client as a negotiating team.  When time is taken to do this, more often than not, expectations are met more satisfactorily for both you and your client.  There is a new focus on the agent performing their fiduciary duty in short sales and transactions with alternative purchase options.  Let’s start with a few simple steps to prepare your client.

FORM PHOBIA
First, it’s important to understand that consumers have an understandable fear of paperwork.  What’s even worse is that so many of them are making major decisions, such as loans on their properties, without even reading the forms, agreements, acknowledgements and disclosures they are signing.  They just don’t want to bother with either taking the time or energy to do this.  They just want to get the deal done.  This is the number one cause of misunderstandings in real estate that often lead to claims, lawsuits and complaints with the proper authorities.

Make it clear to your client that it is very important that they study the documents they will be signing.  Giving them a sample copy of the contract and the other forms they will have to review at the very beginning of your relationship and advising them to read and study them carefully is one major step that can enable them to make a better informed decision.  Let them know they will be called upon to respond very quickly, and the more they read, study and ask questions ahead of time, the better they’ll be prepared when the decision time occurs.  When they have had an opportunity to read and study the contract and the other forms, they’ll be less fearful when they have to sign them.

THE UNIVERSAL RULE OF REASON
Very simply stated, sales associates should advise their clients to only make requests of the other party that they would agree to if they were on that side of the transaction.  Anyone who is asking people to do things that they themselves wouldn’t be willing to do is a party you are better off not working with.  Life is too short, and legal/ethical risks are too great, to take this kind of gamble with your career.

SETTING TARGETS 
Your clients really need to know what they want to achieve when they enter into negotiations.  Too often contracts are negotiated to death when it becomes a series of knee-jerk reactions to the other party’s requests to the point where both buyer and seller don’t see the big picture and are just playing a game of “not giving them another dime.”  Always reinforce the big picture perspective with your clients so that they don’t end up shooting themselves in the foot.

Instead of setting goals and expectations in terms of specific figures, such as a certain price, net or closing costs, set goals in terms of ranges of expectations.  For instance, if your buyer client sets a goal of paying no more than $275,000 for a property, and they end having to pay $289,000 to get it, they may see it as a failure.  They had to pay $14,000 more than what you said.  Instead, why not set a goal of paying between $270,000 to $295,000?  Now, they will see this as a success.  They will have achieved their goal.  Goals must be flexible, and you and your client need wiggle room.  You can also do this with other terms in an agreement, such as closing costs, closing date, net proceeds and repairs.

DETERMINING FLEXIBILITY
One way to evaluate yourself and your client as a negotiating team is to rate them on the following eight factors from one to five (five being the best) and totaling the score:

  • Client is willing to cooperate with the other party
  • Client has well-defined goals
  • Client is willing to take your advice
  • You and the client get along with each other
  • Client is highly motivated
  • Client makes decisions based on facts
  • You trust the client
  • Client understands the risk/reward ratio

Obviously, with eight factors rated one to five, the maximum possible score is 40.  If you and your client score a 32 or higher, you are a strong team.  If you score 24-31, you are a good team, but you need to keep them focused.  If you score 16-23, this one might take a little work and patience and be high maintenance, but it still might be worth the effort.  If you score less than 16, it might be time for you to give them a “friendly rejection,” which might be stated like this:  “Mr./Ms. Buyer/Seller, Based on current market conditions, I don’t think that it is possible for you to achieve your goals at this time.  Therefore, I will not be able to represent you.  I would rather turn you down now than let you down later.”

Following these simple steps will make the negotiation process enjoyable for you instead of stressful. Good luck!

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