A real estate broker facilitates the buying, selling, or renting of properties by guiding clients through the process, negotiating on their behalf, and ensuring a smooth transaction. Communication skills, a solid understanding of real estate laws and regulations, and negotiation skills are critical for brokers. However, even experienced real estate brokers may make common mistakes in negotiation that could cost time, money, or the deal itself.
Here are common real estate negotiation mistakes to avoid.
Key Takeaways
- Lack of preparation is a common mistake in real estate negotiations. Brokers must thoroughly understand market trends, property values, and their clients’ needs to negotiate effectively and secure the best deals.
- Real estate transactions can be highly emotional for clients. Brokers who ignore the emotional aspects of negotiations risk alienating clients.
- Focusing solely on price can be a pitfall in negotiations. Brokers should consider other critical factors, such as terms, conditions, and contingencies, which can be just as important, if not more so, than the price itself.
- Effective communication and getting all agreements in writing are essential. Misunderstandings and lack of documentation can lead to costly mistakes and client dissatisfaction, making it vital to document and communicate every aspect of the negotiation clearly.
Common Mistakes in Negotiation
Whether you are currently working through your real estate pre-licensing courses or are a seasoned real estate broker, consider taking additional training in negotiation. During negotiation training, you’ll learn the best strategies for getting the best deal for your clients – as well as mistakes to avoid.
Here are some quick thoughts about mistakes that real estate brokers make while negotiating.
Related Article: 11 Tips to Master Real Estate Negotiation
Mistake #1: Lack of preparation
We know that there are only 24 hours in a day and that real estate brokers typically have mile-long to-do lists. However, make sure you prepare for each client interaction. Lack of preparation is one of the most common negotiation mistakes
- Know your market: Understand local property trends, neighborhood dynamics, and buyer/seller behavior.
- Research property values: Your clients will only have online tools to refer to for property values. We all know that pricing is more complicated than what is found online.
- Understand client needs: You can’t negotiate effectively without a solid understanding of your client’s needs.
Your clients depend on you to get the best deal. Make sure you are prepared for each negotiation.
Mistake #2: Ignoring the emotional aspect of real estate negotiations
For you, the transaction may be one of dozens you oversee in a given year. But for your client, selling the home they have owned for decades can be an extremely emotional experience. It may be difficult for them to hear buyers’ complaints about the property and recommendations on how to fix the home they love so it is market ready.
Your buyers may also be emotional during negotiations, especially in markets with a low inventory. They may have put offers on many properties but have yet to find a house in their price range.
Many real estate brokers make the mistake of not understanding the emotional aspect of real estate negotiations. Instead, they should acknowledge and manage the emotional side of negotiations from their client’s and the opposing party’s perspectives.
Learn strategies for keeping emotions in check and using empathy to gain an advantage.
Mistake #3: Focusing solely on the price
While price is crucial in real estate negotiations, other factors, such as terms, conditions, and contingencies, can be equally important.
For example, your seller client may not want to budge on pricing, but they may acknowledge that the carpet does need to be replaced and will not balk at offering money to the buyer for flooring upgrades.
Your buyer client may be willing to pay more than the asking price on a home as long as they can move on their preferred weekend and have the seller pay their real estate broker’s commission.
As mentioned earlier, one common mistake real estate brokers make during negotiations is not understanding their clients’ priorities. Pricing is just one factor of a real estate negotiation.
Mistake #4: Overconfidence
In sales, you’re only as good as your last month. In real estate, you’re only as good as your last deal.
Whether you have three or 53 transactions under your belt, try to approach each transaction with the same energy and focus as you did as a brand-new broker. Overconfidence can lead to misjudging the situation, underestimating the other party, or missing critical details.
The real estate industry is ever evolving. You’ll need to learn how to negotiate with clients and brokers from other generations. Balance confidence with humility and always be open to learning.
Mistake #5: Neglecting to get everything in writing
During negotiations, a buyer’s broker tells you their client has made a last-minute decision to take the refrigerator when they move. This is never documented or written into the contract and leads to a great deal of confusion on move-in day when the buyer takes possession of the house with a kitchen that doesn’t have a fridge.
Documenting everything in writing is essential. Surprises like this one lead to unhappy clients and poor reviews.
Mistake #6: Poor communication
You must get everything in writing and ensure your clients understand the contract’s details.
Consider the refrigerator example from the last section. A buyer may not notice if a refrigerator is not included in the sale – even if it is written into the contract. They may assume that a fridge will be present on move-in day. It’s up to you to communicate those details to your client.
Lack of communication and misunderstandings lead to frustrating situations where parties lose time and money. Thoroughly review the contract details with your clients so they understand what they are signing. Unclear, inconsistent, or ineffective communication can derail negotiations and make you unpopular with other brokers and clients.
Enroll in the Real Estate Negotiation Institute (RENI) to learn best practices for all types of real estate negotiations (and more about mistakes to avoid). RENI offers two certifications: Certified Negotiation Expert (CNE) and Certified Buyer Agent Expert (CBAE).
RENI courses teach proven tactics used in S&P 100 corporate negotiations to give our students an unbeatable advantage. Since 2006, RENI has helped over 70,000 agents and brokers improve their negotiation skills. Learn more about the RENI certifications and enroll in real estate negotiation classes today.
