2 Reasons why most Real Estate negotiations fail

SUPER RAW video transcript

Hey, so I was talking to a couple of clients today people thinking about buying and selling it today is always fun always challenging environment. And one of the one of the things came up just added literally out of the blue. We started talking about negotiation. And one of the clients was somebody looking to purchase a home here locally to be specific and they said do you think people are going to be offended if I didn’t go she ate a little harder and I said, well, what do you mean offended and he goes well, you know, a lot of people say like, you know, no lowball offers don’t lowball me.

We don’t we don’t want a lowball offer. And I said that’s interesting to you know, what people mean when they say low ball offers and he goes, well, I never really thought about that before and I said a lowball offers anything outside of the parameters of what they were expecting when they originally listed the home lowball offer has nothing to do with the market. It has nothing to do with value. It has nothing to do with what’s realistic. It’s the seller has a box of parameters and the in one of the easiest parameters to identify as the listing price, right, you know listing price doesn’t always mean it’s what they’re going to sell.

I’ve seen sellers that are are way off in regards to what it’s listed for and what it sells for and I’ve seen some completely hold strong, you know for good or bad with those right? So do I think that real estate is going to be a little bit more negotiable in the next six months to not probably I do, you know, we do have a shortage of inventory right now with Buyers, they’re the stuff that’s priced and and stage and put together right is still sell it to selling and really good times are really good marketing time right now, but if I were a buyer,

ER in today’s climate would I negotiate harder than I would negotiate maybe five or six months ago. And the end the answer to be a hundred percent honest would be yes. I would negotiate more right now. Let me tell you why number one, you’re not negotiating to take advantage of people. That’s not why we’re negotiating right now and a lot of people don’t understand this. We’re negotiating from an insurance policy perspective because we don’t know what’s going to happen in the next three to six months. We don’t know in every economic every Economist. I don’t know why I said I can office to economist.

Right now is saying that we will go through some level of a v curve correction. Meaning there’s probably some of this is going to happen and it’s going to go like this now. I don’t want you to get confused because I’m definitely in for those of you guys that have a lot of context with me. I’m not a doom and gloom type of person. I’ve never been to Doom and Gloom. I’ve seen the opportunity and every Market that we’ve been through and if you guys ever have questions on that you should totally reach out to me because I think there are going to be some crazy good opportunities going forward these next couple months. Maybe I’ll talk about those.

Jean these videos maybe I won’t I don’t know but if you want to know what those are you should reach out to me. I’ll totally talk to you about those. I think there is opportunity and every Market even like we had one of our best years in 2009 and 2010. We sold upwards of I think 340 and I’m 500-plus homes those years. I’m not sure they were foreclosures and short sales and all that stuff, but we were able to help a lot of people and make a lot of money and we were able to save a lot of people from losing a lot of money during that time as well. Is this going to be like two thousand eight nine ten? No, I think it’ll be different.

Well, I don’t think it’s going to be significantly different. Right and the only reason why or the few reasons why I think so is because people have equity in their homes and this isn’t a mortgage started starting, you know type of a crisis. It’s something totally different right? So I don’t think home prices are going to get affected that much going forward maybe a lot for a little time and then and I’ll bounce right back right? Let’s get back to the negotiation thing. We’re negotiating from a perspective of an insurance policy to cover us through the next three to six months now,

Before I get into what I’m going to tell you and how to uncover who you should negotiate with and who you shouldn’t if you’re thinking about buying a home and you’re only wanting to hold it for one year or two years or three years. I’m going to tell you that over these next time in almost any part of the market. It’s hard to make money that quick unless you buy remodeled and so right if you’re not doing anything to physically add value to the property nothing is going to happen and you might be thinking like well Steve, well, what if I just buy low and sell high and that’s that’s true. You could do that. But here’s what

Happens in most neighborhoods in San Diego, California, if you just simply by low and do no work you set precedent for comps right? And here’s what I mean by that. If you live in a neighborhood where the average sales prices is 1.4 million and all of a sudden one of the home sells for 1.15 million if the rest of the neighborhood starts to see all the construction happening now, they’re going oh, they’re redoing the floors and they’re you know, maybe there’s smoothing the drywall’s out or a new bathroom or new kitchen or something like that.

They start to get confidence and putting their homes on the market at a higher price because they can see the equity value add to the neighborhood if nothing happens and you just got a screaming deal because of the right seller at the right time at the right terms, then it starts to shake everybody’s confidence and the cops start to dip a little bit. So even though you made by low, it doesn’t necessarily mean you’re going to sell high now. Do you need to remodel the property if you buy low right now? No, you don’t have to and I would buy lower before I buy higher.

Now like I wouldn’t pay retail just because you don’t want the cops to go down. Like that’s a failed strategy. Right? But if you’re thinking that hey, I’m in this unique opportunity. I’m going to buy a home right now. And I’m going to sell it for two years closing costs mortgage payments commission’s all of that stuff. You may not make money right? I want to be very clear about that. But let’s get back to our negotiations two things. I don’t know where this comes from two things that I would be very clear on negotiating then if you are on the other side and you see two of these traits, you know that you’re probably negotiate with somebody who either a is

Committed to the deal or number two is not very experiencing. It’s not very experienced weird words that I don’t know what’s going on. They’re not very experienced and negotiating things and I’m talking about the real estate agent and the principal right now. It’s the both people suffer from this and even I’ve been caught in this trap in the in the past right number one is they negotiate with emotion a negotiate with emotion. I can’t tell you how many times we write an offer for our for our clients and listen a great real estate agent will tell you they represent your interests not

The market and I’ll go off on a little tangent right now. Here’s what I mean by that. You may have a home again. I’ll give you the same example earlier. It’s listed for 1.4. And you as the client tell your real estate agent. Well, hey, look, why don’t we start with an offer of 1.25? Oh it regardless of what the market stats a meaning like this might be a neighborhood that’s going to sell in three days with multiple offers an inexperienced agent will get emotionally charged with that offer. They’ll say things like, oh my gosh, you don’t want to do that. The seller is not even going to look at it. Don’t do that. That’s

Stupid and they start to get really frustrated over your things. Now, if an agent believes that your author writing strategy is a failed strategy. They should 100% be telling you Hey, listen, my job is to write the offer and fight to the death to get this accepted. However, I’d be ill advising you if I told you that this was a winning strategy based on today’s market dynamics. Let’s go over those. One, two, three, four, five six, seven eight nine ten. Now you’re educated based on all these market dynamics is

is one to 500 still the offer you want to go to bat with because it is listen will sign the offer right now and I will fight tooth and nail to get this thing approved for you, but it’s my job to make sure you’re educated. That is the right strategy going right into the emotions of like no don’t do that. You’re never going to do it. You’re never going to do it. You’re never going to do it. If they get emotionally charged when you write the offer. They’re probably focused on the commission and I hate to say this, but they’re probably focused on the commission because an age doesn’t want to do free work. That’s how they perceive this.

No, it’s not free work. This is just part of the gig that we do every single day. Right? The second part of the emotion is when the agent writes the offer it gives it to the other agent and the other I’ve had this happen guys. Literally I should curate this probably hundreds of times in my career, but they get on the phone. Let me get my phone out and they call you back and they say Steve I just got your offer is your buyer series and I just sit there and I know they don’t answer the question. I said sure what’s going on. Well listen.

This price like I just don’t think they’re serious. I said, of course, they’re serious their 1000% serious buyers at that price. Well, that price is never going to work. That’s why we have counters for so do me a favor present the offer talk with your seller about it get me account of it works with it. And at the end of the day you and I are going to go back and forth and there’s going to be a price that everybody kind of dig their heels in and at that point my buyer is going to make a decision and your seller is going to make a decision and if that decision is to move forward great if it’s not we move on to the next one, right?

That’s where we have to stand really really really strong on this because when emotion kicks in we kind of get those like weird Jitters like oh my gosh, the deal is going to fall apart. Listen in the negotiation phase there is no freaking deal. There is no deal until both parties agree to signed a contract and earnest money or consideration has been given everything before that is just as hypothetical like hey, hopefully this works out hopefully it you know, whatever happens happens, but it’s my job to get you to the Finish Line, right?

So that’s the first thing when there’s overly High emotion to deal. Let me tell you the second thing. And and by the way do sellers get frustrated with this yes or no. Of course they do they get super mad because not only are you not giving them the price that they listed it for. They probably got an idea of what they’re going to do with that Equity once they sell it and right now you’re negotiating of a demotion, right and I talk about this all the time real estate agents don’t negotiate numbers. I don’t negotiate times. They don’t negotiate contracts. All we do is to negotiate emotions, right? We’re

Their top emotions and we bring them back reality. We take your bottom emotions and we bring them up to reality and hopefully wherever reality is wherever your parameters are to bring success we can get you a win if we can’t we move on to the next one. It’s honestly no big deal. But if you ever run into a real estate agent that’s overly aggressive to get you to negotiate on your own number meaning like the other agent should get you to negotiate because you believe that the sellers not going to take your deal. But if your own agent is trying to get you to negotiate to a number there’s

only something broken right there and I’d probably advise against working with that type of agent the second thing that I wrote down in my notes are that’s in my head on this one is things that people say when you know that there’s a negotiation to be had in the number. One thing that you should look for is Steve. I don’t have to sell Steve. I don’t have to buy right negotiation 101 are that I mean nobody cares, right? Of course, you don’t have to sell course you don’t have to buy but if I tell the other party and it’s

Hey, we’ve got this homeless at one point for here’s our offer at one point two five. And by the way, my buyer doesn’t have to buy. What is the seller think when they hear that well if they don’t have to buy or really want to buy why are we negotiating in the first place? So now this you automatically demotivate or unmotivated the other party by saying that because if you don’t love the product if you don’t love what they’re having to sell how do you expect them to get motivated to sell it to you? And when I say motivated I mean like how do you get them to the point to where you know what?

But this is a really cool agent to work with are those are really cool buyers to work with our this was a really cool, you know homeowner or seller to work with. I’m going to negotiate a little bit more because I’m just excited to sell them this piece of property, right if you guys don’t think that’s happening behind closed doors. You’re nuts people judge on almost every Factor there is when selling their property they want to sell it to the family that just or the or the or the husband or the wife or the single, you know, anybody under the sun, right? They want to sell to somebody who makes them feel excited to transfer all the

Memories are they’ve made with that home to somebody else. If you do everything that you can to erase that motivation the seller or the buyer who’s ever on the other side of the transaction. They tend to dig their heels in and it almost always results in a failed contract. And then what happens is that, you know, the deal falls apart you’re frustrated the other side’s frustrated the other agents frustrated and now we’ve got nothing to move forward. Now I say this all from a perspective of in my career. I’ve been I’ve been in this business since beginning of

Ian and unfortunately or fortunately however you want to look at this there have been many times when I’d had it, you know called the client and say hey I got to be honest with you. I know where we know we’re negotiating right now. I know we’re waiting for a counter. I know you’re you’re mulling a counter over right now. I don’t think this is the right house for you. And what do you mean? It’s not the right house? Well, typically, you know X Y and Z happen. I didn’t see that stuff happened and I don’t want you to call me in three months from now saying that you have buyer’s remorse because the home down the street hit the market and you wish you would have taken.

Not one or just had a better garage or that had a better view or this one had a better pool. It’s very heartbreaking. I’ve had those conversations before when the client says. Hey, you know what? I wish we would have waited another month. I wish we would have, you know, considered this neighborhood. I wish we would have you know up to our average are our price range to this or I wish we would have looked at cheaper product because I think I could have gotten what I wanted about Market.

From a real estate perspective that’s really committed to this business. That is the worst conversation. Anybody could ever have with me every you know, the hard conversations are not Steve cancel the listing or Steve. We don’t want to move forward with this transaction or don’t write the offer or don’t Market it flick look all that stuff to deal with oil, you know, does it sting sometimes sure but not as bad as when somebody tells you they feel they made the wrong decision now, well you get buyer’s remorse in this process, of course you will of course she was very natural for you to have

But to have straight up resentment over a decision you made it’s just bad process. I don’t want that to happen to you guys. So let me sum this up again. Number one. You want to be a great negotiator. Don’t let the emotion around the numbers they come in get to you. It’s just a number and oftentimes the other party is giving you a number to get you to budge. It’s not because they have any emotional belief in that number whatsoever. They’re just trying to get to a Finish Line every counter every conversation. Every number every term is 1

one more step to you getting what you want in the transaction. The second thing one of the terms I would never use is we don’t have 2X. We don’t have to buy we don’t have to sell we don’t have to finance. I can pay cash. I could buy 20 of these those statements in the negotiation table whether you’re doing it verbally with a client whether you’re doing it, you know through a proxy and agents should never come up because it almost always demotivates the other client instantaneously because once you say I’m not excited to do this

Nobody wants to move forward. Now. The last thing I’ll tell you is you might be thinking of your head will Steve if I tell them that I’m excited to buy the home won’t they use that against me on the surface? You may think that that’s possible but at the end of the day you’re going to get a contract in your hand. There’s going to be a number on that contract. You’re either going to sign it. You’re going to counter it or you’re going to reject it. You’re in 100% full control. Now if you write an offer and we put all the offer that this client is super super excited to buy it. Does that mean you’re going to pay more? No, not at all.

All it doesn’t and at the end of the day, you’re the one who’s in full control. So listen negotiation in today’s market and even in great markets and in bad markets, it really really really matters. And if you want somebody to work with you that understands us at a super high level and that won’t convince you to sign a contract because commissions at stake or or worse yet. Like we’ve already put all this time into the process right now. You should just accept the offer guys. I hate to say it. This is why so many people have so many negative opinions about our industry.

Because you have agents that are just fed up with a process or maybe they need the money or maybe they just don’t have the whatever the issue is, right. There’s no right or wrong issue. But you’re the one that pays the price for its. Oh, look, there’s so much money. We say all the time. All the money is made in the closing process. It’s because negotiation matters write, my name is Steve. Also, if you have any questions or somewhere below you can click to contact me. I love you all any questions Carlsbad down south to Solana Beach real estate. I’m your guy talk to on the next one. Be safe.


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