I saw a television commercial recently with a young couple and their two children sitting patiently on a bench in front of a house with a “For Sale” sign out front. When the husband asks what they’re waiting for, his wife explains they were told to watch the market and wait for a great deal.
Well, let me tell you, there is no reason to wait. Prices and mortgage rates are at historic lows. Homebuyers can purchase a nicer property at prices that would have been laughed at just five years ago. But still the bargain hunter is hovering, eyeing properties like a predator ready to pounce. And when they strike, it’s with an offer that sellers and agents often consider insulting.
In this market, you don’t have the luxury of such sensitivity. Buyers have been conditioned to negotiate the price for a home — regardless of the listed price and how many times it has been reduced. They don’t care about your costs or shrinking profit margins. Why should they? That’s not their problem. It’s yours. If you want to sell a home in a tough economy, you need to recognize that the recession has created a society of bargain hunters that are feeding on the plight of sellers — whether it’s a home, automobile, or consumer goods. They’re savvier than ever before and can smell panic in a seller. So, you’ve got to be prepared to deal with their carnivorous desire for a rock-bottom price.
When you get a ridiculous offer, rejoice! At least you have an offer. The alternative is no offer at all, which leaves you with no opportunity to negotiate. When you get any offer, the buyer is signaling interest. It’s now up to you to rev up your sales skills and take that offer from ridiculous to acceptable.
Simply put, intense desire to own reduces the price substantially. Yet, as we all know, even if some prospects ardently desire what you’re offering, you will still hear objections such as, “it costs too much.” For some people, wearing down a salesperson is a sport and to negotiate is a way of life. And, of course, it is a method to offer reassurance to themselves that they are receiving the best value available.
One of the greatest responses to “it costs to much” is to ask, “how far apart are we?” or “how much is too much?” Simple questions such as these will determine what they think your product should cost.
When you know what they are willing to pay versus your actual cost, you are in a position to overcome the objection. Also, given the objection “it costs too much,” you can ask, “in comparison to what?” Again, if it’s a price objection to other availabilities, it is then a matter of presenting the benefits of differentiation over the competition.
The purpose of a negotiation tactic is to have the other person move from his or her position without moving from your position. As a professional negotiator, the tactics must be memorized so you not only learn their applications, but also how to deflect a tactic when it is used against you.
1. THE WINCE
An overreaction to the action of the counterpart
They say the price is $25,000. You make a face (the wince), overreact, and say, “$25,000! You’re kidding!” Remain perfectly silent, and the counterpart now will defend or immediately drop his price.
The most fundamental rule with Application of the Tactics is: Never accept the first offer.
As a buyer, if the seller accepts your first offer, you will always feel you could have done better or something must be wrong. As a seller, you are left feeling you left money on the table.
COUNTER TACTICS TO THE WINCE:
• Plan your concessions and always start high on price. By prearranging your concessions and knowing in advance how far you are willing to drop, you will still get what you want even if you end up at your ultimate “fall-back” position.
• Silence, and let the airwaves fill with concessions.
2. SILENCE
The most powerful tactic of all in a negotiation is the ability to remain silent
“The only pressure you are allowed to use in a sales presentation is the pressure of silence after you have asked a closing question.” —Brian Tracy
“Whenever you ask a closing question, shut up. The first person that speaks, loses.”
—J. Douglas Edwards
COUNTER TACTIC TO SILENCE: Silence.
3. OUTRAGEOUS BEHAVIOR
Surrendering to the counterpart’s position by using fear as a tactic
Unscrupulous and childish negotiators understand people will succumb to fear. Therefore, they practice outrageous behavior by slamming their notebooks, throwing their pencils across the room, or simply raising their voices. Realize that the number one reason a negotiation fails is because both parties become emotional and an impasse results. You cannot meet outrageous behavior head on.
COUNTER TACTICS TO OUTRAGEOUS BEHAVIOR:
• Time-out: Side-step outrageous behavior by taking a break.
• Set-aside: “This is obviously a sensitive issue. Why don’t we set this aside, discuss the other issues and return to this point later?”
• Feel, felt, found: “I understand how you feel. Others have felt the same way, but after consideration, here is what they found.”
Check Back to learn more Fundamental Tactics of Negotiation…
As we discussed last week, we all react and respond according to our own dominant personality style. Consequently, you should know yourself better than others do, and know others better than they know themselves. Now let’s talk about the second personality type, The AMIABLE:
Amiable types are slow moving but consistent, and enjoy helping others accomplish their desired results. They will consistently produce if conditions are perceived as perfect. They dislike change, because they prefer to perfect only what they are doing.
WEAKNESSES OF THE AMIABLE TYPE:
• Takes life too easy
• Not goal oriented
• Hard to get going
• Can bring others down
• Passive observer rather than active participant
• Resists change
STRENGTHS OF THE AMIABLE TYPE:
• Low-keyed, easygoing, and relaxed
• Sympathetic and kind
• Consistent life
• All-purpose person
• Steady, dependable
• Has good administrative ability
• Finds the easiest way to accomplish task
OBSERVABLE BEHAVIOR OF THE AMIABLE TYPE:
First impression: Open, warm, indirect
Movement: Slow and easy
Main Focus: Relationships
Priority: Building trust and getting acquainted
Irritation: Pushy and aggressive behavior
For acceptance: Depends on conformity, loyalty, and helpful nature
Personal worth: Attention from others and acceptance of others
Personal billboard: “Notice How Well Liked I Am”
AN AMIABLE TYPE MAY WANT:
• Status quo
• Security of situation
• Time to adjust
• Appreciation
• Identification with group
• Work pattern
• Limited territory
• Areas of specialization
HOW TO RESPOND TO THE AMIABLE TYPE:
• Provide a sincere, personal and agreeable environment.
• Show a sincere interest in the person.
• Ask “how” questions to get an opinion. Allow for use of visual illustrations.
• Be patient in drawing out the goals.
• Present ideas or departures from status quo in a non-threatening manner. Give Amiable Types a chance to adjust.
• Define their roles or goals in the plan.
• Provide personal assurance of support.
• Emphasize how their actions will minimize their risks.
Check back for Part 4 of the Four Personality Types…
As we discussed last week, we all react and respond according to our own dominant personality style. Consequently, you should know yourself better than others do, and know others better than they know themselves. Now let’s talk about the second personality type, The EXPRESSIVE:
The Expressive is a “people person.” He or she likes establishing rapport, bringing people together and being natural bridge-builders. The Expressive is the type of person who would wear or drive red, and likes status and flashy possessions.
STRENGTHS OF THE EXPRESSIVE TYPE:
• Appealing personality
• Cheerful, upbeat, bubbly
• Sincere at heart
• Adventurous
• Inspires others
• Charms people into ideas
• Makes friends easily
WEAKNESSES OF THE EXPRESSIVE TYPE:
• Too happy for some
• A need to be liked by everyone
• Distracted very easily
• Talks too much and never gets down to business
• Undisciplined
• Needs to be around people and be the center of attention
OBSERVABLE BEHAVIOR OF THE EXPRESSIVE TYPE:
First impression: Open and direct
Movement: Fast-paced
Main focus: Relationships
Priority: Open interaction, dynamics of a relationship
Irritations: Boring task and being alone
For acceptance: Depends on playful, charming nature
Personal worth: Acknowledgment, being appreciated, personal recognition, applause
Personal billboard: “Notice ME”
AN EXPRESSIVE TYPE MAY WANT:
• Social recognition
• Popularity
• People to talk to
• Freedom of speech
• Freedom from control and detail
• Recognition of abilities
• Opportunities to help and to motivate others
HOW TO RESPOND TO THE EXPRESSIVE TYPE:
• Provide favorable friendly environment.
• Never use confrontation if you want productive feedback.
• Allow the Expressive type to express their intuition and ideas.
• Provide ideas for transferring talk to action.
• Provide testimonials of experts on ideas.
• Allow time for stimulating and fun activities.
• Provide details in writing, but don’t dwell on them.
• Create a democratic environment.
• Provide incentives for taking on tasks.
Check Back for Part 3 of the Four Personality Types…
We all assume that other people want what we want and therefore attempt to conduct the negotiation in the same way we would. We all react and respond according to our own dominant personality style. Consequently, you should know yourself better than others do, and know others better than they know themselves. This week, let’s talk about the first personality type, the DIRECTOR:
Directors are no nonsense, bottom-line people. Give them the ball and let them run. They like challenges and they want immediate results. They love power, authority, and prestige.
STRENGTHS OF THE DIRECTOR TYPE:
• Born leader
• Unemotional
• Embraces and is in dire need of change
• Goal oriented
• Well organized
• Big thinker
• Thrives on competition
• Excels in emergencies and usually has the right answer for a problem
WEAKNESSES OF THE DIRECTOR TYPE:
• Bossy, impatient, tactless
• Comes on too strong
• Minimum tolerance for poor performance, mistakes, and ambiguity
• Enjoys controversy
• Can’t relax
• Quick tempered
• Big picture, but details unimportant
• May be right, but disliked in the process
OBSERVABLE BEHAVIORS OF THE DIRECTOR TYPE:
First impression: Direct and self-assured
Movement: Quick and fast-paced
Main focus: The task at hand
Priority: Results in the shortest amount of time
Irritations: Wasting time, chitchat, and actions that postpone results
For acceptance: Depends on leadership skills
Personal worth: Measured by winning track record, results
Personal billboard: “Notice my accomplishments”
A DIRECTOR TYPE MAY WANT:
• Authority
• Challenges
• Prestige
• Freedom
• Varied Activities
• Difficult Assignments
• Logical Approach
• Opportunity for Advancement
HOW TO RESPOND TO THE DIRECTOR TYPE:
• Provide direct answers, be brief and to the point.
• Confrontation may be necessary to gain their attention.
• Ask “what” questions, not “how.”
• Stick to business.
• Outline possibilities for Director to get results, solve problems, be in charge.
• Stress logic of ideas or approaches.
• When in agreement, agree with facts and ideas, not the person.
• If time lines or sanctions exist, get them into the open but relate them to end results or goal.
CHECK BACK FOR PART 2 OF THE FOUR PERSONALITY TYPES…
It is a misconception that, in the case of a new home or homesite, customers are only concerned with the lowest price. Many salespeople and builders/developers think this is so. As a professional, you must realize customers are concerned with more than price, even though you hear them ask “How much per square foot?” when you haven’t even had a chance to fully present your neighborhood and homes. That question appearing early in the presentation is just as frustrating as the prospect’s responses: “What’s the best you will do?” or “Will you take less than the listed price?” or “We can’t go over a certain amount,” or the classic, “Your competition is cheaper.”
The Basics of Price Resistance
It always costs too much: A price objection is an automatic response. Everybody asks how much it is and then flinches at the price. All customer, yourself included, become intoxicated with the idea of obtaining the best price possible. Regardless of the cost, their initial reaction is, “It’s more than we wanted to pay.”
Are they objecting to the price or are you? For the sales professional, this must be clear. Often the price objection appears in the salesperson’s mind first. If you have issue with your neighborhood values, then you won’t be able to overcome the objection if your prospect voices it.
I. RELATE: Before you begin to negotiate, you must first establish if your counter party sincerely wants to own a new home or homesite.
II. EXPLORE: Verbal offers are a worthless sign of commitment. Commitment comes in the form of a check and a contract. Unless you have a check and a contract, you are merely having a conversation. If prospects are hesitant to issue that check, continue exploring until you find out where their minds are and what is prompting their reluctance.
III. PROPOSE: In most real estate transactions, the prospect wants to negotiate based on tradition. The tradition is based on your propositions or how you present the contracts.
If your contracts say “Offer to Purchase,” change them. Avoid using the following phrases:
“Let’s make an offer.” or “You will never know unless we ask.
“By law I’m obligated to present any and all offers.”
“This home is listed at $__.” or “The price they are asking is $__.”
IV. AGREEMENT: You arrive at an agreement by working through the written proposal one provision at a time, by answering the customers’ questions and allaying their fears, and by showing that you truly do have their best interests in mind by helping them find the home of their choice.
The Fundamentals of Negotiation
Never allude that there may be room to negotiate. If you are working for the seller (builder or developer), by law you are representing their best interests. You are not a buyer’s agent and the moment you negotiate for the buyer, you have crossed the line.
If you must make concessions, only negotiate terms, conditions, closing dates, initial investment, etc. Never the price.
Negotiation is a mindset. If you believe in the value of the offer, you will stay strong.
Both sides want something. You want them to become owners and they want to own a home/homesite. There is equal pressure and you should never approach the negotiation table feeling that you are the only one in need. Both parties desire a specific outcome or there would be no reason to conduct the negotiation.
Developing Negotiation Power
Before covering the tactics, there are antecedents to negotiating that must be understood.
The first is emotion. The more you are able to keep your emotions out of the negotiations, the better you perform. The key is not to get so caught up that you become overwrought.
Secondly, by controlling emotions and appearing as a reluctant seller, the skilled negotiator possesses “walk away” power. This means you must decide in advance that you are willing to walk away from the negotiation table all together.
Negotiation Tactics
The purpose of a tactic is to cause the other person to move from his or her position without moving from your position. As a professional negotiator, tactics must be memorized not only to learn their applications, but also to learn how to deflect a tactic when it is used against you.
1. Will You Take Less Than the Listed Price?
Prospect: “We would like to make an offer,” or “Will you take less than the listed price?” or “What’s the best you can do?” or “What’s the bottom line?”
Superachiever: “Are you saying you like this home/homesite and would like to own it?”
Prospect: “Yes, but only if we can get it at the right price” or “at a deal.”
Superachiever: “Mr. Prospect, let me ask you this. When you move into your new home and meet your neighbor who says, ‘How much of a discount did you get?’ Or ‘What kind of deal did you get’ how are you going to feel? The reality is if we offered discounts to everyone, your neighbor might look at you and say, ‘Is that all?’ At this point, how would you really feel? I sense now you understand why we don’t negotiate. Everyone who owns in ___ gets the same value. After all, that’s what’s really important, isn’t it?”
Prospect: “I’m only concerned about the deal I get. If my neighbors get a better price, then good for them,” or “I’ve never paid full price for real estate.”
Superachiever: “I’m curious. Are you familiar with how real estate’s true value is determined? In reality, the developer/builder, or the salesperson representing the home/homesite, does not determine value. Value is based on comparable sales. In other words, a professional appraiser says property is only worth the last price for which a home was purchased. If yesterday, someone purchased a comparable home/homesite at $__, and today, you purchase it at $__, then what is the true value? Miss Prospect, perhaps you might be more comfortable owning a home with incentives rather than the lifestyle, quality and value we offer?
2. Negotiating with a “Buyer’s Agent”
When a buyer’s broker is negotiating on a customer’s behalf, the strategy is to make sure the broker understands why you do not want randomly negotiate price.
Superachiever: “Miss Broker, you have access to the local MLS and can see everyone paid the same fair price, which is the stated value. We’ve promised our customers value protection and we have committed to protect our homeowners sacred equity. Don’t you think your customer wants to invest in a community where the developer/builder is committed to the homeowner’s best interest?”
3. The Competition Will Discount Their Homes
Superachiever: “Mr. Prospect, I do not want to appear discourteous, but I’m puzzled. If you feel that it’s such a great price, why haven’t you purchased one of their homes?”
Remain silent and let them state their reasons: They might like the homes, but not the community, or they like the price, but not the designs, quality, etc.
Superachiever: “Mr. Prospect, it seems that price is not the true issue and you recognize incentives and random discounts actually decrease the value of a home and neighborhood. What you’re really concerned with is obtaining the best value, is that correct? Let’s take a moment to discuss what’s truly the best value for your family and/or investment needs.”
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