Real estate negotiation sounds easy on paper, but in practice even small mistakes can sink deals. You need to understand psychology, strategy, and a shifting market to get the best outcome for your clients. Not easy!
That’s why I decided to write this guide to real estate negotiation. In this guide, I asked industry luminary Ryan Serhant and top agents from Douglas Elliman to add in their best negotiation strategies for 2023. Since we know you’re busy, we only included actionable tips you can start using today.
Want to become a better negotiator? Grab a cup of coffee, turn off your phone, and check out these 23 effective real estate negotiation strategies from some of the best dealmakers in real estate:
1. Follow the 3 Ps: Push, Pull, Persist
“For negotiations, we follow the 3 Ps: push, pull, and persist. This helps us have options as the discussions progress or regress. For example, we push information, data, proactive help, understanding and listening. We persist, relentless in our pursuit of getting to yes. And we can pull: yes … pull the deal away.
“Whether I’m selling a home for $1 million or $130 million, the minute the buyer likes it, every other agent would run to write the offer. Sometimes being the boldest pays off with the biggest successes for your clients and your business.
“It’s important to remember that, in negotiations, the one with the power is the one who will walk away. So we can sometimes use ‘pull’ in our strategies. This works with buyers and sellers and in any market. In addition to that, it’s always good as a broker to demonstrate you don’t just want to rush to do any deal for clients—you want the best deal for them. So taking the deal away can be effective to create urgency for getting the deal done and for your relationships with clients as well.”
2. Include an Escalation Clause to Make Your Offers More Competitive
“An escalation clause is a great way to give your client the best chance to win a multiple-offer situation. Here is the language we use in our counteroffers: We hereby instate an escalation clause. ‘Bob Smith’ is willing to pay $10,000 more than your highest written offer, but not to exceed $1,500,000. A copy of the highest written offer must be sent along with acceptance.”
3. Always Negotiate by Phone Before Committing Anything to Paper
“We like to advise that our agents negotiate deal points over the phone with the cooperating broker before taking it to paper. We feel that a counteroffer could get messy when there is a lot of unnecessary back and forth. If you are negotiating with an agent over the phone, it’s helpful to write up the contract as you speak to keep things more straightforward. Multiple counteroffers create confusion and make for a less-than-favorable real estate buying or selling experience. Keep it simple!”
4. Manage Buyer Expectations Early & Practice Discretion
“When negotiating on behalf of my buyers, my best tip is to run through scenarios with them to help manage expectations and proactively anticipate the response from the seller so we can be one step ahead of them once they reply.
“I also like to ask very little about the seller and share very little about the buyer to avoid giving any indications that the property has something that makes it more appealing to my side. I think the best negotiation tool is discretion—to not show my buyer’s cards and to get a non-biased view on the deal.”
5. When Things Get Personal, Sleep on It
“Brokers should not make the negotiations personal. Both sides want to get the deal done. If it is becoming personal, I recommend slowing down the negotiation and communicating that both sides should sleep on it before moving forward. Communicating and reminding the other side to not take negotiations personally is very important to keep both parties happy and interested in continuing. Focus should always be on the clients and not the brokers.”
6. Assess the Type of Negotiation & Identify Value-creating Moves
“My negotiation strategy was influenced by the book ‘Dealmaking: The New Strategy of Negotiauctions’ by Guhan Subramanian. My recommendation is to assess the type of negotiations you’re trying to accomplish—whether you’re negotiating the best deal for yourself or, ideally, a win-win situation. One of the core challenges in negotiations is identifying value-creating moves: things that are cheap for me to give and valuable for you to receive, and vice versa. This is very true for real estate negotiations.”
Here’s an example of this methodology in action:
The house is on the market for $600,000, but your research, backed up by your broker’s opinion, tells you it’s overpriced. By your estimate, a fair price would be $500,000. But when you offer that amount, the seller says you are “not even close” and doesn’t counter. You think the seller is in denial about the slump in the housing market, which has affected prices in your town quite a bit.
Sellers are looking at the prices paid for their neighbors’ houses a few years ago, while buyers are looking at comparable transactions from the past few months to try to determine the fair price. You might consider creative deal structuring to break through the resulting impasse. Start by noting that the typical house purchase is a very tight deal: Once the seller commits to a particular buyer, the seller can’t (legally) sell the house to someone else, even if offered a substantially higher price.
In your circumstance, a loose deal structure might provide a way forward. Imagine you make a slightly higher offer (it is, after all, your client’s perfect house) of $525,000. Then give the seller 60 days to keep shopping the house. If a better offer comes in during that time, the seller has the right to walk away by paying you a breakup fee—say, $25,000 or less.
This real estate negotiation strategy creates value based on the different beliefs about the value of the house. In effect, you are saying this to the seller: “You think the house is worth $600,000, but I think you won’t get a better offer than my $525,000. I’m so confident in my belief that I’m willing to give you 60 days to prove me wrong. If you do find a better price, I’ll keep looking for the perfect house. If you don’t find a better deal, we’ll close in 60 days at my price.”
7. Always Keep Notes on Listing Agents in Your CRM
“Since listing agents can have very different negotiating styles, it’s crucial to keep notes on each listing agent you work with so you can adapt to their working style when you do another deal with them. Did they prefer phone calls or texts? Were they responsive? How long did they take to respond to your emails? This is all useful data you should be noting in your customer relationship manager (CRM).
If you don’t have a CRM or want to switch to one that can grow with your business, AgentLEADS starts at just $49 per month.
7. Set Reasonable Expectations
“Many sellers get stars in their eyes in a seller’s market, only to find themselves disappointed when the offers come in lower than expected or multiple buyers ask for items after the inspection. On the net sheet, prepare your sellers for a lower-than-expected offer and build in a budget for inspection items. This will serve you and them later if the offer isn’t as expected or surprises arise from the inspection report.”
8. Watch Out for the Anger Hammer
In negotiation (and in life) nothing can keep you from getting what you want faster than becoming emotional. Since the stakes are so high, anger is one emotion that is very common in real estate deals. In his book “The Altman Close,” Josh Altman compares getting angry during negotiations to a hammer falling out of the sky and hitting you on your head. If you want to become a stronger negotiator, you need to learn how to keep your poker face—no matter what the other side throws at you.
“Emotion, especially anger, is a weakness at the negotiating table, and if you can’t find your poker face, buying and selling real estate is going to be hard for you. Don’t whine, don’t bitch, don’t pout, don’t curse, don’t get angry, don’t pace, and don’t storm out. Things happen. Not everyone is as respectful as they should be. Know this going in and be prepared to let it roll off your back with a smile. It’s the job.”
9. Make Them Think Saying Yes Was Their Idea
No one likes to be coerced into doing something. That’s why smart negotiators often subtly encourage the other party to think they’re in control. A great way to do this is to offer them a quick out. Studies have shown that using affirming language like “You’ll probably refuse, but…” leads to increased compliance.
Here’s “Million Dollar Listing” star Josh Flagg with an example of how you can apply this technique in your negotiations:
“The buyer is asking for you to pick up the closing costs to seal the deal. You’re free to say no to that, of course, but would you be willing to consider it?”
10. Negotiate From a Win-Win Perspective
“Many new agents make the mistake of starting every negotiation as if they were going into battle. Not only will this annoy the agent on the other side of the deal with whom you will likely need to work with again, but it can actually hurt your client’s interests as well.
“Instead, learn to focus on solutions instead of turning everything into an adversarial crisis. Your clients and fellow agents will thank you.”
11. Always Start With Market Value Instead of Asking Price
“My strategy is to calculate the value of a property. This, rather than the asking price, is the starting point for negotiation. It may require an offer above present market value in hot markets to get a home under contract.
“Many people want to lowball, making an offer that will never be accepted. I advise against this. It does not reveal anything about the seller’s position. I like to offer just below the minimum the seller is likely willing to accept. The seller is forced to decide to accept just a little less than their minimum but, if not, will be forced to counter aggressively not to turn away a strong buyer. The analogy I use is tennis: It doesn’t matter how hard your first serve is. If you do not get the ball in play, that first serve is wasted.”
12. Focus on Timing
“When I got into real estate, it was explained to me that one of the most important factors in negotiating with buyers or sellers is the timing. Too fast and everyone feels like it was too easy; too slow and one side may lose confidence or get cold feet. The key to managing the cadence of a deal is communication. Let the other side know what to expect and when.”
13. Learn the Rudiments of Persuasion
“Did you know that if waiters include a gift like a mint or a cookie at the end of your meal, tips increase by 14%? That’s an example of reciprocity, the first of six rudiments of persuasion:
1. Reciprocity: People feel obliged to give if they have been given something.
2. Scarcity: Antiques, artworks, and trophy properties are examples of scarcity, persuading people to act.
3. Authority: We are more likely to comply with a request if it comes from a perceived authority or expert in the field. This is why your doctor has degrees on her wall and why certifications and designations like certified negotiation expert can be so helpful.
4. Consistency: People tend to gravitate toward and feel more comfortable in situations that are consistent over time.
5. Liking: Everyone likes people similar to themselves, and studies have shown that group preference is positively correlated with persuasion.
6. Consensus: The kitchen pinned repeatedly on Pinterest will help a home sell much easier. Likewise, if you have a reputation as a great agent to work with, more agents will want to work with you, and as a result, you’ll gain leverage in negotiations.”
14. Try to Have More Data Than the Other Side
“The adage in real estate is location, location, location. When it comes to negotiation, it is data, data, data. Let the data drive your negotiations and decisions. Gather information and leverage it to your advantage. The key is to have more information than the other side.
“The person armed with the most amount of information is more likely to win the negotiation. You should also have an understanding of the best alternative to a negotiated agreement. If negotiations fail, what are the other options for your buyer and seller?”
Here are a few data points you should know about a listing:
- Market time
- Average market time for similar homes
- Average market time as a whole in the market
- Comparables
- What else is on the market
- Square footage
- Room counts
- Taxes
- Homeowner association fees
- Why they’re selling
15. Learn the Power of No
Contrary to popular opinion, “no” is one of the most empowering words someone can say. Here’s psychologist Judith Sills on the power of no: “Where negativity is an ongoing attitude, ‘no’ is a moment of clear choice. It announces, however indirectly, something affirmative about you.”
As a hostage negotiator for the FBI, Chris Voss learned that saying no can be far more powerful in getting someone to agree with you than saying yes:
“Yes is a horrible word. It scares people. They wonder what they’ve committed themselves to. They become nervous. They become distracted, and when they’re distracted, they’re not listening to you. An agreement is not necessarily through ‘yes’ because, again, we’re so used to being trapped by ‘yes.’”
If you want to learn more, check out Chris’ interview with Tom Ferry below, or better yet, grab his book, “Never Split the Difference,” from his website.
16. Use Price Anchoring to Find Someone’s Lowest Price
“The low anchor is the most effective negotiation strategy for me—when you intentionally give a lowball offer or range to a prospect to change their perception of the deal’s financial aspects.
“Typically, this will get a prospect to go right to their bottom line, or at least close: ‘Hey Jim, I’m taking a look at the numbers, and don’t kick me out here, but our initial glance is somewhere around $250,000.’ Response: ‘Matt, I told you I wanted $350,000! No way $250,000 works! I won’t take a penny less than $300,000!’”
17. Offer the Buyer a Credit on Their Mortgage
“It is clear that our current market is impacted by higher interest rates, which have decreased buying power. As a listing agent working with a buyer’s agent or buyer who is getting a mortgage as part of their purchase, one strategy is to offer the buyer credit they can use to buy down points on their mortgage. A point may cost $10,000, but that $10,000 will offer compounded savings to the buyer over the term of the loan. It will position them to achieve a rate closer to 3% (depending on how many points are purchased), which will be a win in our current market where rates are hovering between 5% and 6%. Instead of going back and forth over the purchase price, change the conversation and repackage those dollars in a thoughtful way.”
18. Learn What the Other Party Needs From the Deal
“Learn what the other party needs—not really why they are selling or buying, but what will satisfy them that they have a win-win sale. Ask the agent questions and praise the good points of the property or the nice character of the buyers if you’ve met them. Put together the best deal so that the closing is smooth and successful. I’ve closed many deals using this mindset.
“Here’s an example: I call the listing agent to say that we are writing an offer. Are there any terms the seller needs? Fast close? Contingency to find a new home? I don’t really ask why the seller is selling, but I will often pose a leading question to find out why they are selling (perhaps I see they’ve owned this home for many years via the title profile, or did they raise their kids in it? Or was this an investment rental?). I take this opportunity to tell the agent about my buyer’s story and the lender involved so far.”
19. Try to Meet Sellers in Person
”The single biggest negotiation tip I give to my buyers is to make sure we meet the sellers in person. Schedule an appointment in the evening or during the morning on the weekends—never just wait for the open house. Meeting them in person is critical to a smooth negotiation.
“When looking at multiple offers, the sellers only choose the highest price offer when there are no other factors to compare them against. The seller’s first choice is usually someone they like, so if you have a chance to talk to them and find some things in common, you’re in a better negotiation position. When your offer is sitting there in a pile of five other offers, you’ll stand out because they can put a face to yours.”
20. Keep Your Cards Close, but Try to Stay Nonchalant
”This strategy is used well when it’s a buyer’s market. It is important to be nonchalant and use innuendo, letting the listing agent know that we have other options. It is vital that the other side of the table never thinks that this home is your favorite or that you don’t have other options.”
21. Live Conversation Beats Texts & Emails Any Day of the Week
“I am in a transaction now with an agent who returns all of my voicemails with text. I get the sense she is making a point that the new generation uses technology. I’d like to make a counterpoint: She is missing so much information by communicating only electronically. There is a natural back-and-forth in a conversation where way more information and understanding come out, and those things can be essential in getting to a win-win.
“You might learn, for example, that a seller is very nervous because they are buying a home and trying to close both sales and move the same day. If you are in a multiple-offer situation, your client now has a card to play. Perhaps they can offer the seller a one-week lease after closing. This may win the day.”
22. Use Inclusions Strategically
“As a certified negotiation expert, I feel like a place where agents miss the boat is on inclusions. Many automatically include the washer, dryer, and refrigerator, but I have often wondered why. I always put it as an exclusion and say they’re negotiable.
“At certain price points, when the $2,000 or so will make or break a sale, it might be a good idea. However, if I can leverage it for something my seller wants when it comes to inspections or more favorable terms, then it is pretty effective, in my opinion. You can say, ‘You’re already taking the appliances, so your client can take that savings and fix an inspection item.’”
23. Get Your CNE Designation
“If you’re serious about learning how to become a better negotiator and want your prospective clients to know it, get your Certified Negotiation Expert (CNE) designation. The CNE course teaches you proven negotiating techniques to build trust with clients by being more confident and persuasive. Even better, you can finish the CNE designation in either four half-day sessions or two full-day sessions, and it is available in person or virtually.
“The course covers the psychology of buying and selling, building a value proposition, persuasion principles, and even scripts. This is not a book course either. It includes group discussions, role playing, breakout sessions, and exercises to help you master the strategies you’ll learn.
Over to You
Have a great negotiation strategy we didn’t cover here? Let us know in the comments.
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YASSER KHAN
Author, Coach & Trainer
Yasser Khan earned less than $1,000 in his first year as a full time property agent. With no money for the $2 train fare to his Broker's office, he was forced to walk 25 kilometers on foot. Worse, he got evicted at midnight with his wife and baby son by the roadside. Desperate, he bought a $16 Sales book and took massive action. That single investment in himself gave him an OBSCENE ROI of $160,000 in just 11 months. Today, Yasser is on a mission to make the real estate great career again and helps ambitious agents quadruple their commission income within 90 days.
Yasser Khan is a real estate coach at YasserKhan.SG, trainer at PropertyAgentUniversity.com and the author of Property Agent Secrets Book who teaches Realtors how to make more Money, have more Time and enjoy more Freedom without all the B.S. plaguing the industry today.
Yasser Khan’s approach to coaching is highly personalised, holistic, no B.S., and for “PROS ONLY… amateurs not allowed.” He believes that true success means winning in every single area of your life (like Financial, Family, Social, Physical, Mental, Spiritual and Fun).
When Yasser isn’t coaching, he loves playing GOTY PC Games with top-of-the-line Razer products and being a kid again with his 3 naughty children (actually, boss babies...), traveling to and across scenic Pakistan, enjoying hot & spicy food, taking pictures of the Milky Way with his favourite Canon DSLR and reading up all about Dinosaurs (especially T. Rex)
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