How to negotiate a real estate sale and purchase

We believe that winning or losing in the negotiation of a property sale depends on the negotiator's expertise. This is why estate agents champion their experience in securing a favourable deal for their clients.

In this post, I argue that regardless of negotiation skill, the outcome of the negotiation is strongly conditioned by the individual circumstances in which the parties sit down at the negotiating table.

Let's see what variables affect negotiation and how they do so:

Negotiating positions

In any property sale negotiation, there are three potential seller positions: urgent (“I need to sell now!”), speculative (“I'm not in a rush”), and rational (“I want to sell”); and five potential buyer positions: urgent (“I must buy now!”), speculative (“I'm looking for a bargain”), worn out (“I'm fed up...”), passionate (“I've fallen in love with the flat”), and rational (“I want to buy”).

Being in one position or another doesn't always depend on factors within our control, but often The forecast, reasonable expectations, or timing puts us in a negotiating position. Strong for which we are entirely responsible. Similarly, a lack of foresight, or overly optimistic expectations, often lead to unfavourable positions.

Foresight, reasonable expectations, or a sense of timing put us in a strong negotiating position.

Strong negotiating positions for both buyer and seller are “rational” and “speculative”; whereas “urgent”, “eroded” and “passionate” are clearly weak negotiating positions.

In the case of poorly or unadvised sellers or buyers, it is common to move through various positions.. And so the sequence "I'm not in a hurry - I want to sell - I must sell now!" has already become a classic among private sellers during the period 2008-2014; just as the sequence "I'm looking for a bargain - I'm fed up - I must buy now!" is among property buyers.

The selling team wins 3 to 1

Game theory explains that having fewer options is often more advantageous in a negotiation. Therefore, in conditions of equilibrium between supply and demand, the seller group has an advantage in six out of the fifteen possible negotiation scenarios that can occur (see figure 1) and a three-to-one ratio concerning scenarios favourable to the buyer group. This does not speak to the advantage of a specific seller or buyer in a specific negotiation, but rather to the natural predisposition of the property buying and selling game to favour the seller group in any balanced market, regardless of location. I do not have the expertise to assess the implications of this, but it would be interesting to know if it has any long-term impact on the price dynamics of real estate.

· OPTIMAL AND WORST POSITIONS

A glance at the table below is enough to realise that The rational negotiating position (“I want to sell”/”I want to buy”) is the most favourable both for sellers (they win in four out of five scenarios) and for buyers (they win in two out of three).. The reason for this lies not so much in the intrinsic strength of this position, but in the comparative weakness of most opposing positions. The same applies from the perspective of the rational buyer. It amounts to doing nothing and waiting for others to make all the mistakes.

It is also obvious that the three weak buyer positions place them in unfavourable negotiation scenarios two out of every three times, and that only when the seller is in a position of “urgency” and the weaknesses of both sides are neutralised, is a balanced (win/win) agreement achieved for both parties.

CONCLUSION

If we accept that the key to success in a sales agreement lies in entering negotiations from an optimal position, we will agree that Starting from the correct price (in relation to value), at the precise moment and with a sufficient time horizon are factors of utmost importance. Once negotiations begin, the skill, ambition, or circumstances of the negotiators may influence the outcome of the negotiation, but their impact will be relative and subordinate to the natural predisposition of the scenario to favour one party or the other.

A separate mention should be made of those extremely skilled negotiators capable of reframing a negotiation to achieve an optimal starting position (turning a “I want to sell”/”I must buy now!” negotiation into “I want to sell”/”I want to buy”), but we would then enter territory where other questions would need to be posed: is one negotiator more skilled than another, is there information asymmetry, are there intermediaries/representatives on both sides?…

Another day.

What variables affect the negotiation of a property sale? The outcome of a negotiation varies depending on the individual circumstances under which the parties sit down at the negotiating table.