So much of life is a negotiation—so even if you’re not in business, you have opportunities to practice all around you.Kevin O’Leary
CRE and residential real estate agents have a wealth of business skills in their toolboxes: data analysis, a basic understanding of economics, financial accounting, business management, emotional intelligence, and so much more.
Among those critical skills? Negotiation savvy. A World Economic Forum listed persuasion and negotiation skills in the top 15 most important skills in its 2020 The Future of Jobs Report.
No one-size-fits-all approach exists for crafting a successful negotiation strategy. Experts recommend those who negotiate regularly be agile and flexible, able to adjust and use different skills depending on the situation and people involved.
Negotiating: An Important Skill for Real Estate Agents
“Negotiation in the classic diplomatic sense assumes parties are more anxious to agree than to disagree.” Dean Acheson
Buying or selling a home, opting to invest in a commercial property, making significant changes to an investment property portfolio, preparing to grow and move a business into a larger space, or setting in motion plans to sell a company and retire…each of these scenarios represents much more than a financial decision. It’s emotional, too. Skilled RE negotiators understand and can put themselves in their clients’ place to understand motivations and offer advice, too.
Other reasons to hone your negotiating skill?
- By equipping yourself with a range of negotiation strategies and tactics enables you to maximize a deal’s value.
- The digital transformation has come to the real estate industry, with Zillow and Trulia or Opendoor and Offerpad using algorithms, machine learning and artificial intelligence to conduct real estate transactions. But only real estate agents offer the ‘human value’ of developing personal connections and advocacy, which are invaluable assets.
- You’ll differentiate yourself from your competitors and increase the probability that your satisfied clients will refer you to others in need of your services.
Hundreds of books, podcasts, seminars, and webinars offer ideas and explanations of best practice negotiation strategies and techniques. But the concepts most provide—that structural framework—assume audiences will use them to build their own negotiation approaches. If you’re not sure about your negotiation style, check out this article which explores the persuasion tools model, which can help you find the best negotiation approach based on your influencing capabilities and level of intuition.
Coaching and training sessions offer roleplaying scenarios for people to develop their negotiation skills. But there are practical tips and skills you can use to enhance and grow your negotiation savvy, such as those we list below.
Negotiation Best Practices
“There are a lot of things behind a negotiation process.” Jorginho
1. Clearly define and set your goals.
Believe in those goals to drive them forward in the negotiation process, whether it’s stronger lease terms or better terms for a merger and acquisition.
2. Cultivate self-confidence and eliminate fear.
“Let us never negotiate out of fear. But let us never fear to negotiate.” JFK
Approaching a negotiation—even one about which you’re unsure of the outcome—with a fear you’ll lose sets you up for that loss. Overconfidence isn’t the answer, either. Instead, imagine possible worst-case outcomes and rehearse your response. Go into that session anticipating the best outcome, take a deep breath, and work to achieve it.
3. Frame the negotiation as a conversation—not an argument.
“He who has learned to disagree without being disagreeable has discovered the most valuable secret of negotiation.” Chris Voss
An aggressive, rude posture—or coming across as a fast-talking used car salesman—won’t win you any points. You’re discussing a business deal, enumerating pros and cons or benefits and drawbacks, not attempting to intimidate the other party into resentfully capitulating. Those outcomes are rarely positive for anyone, and an argumentative style won’t build relationships or goodwill, either.
4. Separate emotions from the process.
“The most difficult thing in any negotiation, almost, is making sure that you strip it of the emotion and deal with the facts.” Howard Baker
Negotiation doesn’t occur in front of a computer—except, perhaps, during the pandemic. Prior to starting the negotiation, actively seek to develop a personal relationship with your clients. Many negotiations can become emotional processes, but by treating all parties with respect, separating the person (or entity) from the negotiation, taking time to understand their goals, you can focus on the deal at hand with a clearer eye.
5. Acknowledge the other side.
“The ability to see the situation as the other side sees it, as difficult as it may be, is one of the most important skills a negotiator can possess.” Roger Fisher
Entering into negotiations, your goal should always be to achieve a win-win (not an “I win, you lose”) outcome. Both sides want—and deserve—to be heard and receive acknowledgement that participants value and respect their needs. Take time to understand what’s important to your side and what the other side values most—even when the components differ. A tenant or seller might have price foremost in mind; a landlord or owner, on the other hand, might prioritize length of lease and stability.
Learn and prioritize the capacity, needs, and urgency on both sides. Identify more opportunities to create additional value for both parties. Take a macro view of each party’s goals. What’s the “big picture” for both? Examine existing portfolios, the proposed deal, overall market fundamentals, and any other relevant data—then work with the other negotiator (when there is one) or the other party to bring everyone to the middle ground.
6. Step outside the box.
“Place a higher priority on discovering what a win looks like for the other person.” Harvey Robbins
Don’t be afraid to get creative! You may find that creativity driven by closely examining the proposed deal from all sides. Avoid falling into the trap of seeing only how the deal benefits “your” side and investors and discounting benefits to the other side. Make the effort to show the other negotiating party what makes sense for them, too—which helps them better see the value you’re offering.
7. Conduct your due diligence.
“Only the prepared speaker deserves to be confident.” Dale Carnegie
Prior to entering a negotiation, conduct due diligence, which for someone working for a CRE mortgage and investment banking firm might include:
- Outlining capital structures like short-term bridges or fixed-rate permanent options that are appropriate for the property and fit a borrower’s needs
- Leveraging past experiences to target the most appropriate capital sources and find the right loan
- Uncovering potential issues or pain points that could upset the deal and proactively finding and communicating solutions to the lender, rather than finding a deal go south because of an unpleasant and unexpected eleventh-hour surprise.
Good negotiating requires a balancing act that requires a range of interpersonal communication skills to achieve the results you seek. You’ll need to be assertive but also listen to the other party. Spend time cultivating a strong relationship with the other participants and gain their trust by sticking to your principles.
Want another way to advance your negotiating skills? Grow your network of like-minded individuals. Take CREA United, for example. This organization’s members represent all aspects of the CRE industry—our groups include construction, corporate, dentistry, industrial, medical & healthcare, multifamily group, office, and retail. We’re passionate about sharing our knowledge with other high-level, experts with the same commitment to integrity and honesty.