Sorry, But Aggressive Negotiations Will Get You Nowhere in Real Estate: Here’s Why

by | BiggerPockets.com

There are many ways to negotiate in life. There is no right or wrong way, as each way can be effective in different situations. There are tough negotiators who try to get the best possible deal they can no matter how much it beats up their opponent, and there are passive negotiators who let others make all the moves.

I have been a part of thousands of real estate transactions as an agent, a broker, a buyer, and a seller. I think I have become a decent negotiator, whether I am trying to get the most money for my clients who are selling a house or I am trying to buy a flip or a rental for myself. I see “tough” negotiators all the time who focus on winning each battle, and personally, I don’t want to do business with them. I want to do business with investors and agents who I trust and will not give me a headache. When I do business, I want to build long-term relationships that will make me successful for many years to come. I want to win the war, not squeeze out a few thousand bucks on deal that may jeopardize future opportunities.

There’s More to Negotiating Than Getting the Best of Someone

A lot of people focus on one deal when they are buying or selling real estate. They want to get the best possible price or sell for the most money they can. When you have a successful real estate business, your goal should not be to do one or two deals; it should be to do many deals every year for many years to come.

The truth is, every deal you do and the way you handle that deal has an effect on how successful you will be in the future. Our reputations can be an incredible asset or a huge detriment to our success. I own a real estate brokerage, and over the years, we have worked with many agents who fought hard for their clients. You usually see their fight and determination during the inspection process. They ask for every possible thing they can to get the most money and most value for their buyers. Every single deal is the same with these agents, and it leaves a bad taste for both the seller and the agent who is representing them. Eventually, agents begin to wonder if it is even worth accepting offers at face value from the agent because they know they will get beat up in the inspection. It might even be easier to take a lower-priced offer from a different agent.

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Related: Why It’s Usually Better to Listen Than Speak When Negotiating Real Estate Deals

I am sure the agents who are fighting for every penny they can for their clients believe they are acting in their clients’ best interests. However, over time, with every deal they fight for, they are hurting their clients because they lose trust from the other agents in the area. They also may scare some sellers off because of all the requests they make. Sellers are often offended when a buyer asks for everything they can in an inspection. People are attached to their home, and when someone insinuates it is a pile of crap, the owners get mad. I have seen many sellers try to cancel a deal when they get a huge list of inspection items. They would have been willing to fix a few things or even offer a small concession, but when they see a crazy long list, they want to end it.

Fighting as hard as you can in one deal is not always the best way to negotiate the best deal.

Negotiating in Bad Faith Will Hurt You

There are many investors who make offers on houses knowing they may not go through with the deal or they are going to ask for a huge concession form the seller during the inspection. They want to get their offer accepted and then bully the seller into lowering the price. They may be a wholesaler who thinks they have a decent deal but need a better deal to make the numbers work for their buyers. If they can get the home under contract maybe they can get the seller to negotiate more, and if not, they will just cancel.

On one or two deals, this strategy may work well, it may even make you some money. Word will get out among agents and the real estate community who is making offers that will most likely cancel. In Denver, there are a few companies who make offers on MLS deals and then wholesale them to their investor list. I see the houses they offer for sale on the MLS, I see them go under contract, and I see most of them come back on the market when none of the buyers want the house. A few agents are starting to discourage their sellers from even looking at offers they know are from wholesalers because they are tired of so many deals falling apart.

I cannot blame those agents, because every time a house goes under contract and then comes back on the market after the contract fails, the house usually sells for less money. People wonder what is wrong with it, and it gets less exposure coming back on the market than it would coming on as a new listing. I hate it when my house flips are under contract to sell and the buyer cancels.

If an agent sees an investor who is always looking to get a lower price during the inspection, the same thing will happen. Agents will steer their sellers away from those buyers to protect their clients, and in the long run, the investors build a bad reputation that hurts their ability to get more deals.

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Related: Investors: Use “How,” NOT “Why,” If You Truly Want to Succeed at Negotiating

Low-Key Negotiation Helps Your Business

Over the last year, I have had multiple agents in other offices bring me deals that I bought before they listed them on the MLS. They called me and asked if I was interested in a house that needed some work. The seller did not want to clean it up—they were worried about showings, and they thought they would ask me first since I had done a deal with them in the past that went as smoothly as possible.

When I negotiate, I don’t give in to everything the seller wants or pay more than I want to, but I always negotiate in good faith with my first offer. I don’t plan on asking for anything in the inspection; in fact, 90 percent of the time, I waive my inspection. My offers are not always accepted, but I make it clear that if my offer is accepted I will close. I will not play games, and it will be the easiest transaction that agent has had this year (at least on my end).

I do business the same way when I buy off-market houses, even though the sellers may have no connection to the real estate world. You never know who the party you are negotiating with knows—and how many more deals you can do if you treat them fairly. I’ve had multiple off market sellers refer their friends or family to me after I bought their house and made it as simple as possible with no games.

The reason people call me up first is because I have done a deal with them and always been fair. I have made it as easy as I possibly could, and they know if we make a deal, I will stick to it.

Conclusion

When negotiation for yourself or someone else, the goal is not to win that battle and get the most you can from the other party. The goal is to build your business the right way so that deals come to you, people trust you, and you are not fighting an uphill battle the rest of your career. If a situation comes along where some tough negotiating is needed, it is a lot easier to get the deal done when you previous deals have gone as well as possible.

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What’s your go-to negotiating philosophy? Have you found that overly aggressive tactics can earn investors bad reputations?

Comment below!

About Author

Mark Ferguson

Mark Ferguson is a has been a real estate investor and real estate agent/broker since 2002. He has flipped over 165 homes in that time, including more than 70 in the last three years. Mark owns more than 20 rental properties that include single family homes, as well as commercial properties, including a 68,000 square foot strip mall. Mark has sold more than 1,000 homes as a real estate agent and is the owner/managing broker of Blue Steel Real Estate in Greeley, Colorado. Mark started the InvestFourMore blog and website in 2013, which has hundreds of article on real estate. Mark is constantly sharing his insights, case studies, and interesting things that happen to real estate investors on both his blog and well-known sites like Forbes.

14 Comments

  1. Katie Rogers

    This post is way too slanted. The fact is most buyer’s agents do not work hard enough for their buyers. In fact, since ALL agents actually work for their broker, there is really no one in the buyer’s corner, and there is an awful lot of shenanigans, even deception, from seller’s agents. Shorter Version of this post: Seller’s agents do not like to work with buyer’s agents who take seriously their fiduciary duty to buyers, and these seller’s agents have the ability to hobble the career of a conscientious buyer’s agent.

    • Josh Garner

      I appreciate your point of view, but I disagree. Due diligence should overcome most deception and shenanigans. For folks who are trying to build a business in real estate, it’s easy to get a bad reputation with pinching pennies at someone else expense. Be frugal in your dealings, sure, but never be cheap.

    • Mark Ferguson

      Katie, I am not sure you read the entire article if that is all you got out of it. I am a broker yes, and I have represented a lot of sellers. However, I don’t list any houses now, I am an investor and let me agents sell. I am the buyer and seller, not just a listing broker. I came at this topic with 17 years of dealing with buyers and sellers. I am not sure how it is slanted.

      What kind of deception and shenanigans are you talking about? Can you give some specific examples?

      The point of negotiating is to get the best deal or deals. I am guessing you don’t like the part about a buyer’s agent asking for everything on an inspeciton. That can kill the deal or make the seller less willing to make any repairs or concessions. The buyers may not want to kill the deal. in fact, it is the buyer’s decision what to ask for not the agents. The whole point is that being too aggressive will hurt the buyers. There is no ulterior motive here to protect sellers.

      In your last comment can you expand on the $20,000?

      • Katie Rogers

        On my last house, I should have asked for everything on the inspection. But I didn’t. I only asked for four or five major things. the seller agreed so readily that it made me very nervous, but the buyer’s agent said I cannot ask for more after the seller has already agreed. Are you really only allowed to ask one time? We closed on the house. Months passed and everything seemed fine until the first major rain. Now we know that the house has a major drainage problem which the sellers had to know about. It looks like they made merely cosmetic repairs just before putting the house on the market. The rainy season was over so the problem was effectively concealed. Now those cosmetic repairs are coming apart Fixing the current damage (permanently instead of just covering it) and solving the drainage problem permanently is going to cost about $20,000.

        • Mark Ferguson

          I am sorry that happened.

          1. Yes you can only ask for inspection itmes once if both sides agree. It is not fair to the seller to keep asking for more just because you think they would do more.

          2. This is not really a negotiation problem but a disclosure problem. It doesn’t sound like you or the inspector knew about it so it would be hard to blame your agent for the situation.

          3. Did you get a property disclosure from the seller? If you did, did you double check to make sure they did not disclose the water issue? If they didn’t disclose it and they knew about it, you could sue them for damages. Were there signs it had happened before?

        • Katie Rogers

          In retrospect, there were signs. However, the seller’s agent attributed these signs to an old plumbing leak that had been repaired long before. The sellers had disclosed that they had the sewer cleaned out annually. This was attributed to the normal periodic issue of roots getting into the sewer pipes. What we now know is that the drainage problem was allowing rainwater to get in the sewer and subsequently backing the sewer water up into the sinks, bathtub, shower, and toilets.

          A lawsuit would be difficult. I think the seller’s agent helped them word the disclosure. Verbal attributions mean nothing in court. They might argue that the fact we did not understand the implication of what they did disclose is on us.

          With other houses, my due diligence did in fact ferret out deceptions and shenanigans. In my experience, every house purchase has included deceptions and shenanigans. The only question is whether the seller will get away with them, or whether the financial result is too small to be worth a lawsuit. My words do not adequately describe the cleverness with which the deceptions and shenanigans were carried out this time.

  2. Christopher Smith

    Hey Mark

    You advised me on a buy back in 2016 which I ultimately consummated. I employed your suggestions above, and got a really great price (to be fair the property’s first buyer fell through so my negotiationing provision was already pretty strong).

    But at the same time I could have easily overplayed my hand to really squeeze the seller which I didn’t do, the ultimate price negotiated was more than sufficiently attractive.

    The property has been a very good cash flow generator, currently 17k on a 185k all cash purchase price – zestimate currently 245k.

    Good to hear from you again.

    • Mark Ferguson

      Nice work and I am glad I could help! You bring up another great point that we sometimes over negotiate ourselves out of a great deal. We get greedy and try to squeeze every penny out we can and lose something that was already more than what we needed.

      I have been around!

  3. Scott Trench

    Mark – great that you wrote another article for BiggerPockets! I’d love to meet you sometime.

    I think this is a great premise and totally agree. If your business plan depends on squeezing a few thousand bucks out of the negotiation on each deal, you are in for a rough ride in real estate investing. Plus, in a hot market like Denver, there are only a handful of deals that make sense. In 30 years, I won’t care if I bought the place for $350,000 or $360,000. If it cash flows and I buy in the right place, my ROI will be a rounding error either way at exit. If the next best deal is way worse than this property at $360K, then it’s in my interest to pay the extra amount in good faith and ensure that I land the deal I want.

    If my plan depends on getting that price down by a few thousand bucks, I’m in trouble and my life will be consumed negotiating the details of my business, not growing my portfolio fundamentally and focusing on the keys to long-term success.

  4. Sharon Yoo

    Thanks for the insight! As a new real estate agent with only 1 transaction under my belt, I was a little concerned about upcoming negotiations for my client who wants to sell and buy. I’m relieved to hear the cutthroat approach is not the way to go. I can definitely do friendly win-win negotiations.

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