The SLOD! Best Price Negotiation Strategy

Published 10 July 09 03:00 PM | Peter Mericka 

OPINION
by Peter Mericka B.A., LL.B
Real Estate Lawyer
Qualified Practising Conveyancer Victoria
Director Lawyers Real Estate Pty Ltd

 

As readers know, I have been very critical over the years of the schemes and scams used by real estate agents. Obviously, it is unfair to criticise the methods used by real estate agents without suggesting some alternative, and so I am presenting what I have called the "SLOD! Best Price Negotiation Strategy".

I sell real estate for my clients without involving any real estate agents, and I am able to achieve the best possible price for every vendor client by using the SLOD! Best Price Negotiation Strategy.

The SLOD! Best Price Negotiation Strategy ensures that the vendor is properly informed as to the value of the property in the current market, allows potential purchasers to discover what the vendor will accept for their property, and encourages competitive and transparent negotiations to ensure that the person offering the best price will emerge as the eventual purchaser of the property.

I invite all real estate industry participants to scrutinise the SLOD! Best Price Negotiation Strategy for themselves by clicking on the icon below. I also invite comment and criticism from anyone who feels that they can improve on the SLOD! model.

I believe that the SLOD! Best Price Negotiation Strategy will become the industry norm.

 

Filed under: real estate, negotiation, negotiator, best price, slod

Comments

# Herb said on July 10, 2009 4:20 PM:

read thru the whole thing and its just what is needed.  can't fault it except what if the seller is not happy with the valuation they get.

# Peter Mericka said on July 10, 2009 4:33 PM:

Hi Herb,

I assume that you're referring to the page on the Lawyers Real Estate website titled "Determining Price" and you are asking whether a vendor is compelled to accept the valuation.

The valuation is entirely within the control of the vendor.  The vendor chooses the valuer, and the vendor is therefore entitled to question the valuer about the means by which the valuer has arrived at the figure stated in the valuation.

If the vendor is not satisfied with the valuation it may be a matter of getting a second opinion.

If the vendor accepts that the valuation is accurate, but is not prepared to accept a price in the vicinity of the valuation, the vendor may decide not to expose the property to that market, and to wait until the market conditions are more favourable.  The decision is the vendor's alone.

The valuation overcomes the problem of the self-interested real estate agent whose "appraisal" is set at a figure that will allow him/her to win the listing rather than giving an honest estimate.

If the vendor decides not to sell, because the valuation indicates that the current market will not pay what the vendor want, the vendor can make a decision immediately, rather than go through the process of putting the property on the market, having the real estate agent hassling for a reduction in the price in order to get a commission-winning sale, only to find that the property still hasn't sold 6 months later.

Alternatively, the valuation may assist the vendor to accept the reality of the current market and the value of the property in that market.

# REAL ESTATE MAN said on July 10, 2009 5:03 PM:

I have been getting vendors to get there own valuations for years so there is nothing new about that but i I do agree that your method is a big step forward but it needs every one to take the same big step forward for it to work because there will still be the same old ways and we have to compete with the ones who use the old ways

# Peter Mericka said on July 10, 2009 5:53 PM:

Hi Real Estate Man,

Yours is a common sentiment among a small group of real estate agents who seem to operate within the existing system under sufferance, but who would adopt a more ethical procedure if it were to become more widespread.

You do realise that you can adopt the SLOD! Best Price Negotiation Strategy yourself, and use it in your own real estate business.  There is nothing to stop you.

# Tim O'Dwyer said on July 11, 2009 10:33 AM:

Why the contradictory auction hammer in the logo. Peter?

Or is it supposed to be a judge's gavel?

# real estate said on July 11, 2009 10:38 AM:

Hello Peter, it's Andrew from PropertyNow, it's been a while since we last spoke but I am always following your blog.

I also have long suggested getting valuations done for the clear logical reasons you enunciated above.

It's perfectly obvious that it's the best way forward and something we will push strongly at our private sale site.

We have the means with our rankings to make such systems widely known and I suggested it to four different Licensees ( before I gained my own license ) 5 years ago. StarrPartners, Ray White, LJHooker and Raine and Horne , all showed nil interest.

Real estate agents cannot be trusted to further the real estate industry.

Keep up the good work Peter and give me a call when you get some spare time as I would like to cross promote with you guys and discuss some other things.

Cheers

Andrew Blachut

PropertyNow

# australian real estate said on July 11, 2009 11:28 AM:

Just following on from Herb's comments. Having a valuation that's either high or low, simply isn't an issue. After all what happens if you don't like an agents appraisal?

A low , or a higher than expected valuation is merely a signpost and it';s simply information to utilise when setting your price accurately. It may not be perfect but in general will be more beneficial than an agents appraisal.

You have to ask yourself not whether its a perfect system but rather whether it's the best available methodology for pricing.

After all, you only have 4 options

real estate agent appraisal - worst option

property reports - too general in nature and unlikely to be accurate enough

your own efforts - if done correctly this is a brilliant option as most people can become overnight experts on their own narrow market segment

registered valuer - an excellent option and a cheap investment

Andrew Blachut

PropertyNow

# Peter Mericka said on July 11, 2009 11:40 AM:

Hi Tim,

There is no contradiction in the use of the gavel, as the “SLOD! Best Price Negotiation Strategy” is set to become an online procedure, based on the popular internet auction sites consumers are used to.

The SLOD! site will allow purchasers to make non-binding bids on a property, on whatever conditions the purchaser may choose (unlike estate agent auctions where sales must be unconditional, and which thereby eliminate the bulk of eligible purchasers).  The bids will be displayed (full transparency at all stages), and will be ranked according to the amount offered.  When bids increase to a point acceptable to the vendor, and on conditions acceptable to the vendor, the vendor can decide to enter the final negotiation stage.  The vendor’s lawyer will then enter into final negotiations on the vendor’s behalf, with the purchaser or the purchaser’s legal representative.  When the deal has been hammered out, the vendor will sign a contract and it will be presented to the purchaser as the vendor’s formal offer to sell.  The sale will be complete when the purchaser executes the contract.

As for the use of the gavel image.  Perhaps it could be seen as part of the process of “hammering out” a good deal.  It could also be regarded as acknowledging the auction-like competitive aspects of the SLOD! procedure.  Maybe it could represent the judge’s gavel in view of the role of the lawyer in finalising the negotiations.  But then too, it could be seen as a mallet, for the purposes of knocking some sense into the real estate industry!

# Peter Mericka said on July 11, 2009 11:55 AM:

Hi Andrew,

Real estate agents moved into the "valuations" area in order to gain more control over vendors.  Similarly, the moved into the "contracts" area to gain more control over vendors and lawyers.  They also moved into the "advertising" area in order to control vendors' advertising funds (remember when they used to receive cash from newspapers, before the practice was banned).  They have also moved into conveyancer  broking, accepting bribes of as much as $150 to "refer" consumers to licensed conveyancers.

Most recently, they moved into "negotiations", appropriating the term to describe the way they work on each party to bring about a commission-releasing sale.

Whenever real estate agents move into a new field of expertise they:

• Displace the true expert in that field;
• They redefine the field, ignoring the long accepted rules and standards established in that field, and replacing them with their own; and
• They convert the field it, so that it serves them, rather than the consumers the original expert had been serving.

It could be described as a form of "expert-cleansing" and displacing, but on a more subtle basis and without the violence.

# Peter Mericka said on July 11, 2009 12:15 PM:

Hi Andrew,

In reply to your comment,

"registered valuer - an excellent option and a cheap investment"

Some of the reasons why the use of a registered valuer is the best option are:

The vendor chooses the valuer.  This ensures that there are no conflicting interests (it's not hard to imagine the real estate agent choosing a "pet" valuer for the vendor and directing to value the property up or down according to the directions of the real estate agent - the same reason for not relying on a real estate agent's "appraisal").

The valuation allows the vendor to determine whether or not to sell.  (Ask any real estate agent at any time of the year or economic climate, and the answer is always the same: "SELL NOW! but list the property with me.")  Again, the vendor is freed from the self-interest of the real estate agent by an independent valuation.

The valuation is in writing, and contains details of methodology.  A valuer writes a valuation with the idea in mind that it may have to be defended in court.  Real estate agent "appraisals" are invariably verbal, and are worth what they cost (who hasn't received a letter-box drop advertising a free appraisal from an estate agent who is "working the streets" giving 5 minute rubbish appraisals as an advertising ploy).

The valuation assists to start negotiations at a realistic level.  A purchaser who knows that the vendor has used a formal valuation on which to base the price range of a property will readily pitch an offer into that price range.  (Astute purchasers often make low offers to real estate agents, particularly if the real estate agent’s Exclusive Sale Authority with the vendor is nearing its end, in the knowledge that the agent will work on the vendor to lower the price).  A formal valuation prevents this.

Dishonest real estate agents either make up their own valuations (calling them “appraisals”) or insist on having some involvement in the choice of valuer.  When the vendor chooses their own independent valuer the vendor stays in control.

# Agent said on July 16, 2009 10:54 AM:

I have a question directed to all interested parties. If, as an agent, I am legally obligated to acheive the highest price for a property and time and time again the best price seems to be acheived using the plus price method am I doing the wrong thing? Despite some agents just grabbing an acceptable price for the sake of a commission my team and I try very hard to ensure that the Vendor does indeed receive the highest price possible. I am not paid by the buyer, I am paid by the Vendor and while i recognise that this pricing system is difficult to navigate as a buyer the results seem to speak for them selves. Is there an alternative that still offers the Vendor the opportunity for aggressive competition and a huge price? Am I obligated to make the process fair for all concerned or should my sole interest be the Vendor?

This is not an opportunity to say that I don't work for the Vendor, take it as fact that my team and I absolutely try for the very best price in every circumstance for our Vendor. With this as a basis does anyone have a better way of doing it?

Fixed prices cheat the Vendor, price ranges cheat the Vendor and valuers often undervalue properties which in many cases leave a Vendor short changed. I am not here to be attacked but am interested in logical discussions on the matter as I too, would like to see some improvements in the way real estate transactions are conducted.

# Peter Mericka said on July 16, 2009 1:59 PM:

Hi Agent,

I came up with the SLOD! method after researching the various price advertising methods used by real estate agents.  Any pricing method is OK, so long as it is transparent.  There is nothing wrong with using the price plus method at all.  The problem is when it is used in a deceptive manner.

For some time I used the “Offers over method”.  This involved a formal written valuation, then seeking “offers over” the valuation figure.  The problem with this approach was that it did not provide any tolerance for and over-ambitious valuation.  So, while a lower valuation would invariably result in competitive offers which would drive the price up, a too-high valuation could result in zero offers.

I now use a price range, based on a formal valuation.  The range is set 5% below the valuation to 5% above the valuation.  The property is advertised on this basis so long as the vendor is genuinely prepared to accept an offer that falls within the range.  If the vendor does not want to accept an offer within the range, the range cannot be used.  However, if competing offers drive the price beyond the upper level of the range, that’s great.

It all comes down to transparency.  So long as all parties know the basis for the price, how the price is determined, what can cause the price to change etc. and no-one is being deceived, there is no problem with the type of method used.

The SLOD! approach has proven to be the most reliable of all because it begins with a sound and objective foundation, everyone knows the “rules” associated with it, everyone gets a fair go, and the vendor invariably achieves the best possible price.

No-one has been able to find any fault with it.

# Agent said on July 16, 2009 3:15 PM:

I agree the pricing issue is a hard one to perfect. I hate underquoting and I loathe the complaints I get from buyers when their dream home has sold for $50,000 more than they can afford. I also feel for them knowing they have spent money doing some due dilligence on the property such as building inspections etc.

I have an interesting perspective as an agent, I have put 4 offers in for an investment property over the last 2 months and have have missed out on them all. I have missed by as little as $5,000 and as much as $55,000 and I know that the buyers life is difficult. I would dearly like to make it fairer all round but as the Vendor is the principal in any transaction I am involved in, i am duty bound to protect their interests.

I look forward to the future direction of the industry but would like to make the point that, on the whole, Vendors and buyers are probably more corrupt than the agents they are dealing with.

Society itself has no honour and, as agents, we have to just deal with the general popualtion. If you think for one second that our clients and buyers are above reproach, then you are not dealing in the real world.

Every one needs to take a more pragmatic approach to this on going issue.

# Peter Mericka said on July 16, 2009 4:04 PM:

Hi Agent,

Again, I must point to SLOD! as the way to go.  The SLOD! approach requires the vendor's negotiator to return to the competing bidders and give them the oppportunity to bid.

No-one "misses out" on a property.  Rather, they "opt out".  If one party is not prepared to pay more than the other, they exercise their option to walk away.

I think some in the industry fail to realise that part of "acting in the vendor's best interests" is to ensure that the parties remain on good terms.  For example, if a purchaser feels ripped off because the real estate agent used a dummy bid to gain an extra $5,000 the vendor will not necessarily feel that the agent has acted in his/her best interests.  Particularly if it leads to legal disputes further along.

And price isn't everything.  A client couple of mine chose to accept a lesser offer in order to ensure that the purchasers of their property (and their future neighbours) were to their liking.  Other vendors have forgone higher offers in order to ensure that their home is sold to someone they feel is deserving, or who will appreciate and look after the property (a reason why vendor inspections are also a better way to effect a sale).

You have mentioned that buyers can be crooked.  Quite true, most of Australia's crooks have bought and sold real estate.  But if they are forced to play by the simple rule of transparency, they can't cheat anyone.

I have found transparency to be the key in every respect when it comes to real estate sales.  Thus:

The vendor conducts the inspections or must be present during inspections - to ensure that the vendor knows who's been in the property (this keeps the visitor and the agent honest).

An independent valuer establishes the current market value of the property - everyone knows where the market's at, and they work from there.

Negotiations are not conducted by one person who acts as a go-between - this prevents a person who needs a sale to take place from putting his or her interests ahead of those of the parties.

The person who represents the vendor does not prepare the purchaser's offer - the purchaser cannot be deceived by anyone on the vendor's side of the transaction.

The SLOD! method is practical idealism applied to real estate.

# Agent said on July 16, 2009 5:22 PM:

I look forward to a far more realistic approach to real estate transactions. Whether your method takes off or not, there does have to be a better way. For many years I have tried to do the right thing by my Vendors and have suffered the ongoing insults and barbs from the General public. Let me once again make this very clear to any of the people reading this blog - be very careful about attacking the ethics of agents if your own ethics are sub par. As a buyer would you happily screw another buyer to gain an advantage in a transaction? As a Vendor would your desire for a high price mean that you would screw over a potential buyer? The reality is that very few people in this world care much for anyone other than themselves and their family. Is it any wonder that the real estate industry is a refelction of these attitudes?

I have been doing this job for many years and I must admit that my view of the general population has somewhat been jaded by my expriences. I can tell you of many, many circumstances where a Vendor or Buyer has quite openly asked me to do something that is either illegal or immoral. I have never done so.

People need to take a good look in the mirror and see if they represent the same high standards they expect of others.

Having said all that I don't shy away from attempts to improve our industry and make the whole transaction more transparent. I currently hold no Auction Listings and my average sales price is currently 12% above our quoted price plus range. Some of us agents are doing our bit to be fair and reasonable.

# Peter Mericka said on July 16, 2009 5:37 PM:

Hi Agent,

Having served as a street cop and detective over a period of 18 years, I believe I have seen more crooks, dirty dealers, scam artists, thieves and nasty types than you have, but I certainly don't share your view of the general population as represented by the real estate industry.

People are basically decent.  Some may be weaker than others when it comes to opportunistic cheating etc., but most will willingly play by fair rules.

Create a system of fair rules, and the majority will gladly play by them.  Maintain the existing system of unfair rules, and the majority will reluctantly fit in with them.  There is a difference.

# Agent said on July 16, 2009 5:46 PM:

Opportunistic cheating. I like that. My point being simply that like any other industry we are just a cross section of the general community. We are, and represent societies norms. I disagree that people are basically decent. It's a nice spin to allow people to feel good about themselves but it not reflective of the people I encounter on a daily basis.

Once again, I don't shy away from a fairer and more equitable system, I just don't beleive we are the demons and theives we are painted to be.

You may have seen more real life crooks, but Peter, I have seen more mainstream citizens willing to throw their ethics out the window for an extra dollar.

Decency is almost always forgone for personal gain, agents and consumers alike.

# Peter Mericka said on July 16, 2009 6:40 PM:

Hi Agent,

I don't think that the real estate agents, as individuals, are "demons and thieves".  However, I do believe that the real estate industry creates the demons and thieves that occupy it.

I like to use the analogy of a young and clean-cut person who joins a corrupt police force, and must make personal choices.  They can quit in disgust, remain and quietly ignore the corrupt goings-on, or become an indoctrinated participant.

It's the system that socialises and indoctrinates.  In Victoria, anyone who wants to become a real estate agent must work under a real estate agent for 12 months.  This process ensures that there is no questioning or changing of existing values in the industry, and that individuals are stripped of their own ethics, to have them displaced by the norms as dictated by the system.

Again, I have great faith in basic decency, but I do acknowledge the ease with which the peer group can dismantle it.

# Barcelona Agent said on July 25, 2009 5:23 PM:

Really great SLOD strategy that works for the people to be informed the all information as should be in their hands  . . this article is simply very beneficial for everyone . .

# George Rousos said on July 27, 2009 2:00 PM:

Hi Peter,

What are your thoughts on

www.FindMeAHome.com.au for prospective buyer's?

Check out this video for more information,you may have already seen it.

http://video.ninemsn.com.au/Video.aspx?uuid=ada7eb34-04e6-4ed4-87bf-24470ce49f6a#::ada7eb34-04e6-4ed4-87bf-24470ce49f6a

# Nathan Mitchell said on July 29, 2009 6:46 PM:

Hi Peter,

With respect, what you have just refered to in the The SLOD! Best Price Negotiation Strategy "to ensure that the vendor is properly informed as to the value of the property in the current market and encourages competitive and transparent negotiations to ensure that the person offering the best price will emerge as the eventual purchaser of the property." is a practice i put into place in my business daily. The big difference being as an agent i soley focus on real estate and buyers and sellers. It is an agents only job and it is fair to say experience plays a large part when guiding sellers towards realistic expectations. Cause as we know aiming to high can sometimes mean you get less than you would have in the first place. The big difference is i don't "allows potential purchasers to discover what the vendor will accept for their property" as i don't see that as working for my clients and what i know is what the property is on the market for will buy it. Am i missing something.

http://redlandsrealestateinfo.com.au/

# Peter Mericka said on July 30, 2009 1:45 PM:

Hi Nathan,

I have a couple of problems with what you have put.

First, when you say, "...experience plays a large part when guiding sellers towards realistic expectations..." I hear a real estate agent attempting to wrest control of the transaction from the vendor, ushering the vendor to a sale that the agent wants, rather than what the vendor wants.

As I see it, another way of expressing your view would be to say, "an experienced real estate agent knows how to nudge the parties into a sale when they're being indecisive."  A sale should only take place when both parties are prepared to commit - not when a real estate agent is prepared to commit them.

You ask, "Am I missing something?"  Yes, Nathan, you are missing the main point.  Secrecy is NEVER EVER in the interests of the parties.  Openness and transparency is the way business is done, and allowing the vendor to tell the purchaser what he or she will accept for their property is good and proper business practice.

How can you say, "...I don't see that as working for my clients..."  Please explain.

Keeping secrets does not contribute to "guidance", rather it become a hindrance.

# George Rousos said on July 31, 2009 11:00 PM:

Further to what Peter has stated, lets not forget that

any person who, while exercising or performing any function as a licensee or registered person, by any statement, representation or promise that is false, misleading or deceptive (whether to the knowledge of the person or not) or by any concealment of a material fact (whether intended or not), induces any other person to enter into any contract or

arrangement is guilty of an offence.

Nathan, it maybe good idea that you check out the ACCC's fair and square guide and download the information sheet on price offering, which can also be passed onto your clients for their own knowledge.

http://www.reia.com.au/government/trade.asp

# Matthew Shelton Sales Agent Gold Coast said on October 8, 2009 1:15 AM:

The Slod concept is a very interesting concept. As a matter of fact I think it has some very real and smart elements in it that are needed a lot more in the real estate industry. Unfortunately I am here to tell you and everyone that comes across this blog that if you can’t find a good agent that you know, like, trust and have confidence in, than this Slod system may be a good option for you. For the most part however I have to say “Good Try!, but it will never catch on”. Actually Never in a trillion years will it catch on. I say this because of 3 key facts that no lawyer would even try and debate me on here.

Fact  1.

It’s a different industry and a different skill set.

Having “Trained Lawyers” basically working as real estate agents would be like taking the club out of Tiger Woods hand and giving it to the caddy because the caddy knows the course and the rules better. Sure the caddy can play golf  but there will be a dramatic difference in score by the end. If real estate was such an easy business for a lawyer to do why wouldn’t they all just become real estate agents? After all good agents make 5 to 10 times more money than any lawyer!

(Now I Have the lawyers attention)

Consider this…An average house sale for a solicitor to do the legal work on will pay $500-$1200 and there will be 2-3 hours worth of work that goes into that. That same sale will earn the agent $12,000 - $18,000 and they may have only put in 5-10 hours in total.

Fact 2.

Most solicitors will have superior consultative negation skill than unskilled agents. But in regards to Residential Resale Property negotiations a skilled well versed agent will run rings around the sharpest legal eagle hands down.

Though the bulk of what the Slod website says dose seem to make a lot of since and it would almost seem brilliant to the people that don’t know the true ins and outs of real estate negotiation, a large portion of the value a real estate agents ads is actually in the areas left out by the author of that site and its content. Unless I am wrong I did not see any mention about the importance of Closing or Selling! Or the importance of knowing the 20 + Key principals of Real Estate Negotiation. That is a standard in my office! Now I am not saying that every agent out there is a highly skilled agents. As a matter of fact my personal opinion of most agents in general is that most are not worth their salt. BUT, I think it should be said that I have attended over 200 sales conferences, workshops and courses on Marketing, Selling, Closing, Negotiating, and Advanced Negotiations, Influencing and just about anything else you can think of that would relate to business transactions.  And I have to say I have met thousands of Real Estate Agents, Pharmaceutical Reps, Corporate Negotiators, Acquisition Specialists, Business Owners, Doctors and Counselors, Human Behavioral Specialist even the odd Police officer at these events. But NEVER have I seen or met a Solicitor or Lawyer on any one of these occasions that has come to learn how to master the art of negotiations and better their skills in this area. Now the website mentions that solicitors are trained in negotiation. Assuming they are, I would like to know who is doing the training? Because my prediction is that the training is at a basic, basic, basic level. In other words free training included and shoved somewhere in the schooling.

Consumers must know that property sellers hire agents to find buyers, close buyers and get them committed to the property and negotiate the highest price and best terms and conditions on the sellers behalf. That is what agents get paid by the seller to do. Any person that sells their service as an agents or legal representative claiming that they have a hire knowledge base in these areas but has not studied their craft is unethical. If they have not read say,10 books on each one of these subjects I would also consider them unethical. My only point here is that solicitors are not trained real estate negotiators. At most a solicitor would have conflict resolution training as part of the standard curriculum, not training on how to get a buyer to pay more money than they are comfortable paying. Solicitors are legal representatives and their skills may very from person to person but over all they are clinical y minded individuals that tend to see things in black and white. This is why they are so good at the things like the fine print, finding, defining and predicting potential risks. These are all of the things solicitors are hired for.

Let me tell you though when it comes to getting more money out of a buyer, that buyer is going to be relying heavily on their trusted adviser. The same trusted adviser that has been by their side for the last four weeks looking at houses with them and helping them along the way. (You won’t see a solicitor running around with buyers in their car now will you?) That’s ok, because buyers don’t perceive solicitors to know property values anyway. That’s not the legal reps role. Believe it or not 5 out of 10 buyers will actually ask the agents “What do you think we should offer?” The offer stage is way before the solicitor stage. As a matter of fact I would say that out of my last 300 sales over 60% of the buyers and sellers still did not have a solicitor until I hade the property compliantly sold and under contract, than they hired there legal representative to do the searches and tidy up the boring stuff.

There are good, bad and dreadful solicitors out there just as there are great, average and shocking real estate agents. In the many years I’ve been in real estate I have seen loads of contracts fall over in the hands of agents solicitors because they simply did not have the negotiation skill to keep it together when negotiations got a bit tough. Even though both buyer and seller wanted the transaction to go through! As a matter of fact commercial real estate transactions are renowned for having a 40%-60% fall over rate once in the hands of Solicitors. Why?... Over complicating EVERYTHING!!!  

Fact 3

Over 95 % of For Sale By Owners eventually sell with an agents. Why? Because buyers don’t like dealing with the sellers directly. And even if the sellers are friendly and open to offers, they struggle to get offers from good buyers. Why? Because if a buyer wants to offer $40000 less than the asking price on the property, they struggle telling the house-proud owner this. The buyer walks away and keep looking at other properties. What the seller may not know is that buyer may have paid an extra $10000 or $15000 more with some good negotiating but there are now gone forever. A good agent will chaise each buyer, qualify them and educe offers out of them without jeopardizing the property value.

# Peter Mericka said on October 8, 2009 5:42 PM:

Hi Matthew,

Let's cut to the chase - give one example, your best example, of a situation where you have relied upon your special "skills' as a negotiator, and have negotiated an outcome for a vendor client.

Tell the readers what the situation was, what skills you called upon, and what result you achieved.  You should also describe how you used your superior drafting skills in preparing the special condition by which the vendor was able to enforce the negotiated outcome (there's no point in negotiating an outcome unless it can be legally enforced). 

REALITY CHECK: Matthew, there is no shortage of real estate agents who spruik about their "negotiation skills", but when asked to give examples they can never come up with anything.

# Matthew Shelton Sales Agent Gold Coast said on October 8, 2009 10:37 PM:

Thanks Peter

Firstly

I will say that that the proof of a strong negotiator is in the final sale price. So firstly if you have sales that show figures that are rounded out even numbers I.E. $450,000 than most likely this property has been under sold. Think about it. What would be the likelihood that the buyer has exactly $450,000? Many properties sell for figures like… $620,000 or $770, 000. Looking at those numbers, they look like typical sale prices don’t they? Yes?... What about a sale prices like these… $547,300 or $663,200 or $927,665. These figures are figures from agents that negotiate every last cent out of the buyer. Now how do we do this you ask? It’s simple. We get buyers to the mark were if another buyer was to pay a dollar more for the property, this buyer would be OK to loose the property for an extra dollar. (I will not go into explaining exactly how we do that as we will be here all night)

Now Peter I ask you, Have a look at your last 10 sales. Now think about them for a moment…….. What were the prices? Ahhh are you looking at a lot of Even numbers?

if so than you probably left some change in those buyers pockets. if you hade really odd numbers than most likely you did a fair job at getting every last red cent for your seller.

Answering your question and giving you an example of the what’s and hows…

The day before yesterday I got a seller to accept an offer on their property that was over $30000 more than the registered valuation.  Unfortunately the offer was still $60000 less than what the sellers were wanting (No that was not my doing, They made up that crazy price all by them self).

These sellers were dramatically optimistic about their sale price. This property was on the market for 2 months and had no offers. The sellers used every trick under the sun on me to try and convince me of all of the reasons why they “Needed, Wanted and absolutely HAD TO HAVE This huge price. What the sellers failed to understand is that they will not see that price in the next 3-6 months.

Due to the fact that the sellers are about to have a baby in 4 months I felt the timing of this contract could suit them perfectly so I put together an option for them.

The challenge with these sellers was that they did not feel comfortable accepting a price that was so far off what they had been anticipating. The reality is that the final offer is actually a great offer.

Though the buyers started $40000 less than where they finished up I did get them to pay their “Walk away Price” without them actually walking away. I also got the sellers to accept the offer by way of making the contract Subject to and conditional upon the Sellers finding a suitable property to purchase within 14 days from this contract date. The sellers have not only realized now that they are now in a strong position to negotiate on another property, they are also very grateful that I was able to lock in the buyers in such a way that it enables the sellers to go shopping now with this amount of money without locking them into the sale if they cant make it work.

The outcome now is that the seller is in a position to make offers on properties and see if they can make the move now rather than sticking to their high list price and not having any options at all. The sellers are also pleased with the sale price as well now. The buyers are happy too as they are in no rush to move in.  

The seller has bought and sold 5 times in the past and has never ever known that they can actually take a buyer off the market this way. “hhhmmmm, all those meetings with solicitors and they have never known about this!”  

In order to get into the head of the seller that it sometimes is OK to sell at a price that is less than what you want providing the timing makes up for the price. What I explained to the sellers was the principal of “Timing” which states. What may seem like a bad deal today may be a good deal tomorrow. (And vice-versa)

With the buyer, 3 principals/laws came into play quite clearly and unskilled negotiators would have missed it and or had no chance to combat them and use them to move the negotiations forward.

1. Indifference the buyer said that they are in no rush to buy and they had plenty of time. This I used against them to lock them into the contract, taking them off the market while the sellers took 14 days to find something.

2. Scarcity I the agent new the buyers loved this house. How did I know? They demonstrated to me their Commitment because they came to the property 4 times. I than used Scarcity by way of making sure these buyer know that these owners helped to design the property. There was no other property like it in the area. This allowed me to dive the price up and up.

Peter I don’t want this to sound like I am against what you are doing. As a matter of fact I do think it’s a great idea. If the business runs well and it works for the consumers than fantastic. But making statements like “lawyers are trained negotiators”  What tha? You are still going to charge thousands of dollars doing it your way but your offering a hell of a lot less service! Sorry I simply see through it!

# Matthew Shelton Sales Agent Gold Coast said on October 8, 2009 10:53 PM:

Peter just read your last line re- Reality Check: I am very sorry here Peter but I think I may have to agree with you on that one. YES YES YES in most places and in most towns I do think you will struggle to find an agents that can give you a good answer there.

It does seem quite odd that an agent can come out and list my property for sale, negotiate the sale of one of your largest asset and only weeks prier to that the agent could have been working at a counter saying “Would you like fries with that?”

# Peter Mericka said on October 9, 2009 9:01 AM:

Hi Matthew,

Let's address one issue at a time.  I note your comments,

"The challenge with these sellers was that they did not feel comfortable accepting a price that was so far off what they had been anticipating. The reality is that the final offer is actually a great offer."

and

"In order to get into the head of the seller that it sometimes is OK to sell at a price that is less than what you want providing the timing makes up for the price. What I explained to the sellers was the principal of “Timing” which states. What may seem like a bad deal today may be a good deal tomorrow. (And vice-versa)"

Negotiation is not the art of turning on your own client and convincing them to accept what you think is best for them (and incidentally what is best for you in terms of winning a commission).

If we strip away all of the pazzaz, it seems that you "negotiated" your client into accepting a price that was lower than what they wanted, thereby releasing a commission for you.

It seems that you succeeded in convincing your client that their interests should mirror yours - that is not negotiating, that's bullying.

# Matthew Shelton Sales Agent Gold Coast said on October 9, 2009 9:40 AM:

Peter, it seems to me that any and every example I would provide you with where a sale has been the final result, you would simply call it “Bullying” and that I have forced the sellers to make a decision they were not happy with. Yes, I have a vested interest in the sale but so does every solicitor that claims No sale no charge.

Property owners are all grown ups and the reality is that despite what you think you know, I know that 9 out of 10 property sellers have a inflated price in mind of what their property is actually worth and that is normal. What I will also say is that above real estate agents, Sellers and valuars, the buyers generally know the prices better that anyone else because they see all the properties. Getting the best buyer to their top offer on the day is top market price that day. END OF STORY. Valuars are not the gate keepers of value, if they were than they would not call me every week asking me my opinion on properties they are doing valuations on. I use the same parameters to ascertain a general market price range as any registered valuar would. The only advantage I have over Valuars is that because I deal with buyers every day, I know the level of demand for each kind of property and Valuars don’t have access to that.

How are we going with those final Selling prices by the way Peter, are that looking like even numbers?

Regards

Matthew

# Peter Mericka said on October 9, 2009 10:34 AM:

Hi Matthew,

If each and every example you provide reveals that you have bullied one or other of the parties, you will be exposed.

The art in proper negotiation is to represent a client without bullying them.

I note that you readily admit to assuming the role of negotiator in circumstances of conflicting interests (i.e. having a pecuniary interest in the outcome).  You then attempt to divert attention to solicitors who do the same thing.  Solicitors who act in circumstances of conflicting interest are just as bad as you - it doesn't make you a good negotiator.

In your negotiation example you stated,

"The day before yesterday I got a seller to accept an offer on their property that was over $30000 more than the registered valuation."

What is a "registered valuation"?  Is it the same as a formal valuation from an qualified and independent real estate valuer?

# Matthew Shelton said on October 9, 2009 12:39 PM:

Yes, A Registered Valuer is a Qualified Independent Valuer. (The kind that Banks and mortgage insurers use before approving loans)

It is not an agent giving an opining of market worth.

# Peter Mericka said on October 10, 2009 11:46 AM:

Hi Matthew,

The scenario you presented is consistent with the property having sold for no more than current market value.

Perhaps the valuer was incompetent and the vendors should get back money they paid him, but that's another issue.  Without a valid valuation the vendors were "flying blind" and talk of achieving more than what the vendors expected is quite meaningless.

As we both know Matthew, there is not really much tolerance in the real estate market.  A property that is the same as similar properties that recently sold for around $400,000 will probably get around $400,000.  Even you would not get $500,000 for such a property.  Why? There are a few reasons:

1. Buyers aren't stupid.  Sure, many of them can be tricked, that that's different from being stupid.  Most do their homework, and most also try to buy for less.

2. Banks aren't stupid.  As most purchasers must rely on bank finance, and banks will not accept over-priced properties as security, the banks act as a check on run-away pricing.

3. Vendors aren't stupid.  Of course, they too can be tricked, conditioned, crunched, nudged (I am sure you're familiar with these terms), but that doesn't mean they are stupid.

At the end of the day the sale is supposed to be the result of a meeting of the minds.  The role of the valuer in advising a vendor as to current market value is to give the valuer some understanding of what the property is likely to fetch where two sensible people take all relevant factors into account and neither is "anxious" about the sale.

Enter the real estate agent with his Excusive Sale Authority (which effectively gives him a 2% interest in the vendor's property provided that a sale takes place during the currency of the Authority) and it's no longer a matter of two non-anxious parties negotiating.

Rather, it becomes a matter of an over-anxious real estate agent working against the clock to get a sale, any sale at any price, in order to realise his interest in the vendor's property, usually to the tune of around $10,000.