After being on MDL: LA for more than a decade, I’ve been asked about what my trick to getting the best negotiations in Southern California real estate is, at least once or twice. Okay, it may be one of the most frequently asked questions that I get on Instagram Live, but I’m going to share it with you in the rest of this article, so keep reading.
Get Out of Your Everyday, Normal Mindset
My trick to negotiating real estate starts with creating a completely different mindset than the one I’m used to every day. Now, I know what you are thinking, Josh you are a successful agent, why wouldn’t you just project that success, and own your regular everyday mindset in your negotiations? The truth is that no matter how good you are at something in life, you always need to push yourself past your limits. Going about things in a casual way is never enough, especially if you want to get a certain caliber of clients to say yes.Instead, you have to raise your game to a whole new level. And this doesn’t just apply to people like me who are selling homes worth tens of millions of dollars--it applies to anyone who wants to do something at a bigger level in life--especially in a field as competitive as real estate.
So what’s my trick? When you’re trying to negotiate a deal remember this one piece of advice, and you will always win the negotiation.
Even if you are a successful millionaire agent reading this, I want you to suspend your disbelief for just a moment… In order to get the sale, you need to put yourself into a completely different mindset. It’s very simple in theory, but extraordinarily difficult in practice. It’s something that has taken me years to learn and master, and now I’m going to share it with you.
Emotions Aren’t Everything
Imagine that you are working on a deal for a seller at $7.5 million, but the buyer is stuck at $7.45 million. Now you’re starting to sweat and you realize you may lose the deal over a hundred thousand dollars. Well, keep this in mind. From all of my experience dealing with very affluent clients, people never walk away from a deal because of emotions.Nobody walks away from a deal if they are in love with the property and actually intended to close it from the beginning. If anything, being tough on negotiations in the beginning weeds out the real buyers from the uninterested ones. For a small price point such as a few hundred thousand dollars or just tens of thousands of dollars, emotions rule, but not in the high-end market. And when you get to a point where it feels like emotions are coming into place, you will know the feeling. That never happens in the beginning, it happens at the end when the buyer actually feels like the home is setting out of his or her price range. So keep in mind if during the first round of negotiations the buyer is stuck from making a deal over a few bucks… weed him or her out… they are not closing the deal, to begin with, and if you open escrow with them I can guarantee you they are going to have second thoughts and or try to renegotiate.
It’s really never about emotion. It’s about a dollar amount and if somebody can buy a house for $7.3 million or 72.1 million, generally they can buy the house for $7.35 million unless they simply cannot afford it, or they feel like they are overpaying tremendously. And from my experience, $100,000 here or there is not overpaying tremendously. Now if you’re $500,000 apart or 1 million apart that’s another thing.
It Takes a Billion Dollars Worth of Chutzpah
To negotiate really high-end deals you have to have chutzpah. The other thing you have to do is pretend to be a billionaire. That’s right. I know that it may sound corny, but if you treat every deal like you are a billionaire, you won’t get hung up on $500,000. Here is advice if you are selling your home: A billionaire who is selling her $10 million or $5 million vacation home doesn’t care if he or she makes the deal or not. If he or she gets their price that is great, and if not, it doesn’t matter. The only way to make the deal and actually get every penny out of it is to pretend like you have nothing to lose. If you do this you will always win because nobody walks away from a deal over small money.And here’s the most important part to remember. If they do walk away from the deal they never would’ve closed, to begin with. If they start getting emotional and then walk away before opening escrow because they get offended or because emotions got involved, then that’s a huge red flag. You can immediately write that off to them being unsure. This may hurt a little at first, but you’ve actually just saved yourself a whole lot of time.
Buyers have an amazing opportunity right now to pick up deals in our current market.
For sellers, if you listen to what I’m saying above you will also be able to use this information to prevail. Keep in mind, I don’t favor my buyers or sellers. I favor the party that I’m representing.
So, here’s the bottom line. No one says no to buying a luxury home over a few hundred thousand dollars. If you stick to your guns you will prevail. Be the billionaire in the room and make decisions on a bigger level.
Only Be A Hard Negotiator if the Price is Right
BUT HERE IS THE MOST IMPORTANT THING TO REMEMBER… None of what I wrote above is relevant if your home is OVERPRICED. If you are an unrealistic seller and your home is overpriced… scratch out everything I said above and start NEGOTIATING. The above information is only for sellers of homes that are realistic and dealing with buyers who realize your home is priced realistically.
Human nature leads us to believe that our property is always the best one on the block, even if in actuality it’s the WORST! There are plenty of other crazy people that have fantasies about what their houses are worth as well… you are not alone. And that’s actually why we have so many overpriced homes on the market. I guess in some ways this is good because that is what causes a market to rise. People think their house is worth x and then people pay for it. But at some point (now) this no longer works. We are no longer in a rising price environment. We have hit the peak of the mountain.
Here is a helpful tip for me to leave off on: Take a look at what houses in your area have sold for and then put yourself in the shoes of the buyer. Ask yourself what would you actually pay for your own home with no bias. And really think about it. Do not be in denial. If you were the buyer of your own home what would you pay for it? Look at comparable SALES, not listings. I can’t tell you how many times my clients will say to me “But Josh, so and so the property is listed for xyz” and then I will cut them off right away (which by the way is something I really need to work on according to my assistant) and I will say “But did it sell?” It makes zero difference if a home is listed for xyz. It matters if it sold because, at the end of the day, the person with an overpriced home can be just as much out of his or her tree as you are. A comp is a comp only when it sells!
And that’s the news...
