I am really having trouble putting this deal together. The sellers just won’t come down to market value. It’s a building lot in a really sought after location in midtown Victoria. There is a home on it, but its old and not worth renovating. I have a builder client that wants to buy the lot, so I approached the owner. They said they would sell if the price was right. I brought an offer of $1.5m. The owner signed back at $1.8m and were adamant that they wouldn’t go lower. The lot is probably worth $1.6m-$1.65m which I think my builder would pay. How can I get the sellers down? It’s a huge commission and I really want to make this deal.
As I read through your question it raised a bunch of other important questions. How long have the owners lived in the house? Is there any motivation for them to move besides money? If the lot is really unique, perhaps an end user would pay more than a spec builder. What is your buyer’s motivation and tolerance for risk? Being an excellent negotiator is about gathering all of the pertinent information from both sides and seeing if there is a creative solution that meets all of their needs.
When you approach a seller with a buyer in hand, the balance of power if different than if the property is listed for sale. They don’t have to sell. Their only known motivation is money. For those of you with negotiation training, they have very strong BATNA (Best Alternative to Negotiated Agreement). You will need to build enough trust and rapport to establish if the seller has any addition motivation. This isn’t always easy, and excellent communication and relationship building skills are essential.
If their only motivation is money then your builder will have to pay up or move on to another property. Now it’s time to work your negotiating magic with your builder. What is his motivation? Would he pay more if he could sell his end product for more? Would there be other residual benefits to his business to build a home in this prestigious location. He may be willing to pay the seller more if he can have a long conditional period that allows him to up zone the property or to presell the new home. If he’s stuck on a price that is lower than the seller will take, move on.
Stay in touch with the seller. Touch base by phone or in person every 3-6 months. This isn’t a pushy sales call; this is a rapport building call so that if and when their motivation changes, you are the one they reach out to.
Be patient, have empathy for both sides, put their needs ahead of yours and in the long run, you will be the agent that both the builder and the land owner trust and want to do a deal with.
Columnist, The Nature of Real Estate
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Dear Zuess is a column dedicated to offering advice to real estate agents, who want to get the most out of a negotiation by knowing their BATNA. Do you have any real estate binds you’ve been in lately? Drop Zuess a line at firstname.lastname@example.org