In real estate, we get paid by our clients to negotiate on their behalf. That means that we have a legal responsibility to have the skills to negotiate well to protect the best interest of our client.
Earlier this month at the negotiation course at Harvard, Robert C. Bordone spoke about the tension between creating and distributing value and how the three e’s of ego, emotion and escalation can trap us and have a negative influence on how that value gets distributed. Robert is the founding director of the Harvard Negotiation and Mediation clinic and has won several awards for excellence in the fields of law, mentorship, negotiation and mediation.
This idea of being trapped by the three e’s really struck home for me. I see this negative effect frequently in real estate transactions, both from the buyers and sellers but also from the agents, so let’s take a closer look at them and how we can avoid these terrible traps that can cost our clients’ money and time or even worse, the home of their dreams.
Ego is a person’s sense of self-esteem or self-importance. As professional negotiators, we must have the self-awareness to leave our ego out of the negotiation. Have you ever known an agent to derail a perfectly good transaction because of their self importance? In addition, we must help our clients manage their ego. Tensions often run high in real estate negotiations and if our clients allow their self-importance to trump their interests and needs, they can make less than ideal decisions.
Emotions can run rampant in real estate negotiations. Often, the home represents people’s memories, life stories and even their identity. Buyers are also vulnerable to emotional turmoil as they imagine creating the life of their dreams in the property they are bidding on. Add to these complicated layers, the agent’s emotions and it’s a wonder we ever get deals done at all.
As a professional negotiator, you must manage the emotions of all parties in the transactions. This starts with your own. Often your negotiation counterpart will deliberately try to put you off balance by upsetting you emotionally. It’s your responsibility to have the self-awareness to avoid this trap.
Managing the emotions of the other parties is just as important. Not only your client’s emotions but often those of the other agent(s) and even their clients. Develop the skills of practical empathy so that you can understand what other people think and feel, but not be impacted by it. Operating with practical empathy can feel counterintuitive to people who care deeply about others, but our ability to help people remain rational and reasonable increases the odds of obtaining a collaborative, mutually beneficial outcome that meets the needs and interests of all of the parties. This is what we get paid to do.
Escalation is when a party to the negotiation becomes overly committed to a deal and begins to make decisions that are not rational. At Harvard, they used examples where simple disputes went to litigation and ended up costing the parties thousands of times more than the original issue would have cost.
In real estate, we see escalation in three important places. One is with buyers overpaying in the heat of multiple offers. The second is when sellers get caught up in the greed of a seller’s market and are irrational in their stands. The third is really important if we want to maintain the trust and respect of the buying and selling public; agents can get overly committed to a client’s transaction and begin acting in their own best interest instead of the client’s best interest. While it is frustrating to work with a client that is slow to make decision, we must always fulfill our fiduciary duty to the client and if we are unable to do that, we must step away from the agency relationship. This is the ethical advantage and I can tell you from 34 years of experience in real estate, this will result in much more success for you over the long term.
To be professional means to not have your ego, your emotions or your commitment to the deal interfere with the best interest of your clients.