Dear Zuess,
I am in an offer negotiation and the seller wants to renegotiate the co-broke commission and sometimes the buyers have been at the negotiation table. I deal primarily in commercial. Can you help me with some suggestions on how to handle this type of situation?
Prakash
Dear Prakash
What the heck is your buyer doing at the negotiation table? I’ve done 1000’s of offers and only once in 25 years did I have my buyer at the table and he was a highly trained professional negotiator. I have also done a lot of land assembly deals and the buyers were never present in these situations either.
I reached out to a colleague of mine, Don Mulholland, CCIM and a very successful commercial agent and asked him about the buyer being at the table. His response:
“I’m always hesitant to bring buyers and sellers together, but on a few occasions I’ve found it necessary. When working with a developer, I’ve sat the two parties down as the deal is sometimes complex and there are other things to consider besides the price, especially if there is a long conditional period such as environmental or rezoning. I’ve found it useful in these situations to get the two parties together to establish credibility. I would not put them together if I felt that there was any issue around commission.”
Skilled negotiators recognize the importance of power when at the negotiation table. Power comes from your knowledge, your confidence, your training and your expertise that make up your experience. Alongside that experience comes the market conditions and your side’s BATNA (Best Alternative to Negotiated Agreement), which can give you the power you need. In the situation you describe, you have reduced your power by having the buyer present. You’ve significantly weakened your own personal BATNA while risking your client’s power by having him/her present as an unskilled negotiator at the table.
Whether your buyer is present or not, the best response to commission renegotiations at the presentation is to state clearly but calmly, that you do not renegotiate the co-broke commission. Don’t defend or argue. If they argue, listen and acknowledge and again, state clearly and calmly that you do not negotiate. This approach works if there is listing agreement with the co-broke commission stated. If they continue to argue and insist, you will need to use persuasion and influence principles to get them to see that you are worthy of the commission.
Keep the commission negotiation separate from the offer negotiation. The seller wants to tie them together because is strengthens their power. Part of the reason you are worth your commission is that you are a skilled negotiator, so start using those skills now.
This takes confidence. You need to truly believe that you are worth the commission and be able to state why. The use of metaphors and analogies will work well in this arena of the negotiations. You may compare a realtor to a car mechanic. There are junior mechanics who work at jiffy lube and there are experienced, highly trained mechanics that work on high performance sports cars. One is much cheaper that the other. Ask them, “Who do you want working on your ‘64 Jag S-type?” There are many other analogies that work well. Choose a metaphor or an analogy that flows naturally for you and that will resonate with the seller.
In conclusion, get the buyer out of the mix by helping them understand that it is not in their best interest to be present. Be confident about your value and have some powerful analogies prepared if you are challenged about commission by the seller. Remain calm and non-emotional in the presentation so that you are able to use your negotiation skills no matter what comes up and be willing to spend the time required to find a collaborative win/win outcome to the negotiations. Good luck Prakash.
Zuess
Columnist, The Nature of Real Estate