Today I would like to explain some finer points in the transaction where an agent literally holds a deal together because the agent knows how to dance. They may not literally know how to dance, but they dance beautifully with several members in the transaction through their actions in order for everyone’s needs to be met. The good agents dance with several partners in a transaction and those “partners” often have competing interests. I would like to showcase different scenarios where the agent has to master “the dance” in order to keep all parties moving toward a common goal of closing the deal.
As a matter of introduction, in real estate we often throw around the term “fiduciary service” when we describe our agency relationship with clients. Essentially this means that we work for our clients and there are many things that we owe them. These duties include confidentiality, accounting, reasonable care and diligence, loyalty, obedience, and disclosure. I could write a book on each and every one of these duties. When agents do a great job at these duties, they typically get referrals and they have strong businesses. Friends and past clients refer prospects to the agent and there is a long list of prospects for the agent. Those that do an awful job at these duties have “transactional” businesses and clients never come back to use the REALTOR® again. They are essentially “one and done” agents. A REALTOR® can be a great sales person, but if they cannot do the necessary duties in the transaction well, they will not be in business for very long. This is why so many in real estate do not make it. They have to be a great “lead generator” and also a great administrator and negotiator. Often times agents do not possess all of these skills. They may have one but not all of them. The dance actually exists in all of these areas and duties.
Let’s get back to the idea of the dance. There are several dances in a transaction. There is the very first dance which is between you and your client. Another dance is between you and the other agent. Furthermore, the other agent is dancing with their client too! You are even dancing with affiliates that are helping in the transaction. These partners are lenders, escrow officers, inspectors, contractors, and appraisers. What are all of these dances all about? Continue reading and let me explain. By the way, if you like to dance as much as I do, you might like this little track…it is a classic! Remember these TV shows? Some people can dance and some people cannot. However, everyone loves to try. We are always trying to get in sync with each other just like a real estate transaction! Watch this!
The main role that we play as real estate agents is to make sure that the dance continues between the buyer and the seller. In order to dance with the listing agent, the buyer’s agent must dance with his buyer first. The buyer’s agent needs to know the client’s needs in order to strive to convey those needs to the other party. Not only does the buyer’s agent need to understand the needs of the buyer, but he also needs to understand the perceived needs of the seller. For example, the buyer’s agent needs to listen to the listing agent intently to see if he can give the other party a win along the way. As an agent, I do not subscribe to cut throat negotiations where I strive to win at all costs. Some may see the concept of “win-win” negotiations as naïve and unrealistic, but I can tell you that it is something that makes transactions go so much better. It is possible! Both agents can model ethical and productive behavior to their respective clients. The clients then begin to follow your lead. Both parties can indeed close the deal and feel good about fair dealing. Everyone can walk away and feel great that both sides got what they wanted.
Let’s get back to the dance. As I have said, the first dance is with your own client. They have needs and those needs are of critical importance. However, some of their needs are strongly held and some others are not as important. Sometimes, the client doesn’t realize that what they want is not possible and it may hurt their ability to come to a win-win arrangement with the opposite party. When needed, it is our job to “share reality” with our clients and maintain the relationship. Critical conversations are sometimes needed to bring clients back into reality. Often times, depending on who the client is, no matter what an agent tells them, they have to experience “an event” before they will completely trust their agent. They literally have to experience what the agent has warned them about before they trust the agent. They have to see it for themselves. Often times, that shows up when a buyer constructs a “low ball” offer and gets rejected before they realize that low-ball offers typically just offend sellers. Well, once the seller gets offended, the dance comes to an abrupt halt. The other party goes over to the other side of the gym and eats the appetizers instead of negotiating. It is just like a junior high dance. The boys are on one side and the girls on the other. When clients dig in on their position, this often requires the agent to put on special shoes…even blue suede shoes if necessary. Sometimes clients forget that professional REALTORS actually do this kind of negotiating for a living.
Allow me to give you an example of what I mean when I see buyers dig in and lose their objectivity. Some buyers that are not a student of the market may try to offer a much lower offer than they should and they may actually offend a seller. In fact, the goal of an offer is not to be rejected and it certainly is to NOT offend the seller. Once rejected, you may never have another shot at the deal. The dance is over. The goal is to keep the dialogue going! In order to keep the dialogue going, the buyer’s agent must represent the buyer and strive to get what the buyer wants. However, perhaps there is an area that is not as important to the buyer that they would be willing to negotiate in order to present an offer that seems fair and reasonable. Can they give up something and still have their needs met? Many times over the course of my career I have warned a buyer that we are in an extreme seller’s market, and a low offer, that is not in line with the market will be rejected. Even though I have educated them on the market and how quickly it was turning over, they still had to “experience” being rejected. The seller took offense and the dance was over. In fact, this is probably the face that the seller made when they saw the offer:
However, the buyer still wanted to come in lower than what I advised and because of that, they wasted their own time, the agent’s time, and they often lost the opportunity to buy that home to a competing buyer. This is all opportunity cost. Then they start to listen. It is almost like they need to learn on their own before they will believe the professional. The dance continues.
Conversely, we need to master the dance with our sellers. I can give hundreds of examples on how I have danced with sellers over the years. In general, I have learned that sellers appreciate a good market analysis and straight talk. Most love the truth and they respect an agent that has confidence in what they are presenting and has good data to back it up. They would rather listen to good analysis and list their homes for less in favor to have it sell in a shorter amount of time. However, there have been times in my career where I have advised against a higher price point on a listing where I was competing with another agent. The other agent was willing to list that property at a much higher price with a lower commission and, of course, the seller decided to go with that agent. Most of the time, I have seen those homes sit on the market for long periods of time, only to suck the air and the money out of the seller. If only they would have just listened to me. I was being realistic and truly cared about getting the home sold in a timely manner. Fortunately, many of those sellers came back to me and asked me to list their homes after they cancelled their listing agreements with the other listing agent. Sometimes when you dance, others cut in and take your dance partner. We hope that they come back to dance again. To avoid losing your dance partner, it is wise to counsel the seller to have a pre-scheduled price reduction strategy when the home is not getting traffic. Also, it is imperative that the home is staged properly. A great agent will be able to coach the seller on how to properly present the home to the public.
I have seen many markets. I have been in the best and worst of times in real estate. I started a real estate company in Phoenix, Arizona in 2009, right smack in the middle of the great recession. I have learned how to make things happen in any market. For example, in a competitive market, I have requested to present offers to the sellers directly in person. This is always fun and I believe that REALTORS under-utilize this tactic. When a seller sees or hears the buyer’s story and actually sees the other party, walls tend to come down and the seller sees the buyer as a human with needs just like their own. In these circumstances, I danced with the other agent’s clients.
We dance in real estate. We try to not step on the toes of our dance partners. We have several touch points in a real estate transaction. We work with inspectors, appraisers, lenders, and contractors in addition to our clients and the other agent. We dance with the appraisers when we meet with them to fight for our sellers on the value of the property. We dance with the lenders on what the buyer should write an offer for and what to show on the pre-qualification letter on what the buyer can afford. We dance like crazy during repair negotiations! Some buyers ask for the moon, some are realistic, some want to play fair, and some do not. Some just want a credit in lieu of repairs. Some sellers dig in and refuse to fix anything and some truly want to present the buyers with a lovely home and they are flexible. I have seen all kinds.
I have become a pretty good dancer over the years. I often laugh when I hear people say that real estate agents make a lot of money. I can honestly tell you that I have worked in several careers. I have an MBA and I have worked for multiple fortune 500 companies and there are few careers that are more stressful than the career of a professional real estate agent. To be a great professional REALTOR, you must also be a therapist, negotiator, counselor, psychiatrist, conflict resolver, troubleshooter, contract expert, and sometimes a spiritual advisor. I am not kidding. For those agents that play at a high level and make a great income, my hat goes off to them. Very few agents make large amounts of money in real estate. However, those that do, did not get there by accident. They know how to market, they know how to treat people and give great client service, and they KNOW HOW TO DANCE. They dance so well, it lifts everybody higher in the transaction. It reminds me of this wonderful song that is timeless. I love dancing!
