Accurate and Direct Negotiation Skills for Commercial Real Estate Investment Sales

In commercial property investment sales today most of the parties that you negotiate with will be experienced and quite direct when it comes to closing on a contract or sale situation.  They know what they want to achieve through the property marketing, sale or acquisition process, and they know the strategies to achieve that outcome.

Your role as the listing agent or broker is to achieve the best conclusion for your client in a timely way, so it is a very good idea to practice your negotiation skills based on the common situations and challenges working with sellers and buyers in the property market today.

There are many pressures that will impact the negotiation including market conditions, other properties available for sale, and the intentions or constraints of the parties.  A question and answer process will get you closer to the motivations of the parties and the limitations of any deal.

Look for Market and Property Changes

Throughout the year the property market conditions will change significantly as will the impact of seasonal business activity on enquiry; any marketing campaign should be timed and constructed taking those factors into account.  In any period of 12 months, you will have some eight weeks of slower market conditions to contend with so be prepared for the slower times, and practice your skills across prospecting, listing, inspecting, and negotiating.

Given that most of the clients and customers that we work with are reasonably experienced in commercial business and property, the negotiation skills of any agent are critical to the momentum of the deal and the outcome.  It directly follows that you should monitor market activity and be prepared for the most common elements of negotiation as they can arise.

  • Understand your client and their choices – Every client will have limitations and targets when it comes to the property sale and its momentum. Mortgage loan repayments, transaction timing, price variations, and marketing monies will vary.  Understand the client and the pressures they may be experiencing as part of the sales strategy.  Balance the transaction and the listing so that you can achieve a successful outcome.
  • Create some inspection strategies for the property – You can inspect a property in many different ways. Ideally there will be some positive factors to merge into the inspection process.  Tell the client how you will show their property and move through it with potential buyers.
  • Understand the strengths of the property – The strengths of the property will help the ultimate negotiation; at the early stages of listing and marketing those strength should have been identified. You can bolster the strength factors for the listing by using photographs, property facts, and market evidence.  Preparation is the key to conversion.
  • Compensate for the weaknesses of the property – Most properties today will have some form of weakness to work through. To some degree those weaknesses can be resolved with the client prior to commencement of marketing.  If however the issues are not easily resolved, then you will need to structure a compensation component into the property negotiation.  Condition the client for the variations of compensation that may be needed to achieve a satisfactory sale price and contract outcome.
  • Have comparable market information at hand – It is hard for a buyer to refute or disprove comparable market evidence. The same will be the case when working with sellers; don’t forget to condition your seller to the prevailing market conditions.  If you specialise within a property type and location, it should be relatively easy for you to come up with comparable market results and listing detail at the right time and in the right way.  Use that information as part of the property negotiation.
  • Qualify the parties before hand – You will come across many people that think they can purchase a commercial investment property; however the reality may be totally different given the existing loan value ratios and financing policies across the banking industry. Don’t waste your time with buyers or sellers that have not been totally qualified and questioned.  Get to the real facts of the matter and the financial capabilities of the parties.
  • Write down all critical factors of property conversation or negotiation – Many a property transaction has been disputed or derailed due to disputes arising between the parties and disagreements inflaming the negotiation. The only way you can protect yourself through the complexities of any property transaction is to take plenty of notes and support any offer or counter offer situation in writing.
  • Get all offers in writing – If a party to a transaction wants to make an offer to purchase, get that offer in writing and ensure that the conditions of the offer are achievable in today’s market conditions. Don’t waste the client’s time with an offer that is unrealistic or cannot be satisfied.  Remember also that your commission for the transaction hinges on the integrity of the contract and the offers made.
  • Allow sufficient time for the transaction to be completed – Far too many contracts are put together at short notice and with little real understanding of the time involved to satisfy contractual conditions such as financing. A contract that is too tight from a timing perspective has the potential to terminate or lapse.  There can also be factors of compensation for delay in settlement.
  • Use comprehensive well-crafted settlement conditions – Clarity is important when it comes to contractual terms and conditions. Understand what needs to be done prior to the settlement of the contract, and ensure that the terms and conditions of the document are crafted in a comprehensive way.  Given that the client is paying your commission, protect the client’s position in the transaction using highly accurate contract conditions that are realistically achievable.

From these simple points you can see the need to develop and practice your negotiation skills in commercial real estate investment sales.  The results come to those agents that do so.

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