Elite AgentProductivity & Best Practice

How to get paid what you’re worth

Sellers have long bargained to push the fees they pay their agent as low as possible. Pancho Mehrotra examines how to explain your fee, not apologise for it.

Right from the beginning, you’re on the back foot.

“We’ve got three other agents coming to give us a quote, what’s your lowest fee?”

The client has hit you with this before you have said anything, so what do you do now?

Your perceptions, not to mention how you feel and what you think, have been influenced and all you can think about is how much lower are you going to reduce your fee to get the business.

Your mind is a blur of questions.

Who are the other agents?
What are their fees?
What do you do?

In this article, I am going to invite you to think differently and to consider certain strategies and negotiation frameworks that you can use in parts of this scenario.

Of course, your negotiation will depend on the specific context or situation as well as your experience.

The difference between selling and negotiating is one approach.

Selling focuses on understanding how to pitch, FAB (Features, Advantages, Benefits) and demonstrating capability.

A negotiator will perform many of the sales processes that a salesperson would, but with a few clear differences.

Top negotiators are excellent at seeing things from other people’s perspectives. Top negotiators listen more, and their focus is on understanding their clients’ deeper interests and challenges.

They have an uncanny ability to see the deal from the client’s perspective to structure the deal more effectively.

The interesting thing is, when this is done well, the concession or reduction of the fee is rarely large, or there may not be a cut at all.

A top negotiator will initially focus on how they create value and how both parties can win.

As a salesperson, you’ve just been blindsided before you have opened your mouth or had the chance to build any relationship with the client.

What do you do? Do you go straight to your presentation and start to pitch, or do you have enough tools in your toolkit to take control of this situation?

Negotiation is not only about conversation structure, it also requires a significant understanding of psychology used to understand your needs as well as your client’s.

The key question is, what is value?

Value is what the other person or people want and find desirable.

One of the critical mantras we learned at Harvard Business School was the importance of managing your mind and its perceptions around information and influence.

That mantra affects your behaviour towards your clients and possibly everyone else on your team, especially in the way you extracted information from the client.

A negotiator will always have more information than the other salesperson.

So, what was that mantra and how did it affect the way you negotiated?

BE SOFT ON THE PERSON AND HARD ON THE PROBLEM
This is tough for many agents to do in real life negotiations as their needs get in the way of thinking about the other person.

Sometimes a verbal attack, either passive-aggressive or active, eventuates, and this can be linked to one’s poor self-esteem.

The need for self-preservation rules most people, especially when we feel challenged. Anger is usually the first emotion triggered and, contrary to most people’s views, it is not a sign of control but the opposite.

So, what do you do as a salesperson when this happens to you?

How do you get control of the negotiation? Preparation is key.

As an example, in our negotiation classes, all agents are required to fill in a pre-meeting checklist.

Implementing the following steps is crucial to ensuring a successfully negotiated deal.

THE PREPARATION

STEP 1. Know your BATNA (Best Alternative to a Negotiated Agreement).
BATNA was developed by Harvard researchers.

What will you do if there is no agreement? Do you know your options?

What are those options worth to you and the client, both in monetary and psychological terms?

What alternatives do you have in place?

These are just a few of the strategic questions that form the framework for the starting point of your game plan.

STEP 2. What is your walk-away price or your reservation value?
The importance of knowing your BATNA allows you to know your walk-away price in far greater detail and the points where you can create value.

Knowing your walk-away price is also important as it can be affected by your risk-averse profile, which may encourage you to compromise quickly on the fee.

The extent of negotiation also has a lot to do with your self-worth.

STEP 3. What is the client’s walk-away price?
Consider the client’s best price.

Do you know how much you can push them?

Think about their RV. What would happen if the client got a poor result and doesn’t make the profit they wanted on the deal?

STEP 4. What is the ZOPA (Zone of Possible Agreement)?
Harvard researchers coined the term ZOPA to describe the price agreement area.

Here you need to consider yours and the client’s range where agreement could be reached.

This is the bridge between your RV and the client’s RV.

Creativity plays a crucial role because you want a win-win situation for yourself and the client.

Returning to the meeting with the client, what should you do?

Always make an offer that you think is higher than what the client has received.

The benefit of making a higher fee is that it influences how the client views the deal not only from you but from your competition. It becomes the reference point for value creation.

This is where you get leverage and differentiation.

Research shows that even skilled real estate agents were affected by reference points on providing appraisals on houses.

As part of a study in the US, four agents received the same information about a house, but with a different comparable listing value.

Each agent came back with an appraisal based on that listing value, rather than their knowledge.

Everyone’s perceptions can be influenced.

THE NEGOTIATION PROCESS

STEP 1. Ignore the request for a lower fee.
I am not advocating that you ignore the request totally, but you need to reframe their request.

This requires confidence and skill in reframing the request.

It has a lot to do with understanding your psychology as well as the client’s. Your ability to do this will depend upon how well you read your client’s signals.

If you do not read people well, then this strategic option is not for you.

A negotiator has multiple skillsets, and you may need training in this area.

It also comes down to how well you can extract information from the client about their fee request.

STEP 2. Understand the difference between information and influence.
You need to get information from the client about what the lower fee is all about.

Every fee or price has components missing or extra value creation opportunities for you that you need to find.

Understanding how you process information and deal with pressure is key.

Being extremely clever with your questioning strategy helps in creating influence within the situation.

In such cases, structured scripts and dialogues reduce your effectiveness as they stifle creativity and your ability to think.

This is why we provide an effective framework within which to negotiate rather than selling from scripts.

STEP 3. Time to negotiate.
Now you need to negotiate on the process and learn to negotiate on multiple issues at the same time, not one at a time.

If you negotiate on one issue at a time, then all the focus is on that one issue and it can become bigger the more you focus on it, with the potential to stall the deal.

Your ability to communicate and reframe this situation, and keep your client in the right mindset, is important to move the negotiation along favourable lines.

You need to work with the client to develop a solution that works for both of you, which means you do not focus on the price alone. Your ability to think outside the box is crucial.

An understanding of how people make decisions under pressure can be useful.

STEP 4. Let your client back down without making them feel bad.
Most salespeople struggle with this step. Allow them to offer you their number.

As you can see, there are many areas to focus on in a successful negotiation.

There is no doubt it takes a significant amount of training to become a great negotiator rather than merely a salesperson.

COMMON MISTAKES SALESPEOPLE MAKE:
1. Their first offer is passive.
2. They talk too much and ignore the importance of listening.
3. They believe their own assumptions about the client.
4. They miscalculate the financial and psychological aspects of the deal.
5. They concede too fast on fee.

There is much to learn to become a skilled negotiator, and the good news is, almost everyone has the raw materials to become a negotiating star.

These are: understanding the psychology, the strategy and the execution within a framework.

Don’t apologise for your price, explain it

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