BATNA or best alternative to a negotiated agreement is a concept that negotiation experts Roger Fisher, William Ury, and Bruce Patton introduced in their book Getting to Yes: Negotiating Agreement Without Giving In.
In simple terms for real estate, if you are offered $950,000 for your property by buyer A, but buyer B has already offered you $1,000,0000 – then the $1,000,000 offer would be your BATNA. In a negotiation, you will be looking for buyer A to offer you more than your best alternative otherwise you will walk away from the deal.
Having the ability to walk away from a deal is one of the most powerful things a negotiator can bring to any bargaining table. So what is the best BATNA for a home seller?
Considering the fact that you may not always have a better offer or any other offer at all, especially in the current buyers’ market, what real estate experts have found when working with their best clients is that the most powerful BATNA a seller can have in any circumstance is the consensus most valuable asset in the world – TIME.
If you have time and there are no outside pressures for you to sell your property, you will always have the ability to walk away from any offer and therefore the upper hand in any negotiation. If you’re confident in the data behind your pricing and are not constrained by time the buyer will feel your confidence and will likely give in to your demands if they have room to do so and really like your property. Therefore, it is very important to strategically plan the whole process even before your property is listed on the market. That means you do not start looking for your next home or commit to buying another property before you sell (this is actually a situation where sellers lose the most money, unless they have the funds to buy without selling), being careful with auction campaigns (they work in some market conditions but certainly not all), spend your advertising budget in a smart way and etc.
Imagine this situation – if you gave yourself one year to sell your property, would you ever feel pressured to take an offer you don’t think is right according your research? Now picture a different one – you have committed to buy another place and if you don’t settle in 60 days you will loose your deposit. Where would you rather be?
The reality is, as long as your property is priced based on strong evidence and data, you will never need as much as a year to get a property sold, especially in Australia’s metro areas, but you will always be in the most powerful negotiating position if you prepare yourself for a marathon. It will likely help you get not only a better price, but better terms as well.
Another thing every home seller has to know is that the property market operates in cycles. In this case however, we are talking about short term cycles. What that means for you as a seller is that when you list a property every buyer that is currently looking for a home like yours will inspect it usually within the first three weeks. What happens next is a big drop in inquiries and interest which is perfectly normal. This happens because after the initial wave new buyers come in one by one. It is super important to know and accept this reality in order to maximize the selling price of your property. The preparation phase is crucial to go back to here and evaluate the offers you have received comparing them against the research.
However, it is one of the biggest myths in real estate that the longer your property sits on the market the more buyers will think there is something wrong with it – this is complete nonsense traditional agents have created to make sure they could pressure vendors to close deals and collect their outrageous commissions checks faster. Just think about it, if the initial wave of buyers did not present compelling offers to you it is very likely they will not be the actual buyer and everyone new that comes on to the market will not have seen the property anyway.
Maximizing the price of your property is all about the process of finding the ideal buyers that are looking for a property exactly like yours so they fall in love and pay a premium. It is a guarantee that the chances of that person showing up during the first month are the same as after three months of advertising and it’s a never ending cycle of new buyers coming on the market.
You have to be realistic – a traditional real estate agent is not a non-profit and only gets their commission when they complete a transaction. As much as they say they want the best deal for you, they work and want to get compensated for their work. Therefore, every agent will always look to close the transaction even if it means you are getting less than you could possibly get by waiting longer. This is because the agent knows there’s always a possibility that you will decide not to sell or start thinking that another agent could possibly do a better job which means your current agent has wasted all this time for nothing. So you having the most powerful BATNA for home selling at your disposal is something your realtor will most likely never want you to know about or use in a negotiation.
It is very important that you are always in control of making your own decision and always ask for facts and data instead of blindly trusting your agent, especially when tens of thousands (or 1/4th of their annual salary) is at stake.
As mentioned before, a lot of people make the mistake of committing to buy a property before they sell without having the funds to do so. Therefore when selling you will very often find yourself being asked to move the settlement past the standard 6 week term because the buyers have to sell their property first. Even if the buyer is asking for a quick settlement, you will likely save more money if you lease while you are looking for you next home. Having a time BATNA works wonders as a buyer as well.
Inreal Property Advisory | Licence Number 20237732 | 1 Buckingham Street Surry Hills NSW 2010, Australia