Negotiation is at the heart of the real estate business. Whether you’re an agency leader managing your team or a negotiator closing deals with clients, your success depends on how well you negotiate. Many people believe negotiation is about winning at all costs, but in reality, the best negotiators build long-term relationships that bring repeat business and referrals.
Professor David Honig of Indiana University explains two types of negotiation: distributive bargaining and integrative bargaining (Honig, 2019). Understanding these two approaches can mean the difference between short-term wins and long-term success in the real estate industry.
The Two Types of Negotiation
1. Distributive Bargaining – The “Win-Lose” Approach
Distributive bargaining happens when two parties fight over a fixed amount of value. One person’s gain is the other person’s loss.
- Example in real estate: A client wants to buy a property for RM500,000, but the seller insists on RM550,000. Each side is trying to take the biggest piece of the pie, without adding more value to the deal.
- Risk: This type of negotiation often leads to hard feelings. If an agent only focuses on pushing for a win at the other person’s expense, they might close the deal but lose future business.
2. Integrative Bargaining – The “Win-Win” Approach
Integrative bargaining focuses on creating more value for both sides. Instead of fighting over one pie, the parties work together to bake a bigger pie.
- Example in real estate: Instead of just arguing over price, the agent finds ways to meet both the buyer’s and seller’s needs. Maybe the seller agrees to lower the price slightly, while the buyer agrees to a flexible completion date, benefiting both sides.
- Benefit: This approach builds trust, encourages referrals, and leads to long-term relationships.
What Works in Real Estate Negotiation
For Real Estate Leaders:
- Building Strong Relationships
- Successful leaders don’t treat their negotiators like disposable workers. If an agency owner only cares about short-term profits and ignores agent development, their team will eventually leave.
- Instead, invest in training, mentorship, and fair commission structures to build loyalty and a strong team.
- Creating Win-Win Deals for Clients
- Agencies that focus only on pushing for the highest commission often damage their reputation.
- A client who feels cheated will never return, but one who had a smooth, positive experience will bring referrals.
- Long-Term Vision Over Short-Term Gains
- Some agency owners operate like Trump did—treating every deal as a battle to win at any cost. But in real estate, reputation is everything.
- A client who buys a condo today might be looking for an investment property next year. Short-term thinking leads to lost business.
For Real Estate Negotiators:
- Understanding Clients’ Real Needs
- A skilled negotiator doesn’t just push for the highest price—they find creative ways to add value.
- Example: If a buyer is hesitant, offering flexible financing solutions or helping them understand market trends can turn hesitation into a deal.
- Adapting to the Market
- If an agent only focuses on one type of property or one negotiation style, they limit their success.
- Example: If the market is slow, instead of insisting on high prices, negotiators should find alternative solutions like rent-to-own deals or flexible payment plans.
- Reputation and Trust Matter
- Clients don’t just remember the deal—they remember how they felt during the process.
- Hard-selling tactics may close one deal but ruin future opportunities.
- The best agents focus on educating and guiding clients, ensuring they feel confident in their decision.
What Doesn’t Work in Real Estate Negotiation
1. Using Only Distributive Bargaining (Win-Lose Tactics)
- Short-term thinking: If an agent forces a seller to lower their price drastically, the seller might agree—but they will never use that agent again.
- Lost referrals: Unhappy clients don’t recommend you to friends.
2. Treating Every Deal Like a Battle
- Real estate is about people and relationships. Agents who view every client or co-agent as an opponent miss out on long-term success.
3. Ignoring Market Realities
- Example: An agent insists on a high price even when the market is soft. Instead of negotiating wisely, they let the property sit unsold, frustrating both buyer and seller.
Final Thoughts
Great real estate negotiators think long-term. While it may be tempting to push for the biggest commission or force a client into a deal, the best negotiators focus on creating value and trust.
Professor David Honig’s analysis of Trump’s negotiation failures teaches us a key lesson: real estate, like global trade, is not about defeating the other side—it’s about building lasting partnerships (Honig, 2019).
In the end, those who help clients succeed will always have a steady stream of business. Win-win negotiations are the key to real estate success.
Source:
Honig, D. (2019). Trump and Negotiation: Why His Approach Fails in International Deals. Indiana University – Robert H. McKinney School of Law.
