Negotiation council: Planning for success

The flattening number of properties sold under the hammer, which has dropped to one in four from one in three, and the weaker average number of bidders at each auction, which has fallen from the mid twos to the high ones, are signs the market is easing.

But we are not saying that it is going backwards. The market has been taking off for the last 18 months since October 2012, and this may be the first signs of a leveling of the altitude.

Last month we had clearance rates in the 70s – but now it is in the 60s.  It is still moving forward, its just that the angle of the ascent is not as steep in March as it was in early February.

It’s also still possible that the market may simply be in a slight lull before it begins another rise, exactly like the upwards staircase (rise, level, rise, level) we saw last year and towards the end of the previous year.

At the three auctions I bid at on Saturday, there were two bidders (Hampton), four bidders (Brighton East) and four bidders (Malvern East). All three were bought under the hammer having sailed comfortably past their quotes and then their reserves.

Next week is another Super Saturday, with nearly 200 $1 million plus auctions scheduled across Melbourne. So, by 6pm next Saturday we should have a definitive answer on whether we’re seeing a real change in the market direction as we go into Easter.

Negotiation council

But the action is not all auction-based right now. While by the end of last week we had cleared the decks a little and were down to only four ongoing negotiations, a week later we were back up to eleven ongoing negotiations that were being discussed and picked apart at our twice weekly negotiation councils.

A number of clients have asked us what is a negotiation council and what happens at them.

All the better selling agencies have them. They are like match committees or, for the sportingly challenged, like board meetings. We have them twice a week – Tuesdays and Fridays – and we discuss any of our active negotiations, including private sales, expressions of interest, auctions, and off-markets. As I said, we had 11 such discussions on Friday.

The meetings can be formal or informal. Eight to 10 of us sit around a space, and each negotiation is presented and workshopped. We look at what the client wants, the current state of play, the outside forces, the agents involved and their track record and so on, and then we simulate different plays and look at possible outcomes just as a coach would draw up on their chalkboard.

Even though I have bid at more than 1,000 auctions and negotiated hundreds of private sales, EOIs and off-markets, I find these meetings most valuable. Someone almost always has something to improve the plan, and even if they don’t, that fact gives me greater strength going forward that we’re going about things the right way.

A negotiation council is the standard procedure at any good agency, on any deal. This is why you rarely, if ever, get a standard or quick reply to an offer. Over the years the making and receiving of offers has become a very sophisticated process. Every time a milestone is hit by a buyer, e.g. an offer or a significant increase in an offer, it is taken back to their client and also taken back to their negotiation council.

Once the negotiation council has discussed the deal and agreed on a strategy, a smaller negotiation team is given clear parameters of how and when to operate. Deals are done once the result is firstly approved by the client and then secondly if it falls within the agreed negotiation council process parameters. That way a bigger organisation can operate relatively quickly and nimbly to meet the characteristics of a fast moving deal, while still having the benefit of everybody’s input.

Tug of War

I am still surprised when an otherwise very sophisticated businessman tells me proudly that they are launching a full-on assault on what they consider to be a measly agent to secure their dream property. They just don’t know what sort of a self-inflicted ambush they are walking into.

You may be chock-full of adrenaline and overloaded with other types of negotiation experience, but if you are dealing with a successful agency on a good home, you are not in man-to-man combat, you are in a tug of war – and the sides aren’t even.

On one side, pulling furiously in the quicksand, is you.

On the other side, on a relatively firm footing, is a team of two, three or more – in some cases backed up by a number of others feeding them info and plays and scripts and research.

Take a look in the footy coach’s box next time you watch the footy on the telly – that is what you are likely to be up against when you are engaged in an expression of interest, pre-auction offer, boardroom auction, lengthy private sale or off-market.

Good luck!