Successful Negotiation Strategies

Hundreds, if not thousands, of books have been written about negotiating. We certainly cannot summarize everything that is involved in this dynamic, often-complex strategy in a few pages. However, there are some things that are worth mentioning, as follows:

General Thoughts

1. The Golden Rule - We all know this one, right? "Do unto others as you would have them do unto you." Sadly, in today's contentious, litigious society, we see many people enter into negotiations with the often misguided belief that negotiations have to be a negative, confrontational experience. Our experience shows that people seem to get more of what they want when they use the exact opposite approach. When you show yourselves to be reasonable and objective, people are often so pleasantly surprised that they bend over backwards to "meet you halfway" and often end up meeting you MORE than halfway! Also, you never know when you're going to need information or assistance of some sort from the other side of the transaction - particular if you are a buyer - so it's always a good idea to try to make a friend when buying or selling a home.
2. The Other Guy Does Not Have to be Your Enemy - This is similar to the prior item, but a little different. We know that it may sound cliche or trite, but our objective in every transaction that we do is for it be a "win-win" situation for all parties involved. How can you take pleasure in an activity when you know the other side is miserable? Toward that goal, there is absolutely no reason that everyone cannot be on positive terms during the course of a real estate transaction. We are occasionally disappointed when we encounter people - buyers, sellers, other realtors, sometimes even our own clients - that have a mentality that "the other guy is trying to screw me." Often times, this mentality is a self-fulfilling prophecy. Show the other guy you are reasonable, and the odds are very good that he will show you the same.
3. Ethics are Everything - No explanation needed here. If people don't trust you, you're done. Once trust leaves any relationship, whether it's in real estate deal or anywhere else, for that matter, you are left with nothing.
4. Never Reopen a Closed Issue/Raise an Issue at an Inappropriate Time - Very often, there are multiple issues to be negotiated in a real estate transaction (e.g., price, closing date, possession and occupancy, items to be included, various deadlines, etc.). In most typical transactions, the parties methodically work through the issues and eventually end up with an overall agreement. One thing that almost always upsets people is reopening an issue that was previously agreed to, or raising an issue that was thought to have not been an issue. The classic example: all contracts have deadlines for raising objections that result from inspections. The proper time for a purchaser to inform a seller of issues stemming from an inspection is very quickly after the completion of the inspection(s). A purchaser has an inspection, and a number of typical issues are noted. The purchaser says nothing to the seller for several days after the inspection is completed. And then, at the very last minute before the inspection deadline lapses, the purchaser presents the seller with a laundry list of requests relating to the inspection. 90% of the time, this approach will upset a seller. In real estate, as in most things in life, timing is everything!
5. Initiating a "Lowball Offer" - Do lowball offers work? Sometimes. Can you shoot a basketball blindfolded from half-court and make the shot? Sometimes. But, as the old saying goes, the "the exception does not disprove the rule." Just because this sometimes work does not mean it's a good idea to use this approach. The reality is that, a very high percentage of the time, lowball offers fail miserably. Why? Because you are effectively saying, "Hey, Mr. Seller, I know your home is worth more than this, but I'm hoping that you are in dire straits and desperate and that you'll accept my offer because you feel you have no other options." Now, if you are correct in this thinking, maybe, just maybe, the seller might accept your offer. But the reality most of the time is this: Even if you are right in your thinking, you will so offend the seller in the process that they won't even bother to respond to your offer. We have seen his many, many times. As much as we try to make our clients view real estate as a "business" (as opposed to something more personal), the reality is that people have a hard time doing this. Homes tend to take on a very personal significance to their owners. If you try to "steal" their personal possession, bad things typically result...
6. Receiving a "Lowball Offer" - I once received an offer on a condo that I owned that was about 33% lower than it was really worth. Did I take it personally? No. Did I tell that guy to take his offer and ...? No. Why? Because, as the old adage goes, I would have been "throwing the baby out with the bath water." Sometimes, buyers just need to prove to themselves that they got the best deal they possibly could. We all know people like this - they want to scratch and claw for every penny they can in every situation. Once they see that you aren't going to give your home away, sometimes they accept reality and step up to the table and increase their offer to something more realistic. You'll never know if you react angrily and refuse to play the game to find out. So, hold your tongue and play along - it just might work out after all.

Specific Strategies

Traditional Method: Start Low and Come Up to Your Real Price - This is the tried-and-true method that most people use. The house is priced at $300,000, the purchaser is willing to pay $290,000, and they offer $280,000, hoping that the seller will come down and meet them "half way." This approach is effective when a home is reasonably priced and the initial "low" offer can be made without insulting the seller. Of course, it is impossible to know what a given seller will view as "insulting."

The positives of this approach are as follows:

1. It's what most people expect you to do
2. You likely won't run the risk of paying too much on your initial offer price

The negatives of this approach are as follows:

1. The process sometimes bogs down if both parties don't agree to react at the same relative "pacing." When one part responds in one hour and the other responds in two days, it can create "bad will" between the parties
2. If you end up with two strong-willed parties in a negotiation and both INSIST upon having the last word, negotiations can become contentious or break down altogether
3. Unless responses from the other side are very quick, the party "waiting" always thinks the other side is taking too long to reply

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"Take It or Leave It/Best Shot" Offer - This is a method that people often use in the following circumstances:

1. The purchaser cannot afford to pay more than a certain amount, and to start the negotiations at a price below that amount risks offending the seller
2. The purchaser does not like to play the "back and forth" game
3. The purchaser desires a quick answer

The positives of this approach are as follows:

1. It does accelerate the entire process
2. Many people like the simplicity of it

The negatives of this approach are as follows:

1. A purchaser might end up overpaying, since he is coming in with his "best shot" from the start
2. A purchaser cannot deviate from this method once they start it; if the purchaser does, then they will lose all credibility with the seller

At the end of the day, the strategy you decide to employ is entirely up to you. We've seen every approach work - and we've seen every approach fail. It really is a "feel" issue, and every person has a different view of the best approach. Good luck!