We cannot count how many times people have tried to do hardball negotiations in residential real estate at any price point. It has happened when submitting a low offer with horrible terms to trying to renegotiate once under contract. People think that because they negotiate in their careers, at the car dealerships, or with their local furniture store, that it wouldn’t be any different for their home. Surprise! They are so wrong. Here are three reasons why:
1. You are most likely dealing with a Seller that doesn’t negotiate for a living: Car salesmen are used to negotiating. If someone negotiates in their line of work, they are speaking with other professional negotiators. The same doesn’t always apply in residential real estate. You could be negotiating with an accountant, software engineer, or someone who doesn’t negotiate on a day to day basis. Therefore, the approach needs to be different.
2. There can be so much emotionality with a home: This could be where someone raised their children, maybe remodeled it by themselves, or it has been in the family for generations. Trying to be the tough negotiator might shut the Seller off completely, thus hurting your chances of getting what you want.
3. Word, and reputation, travels fast: If a buyer has a reputation of trying to be the hard negotiator, then listing agents are going to coach their Sellers accordingly. Here’s a real-life example: We had a listing where we received two offers. One of the Buyers was trying to be the “great” negotiator because they did that for a living for many years. They lost out on the house and were devastated. I had an off-market listing around the corner that we were preparing for sale and I told those Buyers and their Realtors® about it. Because they had the reputation of trying to negotiate on the price, we instructed our Seller to list the price $100,000 above what she was expecting. This way, if they try to grind down the price, they can feel the “win” and our Seller is still happy. And the result? Because they lost out on the last house and didn’t want to lose out on this one, they offered full price. Our Seller netted $100,000 more than what she was expecting, because of the previous interaction with the Buyers.
What to do now? First, do research on who you are negotiating with so that you have the necessary background. If they are professional negotiators, then that is one strategy. But if they never negotiated a day in their life, that’s another. Second, determine what leverage you have, and go from there. Do you have information about the home that would be damaging to the Seller? Has the home been on the market for a long time? Are there multiple offers where you have no leverage at all? These facts can help in structuring your presentation throughout the buying process. Next, consult with your Realtor® to see what their take is on it. They might be able to provide insight (such as we did in point #3) that could be useful.
The goal is not only to find the deal, but to get it. And sometimes trying to be the hard negotiator doesn’t get the job done.
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