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Negotiating Techniques

Section 3 - Chapter 11

Specific Negotiating Techniques

Limited authority may be a reality, or may be a negotiating tactic. In real estate it is common to say something like "I'm not sure if I can do that. I have to okay it with my wife." That may or may not be true, but it is a way of putting off the issue, or possibly getting the other side to drop it, or making your rejection of the idea less personal ("Sorry, my wife said no").

When it's used against you, a subtle ego-attack may reveal it to be just a tactical move. Try something like, "If you can't make that decision, who has the authority to decide? Should I wait and talk to someone else?" Sometimes he'll feel inclined to "prove" he has some authority, and will make the decision after all.

When you use the tactic yourself, try it in a way that encourages the other side to concede something. You might say, for example, "I don't know if my wife would be okay with that or not. I'll tell you what; If we can get the price down to $145,000, I can probably get her to agree." If they try the ego-attack on you, just smile and say, "I'm sorry, my wife insist that I do the negotiating, even if she won't let me make the final decision."

Negotiating a home purchase is full of emotional elements and needs. One is the need for a seller to feel he has done well - that he's "won" something. He won't get that feeling if he asks for ten things and you casually say, "okay," so even with points you can easily concede, be stingy in your concessions. The seller is more likely to give you what you really want if they feel they have already "won" many points.

Always look for win-win solutions, and present them as such. When I was selling real estate, I noticed that buyers just assumed that the sellers wanted the highest price. While this is often true, sellers also want an easy transaction, or a fast sale. A buyer that gives these things can get a lower price, and both sides will win.

The key to good win-win solutions is to find non-conflicting needs or wants. For example, if you need to buy with less cash, and the seller just wants a good return on his investment, you could suggest that the price be raised, while he pays more of the closing costs. Both sides win.

If you could exclude other buyers, you would have a better chance of getting that house, right? Start by never mentioning other buyers. The seller may mention them, so have a response ready. "I know there are others who would love your home, but we have been pre-approved and are ready to close."

Everyone knows this technique, but most are afraid to use it. A real estate investor I was talking to the other day told me,"If you aren't embarrassed by your offer, it isn't low enough." He's made millions in real estate, so I think he's worth listening to. Remember that the extreme offer isn't going to be accepted (usually), but is just a way to alter expectations.

Once, when I sold my car, a really nice guy looked at it. After crawling under and inside the car, he politely offered me half of what I was asking, and left his phone number (I said no). I wondered what was wrong with the car, and I found myself hoping I could get just a bit more than that half-price offer. My expectations had been altered quickly. Fortunately another person gave me the full asking price before I decided to pick up that phone.

The idea of a low offer then, is to alter expectations. If a seller is asking $200,000, and you offer $160,000, he'll most likely say no. Suppose you go back and forth, though, and eventually agree to $182,000. He not have considered going this low before, but now it seems like victory to him after starting at $160,000.

You will lose a lot of potential homes this way. Some sellers won't even take subsequent offers seriously once you have offended them with your extreme offer. This then, is a technique to use when you have time to find that home, and really want the best deal you can get.

I remember sitting there at a real estate closing years ago. The older man who was buying the house for his daughter was told he would have to pay for the propane left in the tank, as is standard when buying a propane-heated home. He stood up, and started shouting, "I'm not paying for anything like that! We didn't agree to that! You can't expect me to pay..."

The seller was desperate to sell, and began to cry. The other agent explained to the old man that it was simpler this way, and that he'd have to buy propane in any case, if the tank was empty. The seller just said, "Fine, I don't care. He can have the propane," and that was the end of that.

I don't know if the old guy meant this as a negotiating technique, or was truly upset, but it saved him another hundred dollars or more. I can't really recommend this as a negotiating technique, but you should know that it is taught as one, and it may be used against you.

Building trust can help keep things going smoothly, and help you get what you want in circumstances where the other side might doubt your intentions. So how do you build trust?

Telling the truth is a start, of course, but you can also approach this in a more active way. Make it a point to promise things that you can easily follow through on. This could be as simple as saying, "I'll get that credit report to you by tomorrow morning." Let the seller know what you'll do, and then do it. Just delivering the credit report without first saying you'll do it won't be as effective for building trust. Find things to promise, and be sure to follow through.

It is often best to set it aside tough issues and come back to them later. This is partly because of the psychology of time-investment. Spend time nailing down the other points, and the seller won't want to throw away the deal as easily. This means that when you finally return to the tough issue, he may be more willing to give you what you want.

Just say something like, "Let's set this aside for the moment, and come back to it later. There are other things I think we can easily agree on, so let's get those worked out first." Usually the suggestion will be accepted. It may even be a relief to all involved to let that issue drop for now. Then, with time and more trust-building, you can return to it in a stronger position.

Settle the points step-by-step, and if there is a big problem at any point, you don't have to start the whole process over. Put it in writing. Even notes you and the seller make together on a legal pad or scrap of paper help to commit both of you to these smaller agreements. There is a moral force to having agreed in writing, even tentatively. Then if the other side wants to take something back, you can more easily ask for something in exchange.

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