Negotiating The Right Way
There are a ton of books available on negotiating. Many have very bold approaches where you just hard line what you want and if you win then you can claim yourself as the champion. While these methods may be effective for quick one-and-done deals they can be very detrimental to a deal where there will be some longevity or a chance for repeat negotiations in the future. A well executed negotiation will leave both sides feeling like they have won.
I’ll use a recent transaction some friends of mine were a party to as an example.
My friends had been looking for a home for over 6 months. The Colorado market was just too hot and finding a home that made sense was becoming more and more difficult. After losing multiple bidding wars they were getting discouraged. One day a FSBO (For Sale By Owner) home popped up on facebook (Yes, you can find a home on facebook). The home was noticeably underpriced compared to the market, but for a buyer it was a steal. My friends jumped on it and were one of only two offers. The first one pulled out and my friends got the deal. They offered $6,000 over asking to get the deal. My friends knew the home was underpriced, but they kept things within a reasonable range for what the seller was asking instead of negotiating the price down.
If the seller had posted the home with an agent it would have easily gone for 20k more. The seller thought (as most FSBO sellers do) that if they didn’t use an agent they would save the commissions and make more money. Admittedly this is sometimes true, but most of the time it is not. In this case the seller lost anywhere from $5,000 – $15,000 that they could have made just by listing it with an agent who knew the real value. This is even after commissions had been paid.
In the end my friends ended up saving $20,000 on their purchase which made them feel like they got a great deal. The seller also left feeling great since they got higher than their asking price. Simply put it was a win/win.
When negotiating remember to look at both sides, not just your own. If you’re purchasing a home you don’t want the seller feeling like they’re getting screwed. It will only make them difficult to deal with. Same goes for dealing with buyers. If your buyer feels like their getting the sharp end of the stick they may just pull out and cause you to put your house back on the market weeks later. Price isn’t everything.
– Dan Mackin