Tuesday, January 31, 2006

Negotiating Points Sells Houses, Benefits All

When I'm looking to sell a property, the first thing I have to look at is my "BATNA," or Best Alternative To a Negotiated Agreement. This is the question a good agent should be putting forward to both buyers and sellers.
"If we can't sell this house at your asking price, what are your steps you're willing to take?" The same can be asked of a buyer. The bottom line rests with what the buyer/seller wants -- the house or the best terms. Keep in mind – the ultimate goal is to get a house.
This is something I've had to remind sellers when they were in the heat of negotiating one point in a counter-counter-offer. We've agreed that we want to sell to a particular buyer, but this buyer has asked just for a little too much -- about $1,000 more than the seller wants to let go.
In the big scheme of things, frankly, $1,000 is not that big of a deal. We're talking about a $400,000 house and the buyer and seller are quibbling over a thousand bucks. Seems trite, but this is where the skillful negotiator can help buyers or sellers remember the real goal is not to "win" $1,000, but to "win" the house.
By the time the buyer and seller get to this point, my advice to both is to focus on the real goal -- getting into or getting rid of the house. If I'm moving to a new job in Chicago, and my house has been on the market for 100-plus days and I have a contract on the table -- believe me -- it's not going away till I have a settlement day on my calendar. This is where both buyers and sellers fail.
Instead of engaging in the negotiation process, they just give up. "Well, if they want that much money from me, then they're just greedy and I'm not going to sell to (buy from) them."
These are the saddest words in the selling/negotiating process. We're starting out at $400,000, the offer comes in at $380,000, we've negotiated up to $389,000 and the buyer has gotten $10,000 in assistance, but wants to hang on to the home inspection items (which will cost $1,000) or they're walking. (Vice versa, the seller won't give $1,000 more to get the deal done.)
Now, how do you handle this? The first thing for both sides is to remember -- in this example, we're talking just over a quarter of one percent of the asking price ($1,000/$389,000 = .00257). So you have to ask whichever party is threatening to walk to first sit down for a second and ask themselves a few questions about the $1,000 (or whatever the amount is):
Do I have the money? If you just simply don't have the money, then it's possibly a break point. There's a bit of suspect in the negotiation price to start with and when a buyer says, "We just don't have any more money to put into the transaction," it's now up to the seller to take that into consideration and either believe it or disbelieve it. However, if the buyer doesn't have the extra grand, then they may not be able to even qualify to buy the house. On the other hand, the seller may be in the same situation, "I have to have that extra $1,000 to make it work on the next transaction."
Many times, give and take is required for both parties to get what they want. Ask: "Is it that you want another $1,000 from this guy or do you want to buy (sell) this house?" What's the real goal here?
Focus on the value. To the buyer, you have to ask, "If you don't get this property, are you going to hate yourself later?" If they quickly say "no," then walk. If the answer is, "Well, I may not hate myself, but I really like the house." Then get over it and do what it takes to get into the house.
For the seller, the question is: "Are you willing to wait another 60 days to sell your house and possibly lower your price (again)?" Keep in mind, when you talk about lowering prices, it's not in the $1,000 range, it's more like $5,000, $10,000 or $20,000, depending on the price range of the property. In the million-dollar home market, it's not unusual to drop by $100,000 at a time.
Thus both buyers and sellers have to think about what will happen in the future if they don't go for the negotiation now. In a market moving up, the buyer should remember the next property is probably going to cost more than the one they are negotiating on right now. In a dropping market, the seller has to take into account the price drop and then the negotiations with the next buyer. The $1,000 may turn into $6,000 or more with a price drop and new negotiations in the future.

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