Whether you are a home buyer, seller or real estate agent,you can never learn too much about negotiation tactics. Sooner or later, someor all of these key tricks will be used by your negotiation opponent. Even thebest negotiators admit there is always more to learn.
Having been involved in real estate sales, purchases andbrokerage more than 40 years, I admit to having been the victim of too manyshrewd negotiators. However, I always learned from the experiences and vowednever again to let someone get the best of me in a negotiation.
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Frankly, many real estate negotiators are not aware whenthey are using a negotiation strategy. Instead, they are just doing what comesnaturally to them.
But savvy real estate negotiators recognize key strategiesand anticipate how to avoid becoming a victim. Here are the five mostoften-used real estate negotiation tricks to expect:
1. THE HIGHER AUTHORITY “TWO BITES FROM THE APPLE”NEGOTIATOR TRICK. This famous negotiation strategy has manyvariations. In a real estate sales situation, it most frequently occurs when abuyer negotiates a home sale as to the price and terms. Then, before signingthe contract, he says, “This looks good. But I need to run it by myattorney (or accountant, mother, father, grandmother, etc.).”
Oops! The negotiation opponent has just become a victim ofthe higher authority or “two bites from the apple” strategy.
To prevent this from happening, smart negotiators start byasking, “Is there anyone not present who must approve this transaction forus to proceed?”
As a property seller and a real estate broker, I’ve learnedthe importance of having all parties involved present. Occasionally, I’ve madeexceptions when one party seemed to have control over the absent person, suchas a property co-owner.
Whenever a sale or purchase is subject to approval ofanother person, especially if that individual is financially involved by payingall or part of the down payment, if the contract says it is subject to thatthird party’s approval, there’s no sale until that “higher authority”approves.
What often happens is the “higher authority”will find something wrong. That’s their job!
For example, years ago, without realizing, I became that”higher authority” for my law school classmates, Fred and his wife,who were buying their first house. I recall crawling underneath the house withFred and finding nothing wrong. The house was immaculate. But Fred said to me,”Bob, you’ve got to find something wrong so I can negotiate a betterpurchase price.” That’s when I realized I was the innocent higherauthority.
When you realize the higher authority “two bites from theapple” negotiation strategy is being used on you, the best strategy is tobe firm but friendly. Even if you absolutely must negotiate a transaction,pretend you really don’t care. “Take it or leave it” should be yourattitude, but don’t take the property off the market while awaiting higherauthority approval.
2. THE NONSTOP NEGOTIATOR WHO NEVER STOPS”NIBBLING” TRICK. Nonstop negotiators are usually buyers. They neverquit trying to get a better price or terms. To them, signing the sales contractis just the start of the serious negotiations.
A frequent example occurs when a home purchase contract,signed by the buyer and seller, includes a contingency clause for the buyer’sapproval of the professional inspection report. This is normal.
However, the nonstop negotiator will use that professionalinspection report to re-open negotiations to get the seller to either reducethe sales price or offer the buyer a credit to repair a real or imaginedpreviously undisclosed defect.
Some buyers will even instruct their professional inspectorsto make minor defects seem extremely serious and costly to repair. For example,I recall selling a house to a nice man who was buying it for his parents. Theirinspector, a retired contractor, found all sorts of minor problems. I readilyagreed to have two serious problems, a missing chimney spark arrestor and anelectrical junction box in the attic, fixed.
But the buyer’s inspection report also said the furnace heatexchanger or firebox was cracked. This is a serious and potentially dangerousproblem, but my inspector said the furnace was fine.
So I called the buyer’s bluff. But I was always very polite.I arranged to have my furnace repairman, plus a representative of the local gascompany, inspect the furnace at the same time. I invited the buyers and theirinspector to attend. Everybody showed up. My furnace repairman checked out thefurnace and said he could find nothing wrong. Next, the gas company man came tothe same conclusion. The buyer agreed to accept their verdicts and the saleclosed without further delay.
Another example of the nonstop negotiation method occurswhen the buyer asks to repeatedly re-inspect the house, such as to measure therooms for furnishings or drapes. The truth is the buyer is really looking for realor imagined defects to re-open negotiations on price and terms. Smart sellersand their realty agents head off this tactic by not allowing re-inspections,except for the customary inspection the day before the sale closes.
3. THE “GOOD COP-BAD COP” NEGOTIATION TRICK. Eitherhome buyers or sellers can use this negotiation tactic which we have all seenon TV shows. Usually, the bad cop will ruthlessly browbeat the suspect, hopingto get a confession. When that doesn’t work, the bad cop leaves the room andthe good cop comes in, makes friends with the suspect, and gets him to confess.
In real estate, husbands and wives use this negotiationtrick especially well. Years ago, this tactic was used on me by wealthy”for sale by owner” sellers Carl and Elsie. They were selling theirvacant rental house. The reason I didn’t recognize this technique was Elsie wasthe bad cop.
Although she was extremely pleasant, I didn’t realize shewas the one holding out for top dollar and all cash. Carl, a retiree, turnedout to be the good cop. He was more laid back and relaxed. He realized thehouse was less than perfect. Also, I think he was bored and wanted to get backto working on his classic car collection of Nash Ramblers.
After several weeks of informal negotiations, bad cop Elsiefinally realized if she wanted to get top dollar she would have to accept myterms of 10 percent down and a 90 percent seller carryback mortgage, whichwould add to the sellers’ retirement income.
Elsie and Carl later became my good friends, and weentered into several mutually profitable real estate transactions together.
4. THE SURPRISE AUCTION NEGOTIATION TRICK. Few homebuyers expect to become involved in an auction. This negotiation trick canoccur when the asking price for a property is artificially low. The result isto create a “buyer frenzy” of competitive bids. The winner is alwaysthe seller.
Real estate agents sometimes use this method to get topdollar for their sellers. This is often accomplished by saying, “Anotherbuyer is seriously interested in this house. You better make your offerfast.”
However, you think you are in competition with another buyerand raise your offer without even a counteroffer from the seller. The result isyou are bidding against yourself.
When this situation occurs, smart buyers either (a) drop outof the bidding to see what happens, or (b) ask for the seller to make acounteroffer rather than the buyer making a higher offer against a mythical,possibly nonexistent second buyer.
5. THE “WOULDJATAKE” NEGOTIATION TRICK. Realestate agents hate this negotiation tactic. As a buyer, I love it. Whenever Ican arrange to meet the home seller before making a written purchase offer, Itry to do so.
Of course, real estate agents usually attempt to keep buyersand sellers from ever meeting, at least until after the sale closes.
This method works best in face-to-face buyer-sellercontacts, such as during an open house or a home inspection. After informalchitchat with the seller, I turn the conversation to the house and the askingprice. My favorite question is, “Wouldjatake $— for your wonderfulhome?”
Then I shut up. The realty agent is usually shocked.Sometimes the seller says “maybe.”
But a better question to ask of the seller is, “What isthe lowest price you would accept for this house?” If that price isn’tacceptable, then ask the “wouldjatake” question.
However, the correct answer for the seller when encounteringa tough buyer like me is to politely reply, “Well, why don’t you put thatoffer in writing so I can seriously consider it?”
SUMMARY: Home buyers, sellers and their real estate agentscan never know too much about negotiation tricks. The five tactics above andtheir many variations are the most frequently encountered. More details are inmy special report, “How to Become a Super-Successful Real EstateNegotiator,” available for $5 from Robert Bruss, 251 Park Road,Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internetdelivery at www.BobBruss.com.
(For more information on Bob Bruss publications, visit his
Real Estate Center).
Copyright 2006 Inman News