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The 7 Biggest Home Price Negotiation Blunders
By Luke Mullins, usnews.com
Jun 26th, 2008
1. Not understanding the seller.
In a home price negotiation, it's essential to look at the deal
from the opposite side of the table. "You want to make best use
of the seller's fears," says Ed Brodow, a negotiation expert and
the author of Negotiation Boot Camp. "So the question is: What
are the pressures on the seller of this house?" Sellers today
could be facing any number of anxieties. Perhaps the local
housing market is even weaker than the sluggish national one.
Maybe the seller has landed a job in another city and already
bought a home there. He or she could even be facing bankruptcy.
Any information you can obtain about the local real estate
market or the seller will strengthen your negotiating position.
When Steven Cohen, president of the Negotiation Skills Co.,
first visited a home that was for sale in 1981, he noticed that
the property had no furniture or heat. "That gave us a little
bit of a sense of the degree to which the people wanted out and
gave us a heck of a lot more bargaining power," Cohen says. "We
offered tons less than what they were asking." The sellers
eventually accepted the offer.
2. Forgetting your homework.
Some of this needed information is readily available. You can
get the sale prices of comparable homes and discover how long
certain listings have been on the market from a real estate
professional, a multiple listing service, or an online resource,
says Joshua Dorkin, the founder and CEO of real estate
networking and information site BiggerPockets.com. To take the
temperature of a local market, identify a couple of good real
estate blogs and click through them daily. To find out the
seller's motivations, try getting in touch with him or her
directly. Some will refer you to an agent, but others will chat
candidly. In addition, "researching who lives in and around the
home you're [considering] buying is of the utmost importance,"
Dorkin says. By speaking with neighbors, you'll gain a sense of
what life is like in the community and perhaps even pick up some
insight into why the sellers are moving. "You can never have
enough information," says Jim Camp, the author of No: The Only
Negotiating System You Need for Work and Home.
3. Showing your cards.
While looking for information on the seller, it's important to
divulge as little about yourself as possible. Any knowledge you
provide could be used by the seller as leverage. "For example,
you may want to pay cash for the house, but the sellers don't
have to know that," Camp says. If you are capable of paying
cash, the sellers may hold firm to their asking price, he adds,
"because it means that you are a person of means."
4. Not having options.
When you begin negotiating on a specific property, make sure you
have identified several other homes you'd be happy with as well.
"Never negotiate without options," Brodow says. "If you find a
perfect house, find another house so you are not so desperate to
buy [the first] house that you wind up giving in to whatever the
seller wants." Furthermore, it's to your advantage to
tactfully—either directly or through your agent—let the sellers
know that theirs is not the only property you are considering.
5. Skipping the face time.
Instead of handling the negotiation process by phone and fax,
it's important to meet the seller in person. "The most effective
way to influence or persuade—which is what negotiation is all
about—is to do it face to face," says Tom Hayman, the president
of Negotiation Expertise, which trains people in negotiation
techniques. "Because then you get your words, you get your
voice, and you get body language—or nonverbals—all into the
equation." If the transaction is being handled by real estate
agents, the sellers should request that their agent get together
with the buyer's agent in person to discuss the prices. If your
agent is unwilling to do so, he might not be the right agent for
you. "A buyer should be looking for an agent who is going to do
that kind of effort for them, because it always pays off better
when it's face to face," Hayman says. (Buyers using agents
should be aware that their agent gets a bigger commission on a
higher sale price and therefore may have less of an incentive to
push for a lower price tag.)
6. Offering a specific number.
When extending an initial offer, present a range of figures—say,
from $420,000 to $450,000—rather than a hard number. An offer of
a specific number that is considered too low could upset the
seller enough to derail the negotiations altogether, says Cohen.
A price range, however, affords you more flexibility. "In
negotiating, you don't want to adopt a position where you paint
yourself into a corner," Cohen says. "Because the only way you
can get out of the corner is to lose face and perhaps lose a few
bucks."
7. Getting caught up in the game.
Remember, your goal is to purchase a home—not beat the seller.
"People often get so enmeshed in the negotiation game that they
lose the house they like and could afford because they didn't
get the negotiation price they thought they could get," says
Daniel Shapiro, associate director of the Harvard Negotiation
Project and coauthor of Beyond Reason: Using Emotions as You
Negotiate. So what if the seller doesn't bring the price down as
much as you had hoped? If you really like the house, the price
has been reduced enough to fit your budget, and you've given the
negotiation process your best shot, consider declaring victory.
"I hear a lot of situations where real estate deals fail because
one side or the other refuses to come down another $5,000,"
Brodow says. "They don't want to give in, and then it becomes an
ego thing."
By Luke Mullins, usnews.com
Jun 26th, 2008