The Psychology of Negotiating

 I ran across a few articles on negotiating and the psychology of it with some very strong opinions on how to negotiate. As I read these suggestions, I agreed with a few and strongly disagreed with many of the others and some were straight out of the reality home buying/flipping shows. In an ideal world, you would ask what ever you wanted for a home and you would have an adversary that was locked into negotiations on your home. This is rarely the case and more importantly, even if it is, you rarely know that this is the case. The two articles I read were from popular real estate and national news agencies. One recommended to find “the most hard nosed, irritating and determined agent” you can find and then always negotiate the commission. This is a fairly tough market right now. Do you really want to be stuck with an irritating agent for the next 90 days. I negotiate hard and am determined to get the maximum for my clients but that can be done in a friendly manner which will actually attract the other local top producing agents to want to do business with me and my clients. The agent that is always abrasive and condescending to agents will have a harder time selling their listings because the other agents don’t want to work with them. As far as negotiating commissions, you generally get what you pay for. In this market, it is not a just throw a sign in the yard and it will sell situation. Advising my clients as to what moves to make and when to make them is a very precise art which requires a very local expertise on what the market is doing.

The next items the article lists is “understand forward pricing" and ask for more than you expect. Forward pricing is basically extrapolating out a price from the last sale based on the trend of the market. Since we have not had a predictable trend in the Avondale area since about 2004, this point seems irrelevant. Asking for more, especially significantly more, than you expect generally leads to longer sales times and market staleness in our market. Of course, there is nothing wrong with leaving a little negotiating room but generally not so much that it limits the activity on the property. Silly little things like appraised value and qualifications of the buyer tend to get in the way of this one. I recommend pricing a home within 5% of the adjusted price of the most recent comparable sale. After all of this, the next recommendation (although it disclaims that it may be risky) is to start a war by significantly underpricing your home. This strategy is laughable. In a roughly equal supply and demand situation, there simply aren't enough buyers frothing at the mouth to significantly boost your price back to market value. The only good parts of the article were to remember that it isn't personal and always keep things moving.

     In another article, it recommended that you always get the last concession, to impose a penalty for asking for concessions and that friction was your friend. These may be very viable negotiating tactics at say a union contract negotiation where both parties really cannot go elsewhere to negotiate which is never the case in a real estate transaction.

Common to both articles was the advice to never meet in the middle during negotiations. Hard line stances such as this will ruin more negotiations than the benefit of obtaining a few extra dollars. 

   Both articles had a couple of things that I did agree with and have promoted for years. They both agreed that it was best to check your ego at the door. They also agreed that information is power. The feel for the currents in the market as well as solid information properly adjusted is something that only a highly qualified, highly experienced agent with intimate knowledge of the area can provide.

Probably the hardest piece of advice given was to stop talking and start listening. This is good advice in almost any situation but is especially valuable in real estate negotiations. Although, I am not a firm believer in making make or break negotiating decisions based on “reads”, they can be helpful. 

Finally, I would add a few of my own pieces of advice based on almost 30 years and hundreds of transactions.

1. Never let the transaction die on your side. Always counter no matter how low or insulting the offer.

2. Never buy you home back for a few dollars. Those few repairs you are asked to do is usually offset by the value of the presence of the buyer.

3. Set aside your emotional attachment to your home and the work you have done on it and try to view the transaction from the buyers perspective as well.