Friday, December 29, 2006
5 home-sale negotiation tricks to anticipate
Sealing deal often harder than it looks
Friday, December 29, 2006By Robert J. BrussInman NewsWhether you are a home buyer, seller or real estate agent, you can never learn too much about negotiation tactics. Sooner or later, some or all of these key tricks will be used by your negotiation opponent. Even the best negotiators admit there is always more to learn.Having been involved in real estate sales, purchases and brokerage more than 40 years, I admit to having been the victim of too many shrewd negotiators. However, I always learned from the experiences and vowed never again to let someone get the best of me in a negotiation.Frankly, many real estate negotiators are not aware when they are using a negotiation strategy. Instead, they are just doing what comes naturally to them.But savvy real estate negotiators recognize key strategies and anticipate how to avoid becoming a victim. Here are the five most often-used real estate negotiation tricks to expect:1. THE HIGHER AUTHORITY "TWO BITES FROM THE APPLE" NEGOTIATOR TRICK. This famous negotiation strategy has many variations. In a real estate sales situation, it most frequently occurs when a buyer negotiates a home sale as to the price and terms. Then, before signing the contract, he says, "This looks good. But I need to run it by my attorney (or accountant, mother, father, grandmother, etc.)."Oops! The negotiation opponent has just become a victim of the higher authority or "two bites from the apple" strategy.To prevent this from happening, smart negotiators start by asking, "Is there anyone not present who must approve this transaction for us to proceed?"As a property seller and a real estate broker, I've learned the importance of having all parties involved present. Occasionally, I've made exceptions when one party seemed to have control over the absent person, such as a property co-owner.Whenever a sale or purchase is subject to approval of another person, especially if that individual is financially involved by paying all or part of the down payment, if the contract says it is subject to that third 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 with Fred 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 better purchase price." That's when I realized I was the innocent higher authority.When you realize the higher authority "two bites from the apple" negotiation strategy is being used on you, the best strategy is to be firm but friendly. Even if you absolutely must negotiate a transaction, pretend you really don't care. "Take it or leave it" should be your attitude, but don't take the property off the market while awaiting higher authority approval.2. THE NONSTOP NEGOTIATOR WHO NEVER STOPS "NIBBLING" TRICK. Nonstop negotiators are usually buyers. They never quit trying to get a better price or terms. To them, signing the sales contract is 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's approval of the professional inspection report. This is normal.However, the nonstop negotiator will use that professional inspection report to re-open negotiations to get the seller to either reduce the sales price or offer the buyer a credit to repair a real or imagined previously undisclosed defect.Some buyers will even instruct their professional inspectors to 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. Their inspector, a retired contractor, found all sorts of minor problems. I readily agreed to have two serious problems, a missing chimney spark arrestor and an electrical junction box in the attic, fixed.But the buyer's inspection report also said the furnace heat exchanger or firebox was cracked. This is a serious and potentially dangerous problem, 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 gas company, inspect the furnace at the same time. I invited the buyers and their inspector to attend. Everybody showed up. My furnace repairman checked out the furnace and said he could find nothing wrong. Next, the gas company man came to the same conclusion. The buyer agreed to accept their verdicts and the sale closed without further delay.Another example of the nonstop negotiation method occurs when the buyer asks to repeatedly re-inspect the house, such as to measure the rooms for furnishings or drapes. The truth is the buyer is really looking for real or imagined defects to re-open negotiations on price and terms. Smart sellers and 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. Either home buyers or sellers can use this negotiation tactic, which we have all seen on TV shows. Usually, the bad cop will ruthlessly browbeat the suspect, hoping to get a confession. When that doesn't work, the bad cop leaves the room and the good cop comes in, makes friends with the suspect, and gets him to confess.In real estate, husbands and wives use this negotiation trick especially well. Years ago, this tactic was used on me by wealthy "for sale by owner" sellers Carl and Elsie. They were selling their vacant rental house. The reason I didn't recognize this technique was Elsie was the bad cop.Although she was extremely pleasant, I didn't realize she was the one holding out for top dollar and all cash. Carl, a retiree, turned out to be the good cop. He was more laid back and relaxed. He realized the house was less than perfect. Also, I think he was bored and wanted to get back to working on his classic car collection of Nash Ramblers.After several weeks of informal negotiations, bad cop Elsie finally realized if she wanted to get top dollar she would have to accept my terms of 10 percent down and a 90 percent seller carryback mortgage, which would add to the sellers' retirement income.Elsie and Carl later became my good friends, and we entered into several mutually profitable real estate transactions together.4. THE SURPRISE AUCTION NEGOTIATION TRICK. Few home buyers expect to become involved in an auction. This negotiation trick can occur when the asking price for a property is artificially low. The result is to create a "buyer frenzy" of competitive bids. The winner is always the seller.Real estate agents sometimes use this method to get top dollar for their sellers. This is often accomplished by saying, "Another buyer is seriously interested in this house. You better make your offer fast."However, you think you are in competition with another buyer and raise your offer without even a counteroffer from the seller. The result is you are bidding against yourself.When this situation occurs, smart buyers either (a) drop out of the bidding to see what happens, or (b) ask for the seller to make a counteroffer rather than the buyer making a higher offer against a mythical, possibly nonexistent second buyer.5. THE "WOULDJATAKE" NEGOTIATION TRICK. Real estate agents hate this negotiation tactic. As a buyer, I love it. Whenever I can arrange to meet the home seller before making a written purchase offer, I try to do so.Of course, real estate agents usually attempt to keep buyers and sellers from ever meeting, at least until after the sale closes.This method works best in face-to-face buyer-seller contacts, such as during an open house or a home inspection. After informal chitchat with the seller, I turn the conversation to the house and the asking price. My favorite question is, "Wouldjatake $--- for your wonderful home?"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 is the lowest price you would accept for this house?" If that price isn't acceptable, then ask the "wouldjatake" question.However, the correct answer for the seller when encountering a tough buyer like me is to politely reply, "Well, why don't you put that offer in writing so I can seriously consider it?"SUMMARY: Home buyers, sellers and their real estate agents can never know too much about negotiation tricks. The five tactics above and their many variations are the most frequently encountered. More details are in my special report, "How to Become a Super-Successful Real Estate Negotiator," available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet delivery at www.BobBruss.com.Labels: Corona, Foreclosure, Home Prices, Inland Empire, Loan Modification, Moreno Valley, Murrieta, Real Estate, Riverside, Short Sales, Statistics, Temecula
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