Examples of Real World Negotiating Techniques

[Wade Sikkink]

Sometimes people struggle with how to employ negotiating tactics that they read about in real world situations.  The BP community has probably collectively negotiated more real estate deals than any other group in the history of time.  We should share some of the techniques we've used and how things turned out so that others can learn by seeing some real world examples.  I'll start.

We bought a SFR a couple months ago and I used a couple specific techniques in the negotiation. Higher authority and specific number. Here's how it went. After opening the negotiation the seller countered a number to us. When we countered I used this specific language:

"We've talked with our banker about the repairs we're going to need to make and the most we can offer is $71,800.  We're buying this house as an investment and that's the best we can do.  We'll take it as is.  You can stop painting and any other work you're doing."

By invoking the higher authority of the banker we made it seem like it's out of our hands.  Most people are constrained by what a bank is willing to lend them, so this use of a higher authority figure will be very familiar to most people.

By using a very specific offer number of $71,800 it seems like we've really done a lot of working figuring out what it's going to take to make this deal work.  In reality the number was arbitrary, but within the bounds of what I was willing to accept on this deal.

The combination of these techniques leaves the impression that we've done a lot of work on getting to this point and this is it.  It's a nuanced way of saying "take it or leave it" without actually using those words.  The seller accepted our offer.

Now your turn.  Share some examples of negotiating techniques you've used in the real world and how they turned out.

[Mike H.]

You don't lie to try to close a deal? You don't think the sellers "lie" when they negotiate? Telling the seller your best and highest is $100k when you are willing to go up to 110k is not lying. Its negotiating. And if you don't think the seller is doing the same thing then you're leaving money at the table.

I'm not suggest you tell the seller that their house has mold in it to get them to come down on price. That would be a lie that would be unethical and that I would agree.

But telling a seller that the bank said the most they would do is 100k even if they would go higher is negotiating. I think a seller would eat your lunch if you were to tell them exactly how high you'd go. You'd never get them to come down with that technique.  That just makes no sense......

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In terms of my techniques, I have a couple.

1) For non hud deals, if the seller counters, I ALWAYS counter with a higher number - even though my counter is usually only 500 to 1k. Much like Wade's reasoning above, I want them to see that I'm locked into my number. But I also want them to see that I'm willing to move a little so I'm not just throwing low ball offers out there to see if they'll stick. I'm throwing what I perceive as a reasonable offer and then I'm willing to negotiate some to see if there's a deal to be had.

You'd be surprised how a seller's first counter tends to only be 1k to 2k off their list. And their second counter might actually come down to something we can make work.  I've picked up a few deals like this over the years.  Makes no sense why they do it on their second counter. But its worked extremely well for me in the past so I've kept doing it.

Believe it or not, it was just pure luck that I picked up on that one. Had an offer where we were quite a bit apart (list was 26k or 27k higher than my offer).  They countered my offer by dropping down 2k. I felt like their house was overpriced so just to be a nuisance, I countered back and added 500 bucks to my offer. :-)    Then they dropped their price 17 or 18k.  All in the same day. I think we ended up splitting the difference and I got it just at my max number. Who would have guessed..... :-)

2) Another negotiating technique is in earnest money and closing time. I use a hard money to close and he can close in 10 days if I need to.  I recently had a house that I put in an offer at 128k. House was listed at 155k and was in near move in condition (had two price drops from 179k originally so I felt they were ready to move). They then said multiple bids and asked for best and highest. 128k was my absolutely max I could do. So I bumped the earnest money from 1k to 5k and put down a 21 day close.

I knew that the house had been under contract once before and it had fallen though. So I thought the seller might be spooked with that happening again and used the higher earnest money and quick close to get them to see I was positive I could close. Got the house (actually closed on it today).

But that is one way to negotiate an offer without bumping up your offer price. It definitely sends a message to the seller if they're looking at offers with financing.