Red Herring Negotiations Technique - Does it Really Work?

Question

Hello BP! I am listening to Rental Property Investing by Brandon Turner and I'm at the topic of negotiation techniques.
One of the techniques listed is the Red Herring Technique.
Basically its putting something in the contract that would mislead/distract the sell from a more relevant/important issue.
The example in the book was lowering the purchase price offering to dispose of your priceless china (I know the example is a bit over the top, but from my understanding he was just trying to make a point)
To me this sounds really off putting - and would do the opposite of helping you get an accepted offer.

So I want to know:
1. Has anyone ever used the Red Herring Technique?
2. Did it work?
and something extra
3. Is there a different negotiation technique that you prefer?

I've never used this technique but only have purchased a residential home. As I'm preparing to be a real estate investor, it would be great to hear what techniques have worked for other investors.

Ola Dantis · Answer

@Ashley Ohno

You should check out a book called "Never Split the Difference by Chris Voss".

You wouldn't need a Red Herring (distracting) technique from the list of negotiating techniques you would get from this book.

Dennis Cosgrave · Answer

Personally, I put everything I could think of that was to my benefit in the offer to purchase, and then sit back and see what sticks. The only exception is the price. Sellers focus very much on price. If you low ball, they get angry and refuse to even read the rest of the offer. I was often surprised by how much the seller accepted. Besides price, the other most important element was the closing date.

Ashley Ohno · Answer

@Ola Dantis

Thanks for the book recommendation! I'll make sure to check it out as well.

Dennis Cosgrave · Answer

Ashley, I never said that I don't change the price. I will always start with a lower than asking price. It is just counterproductive to start with a low ball offer unless the property has been on the market for a very long time.  Even then, you run the risk of angering the seller. Better to go in 10-15% under asking price and make up for it with other terms.

Aaron K. · Answer

@Ashley Ohno it can work, however the reality is most closed sales don't go back and forth more than three times before entering contract.

1. Original offer

2. Seller Counteroffer

3. Buyer Counteroffer

Thus it needs to be introduced and resolved quickly in the majority of cases.

Ashley Ohno · Answer

Account Closed

Did you used to use an agent and found it just took too much time in the negotiation process?That is interesting information though! I didn't realize that many sellers don't know they can counter offer. If that is the case it makes sense to have an 1st offer that doesn't low ball too much.

Account Closed · Answer

@Ashley Ohno we do marketing to property owners so there is usually no realtor involved. In the event a realtor already has the property listed and the seller tells us it is listed then we usually pass at that point. We either need good terms or a good price in order to make a deal worth our time and it is the realtors job to insure that that doesn’t happen. I have wittinessed first hand where the  Seller took the councel of the realtor and had their home foreclosured.

Account Closed · Answer

The technique mentioned above is thru making an offer through a realtor I’m assuming.

I make most of my deals in person and write up the purchase contracts on site on the first visit. I usually don’t buy properties where there’s an agent involved. If an agent is involved the amount of volleying is 3 like @Aaron K. mentioned.

The problem I have found with asking to much is not all sellers know that they can counter so they tell you they need to think about it. The “we need think about it” line is usually a phrase that means, no deal. If both parties are using a realtor then I guess the deal could be still alive after a somewhat confusing offer.

Ashley Ohno · Answer

@Dennis Cosgrave

That makes sense. Thanks so much for the information and insight!

Ashley Ohno · Answer

@Dennis Cosgrave

I see, so are you saying that from your experience you were able to get a great deal by putting other benefits and not changing the price? I can see how sellers focus on price so I wasn't sure the red herring technique would actually drive the seller's attention away from that.

Red Herring Negotiations Technique - Does it Really Work?

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