Negotiation Differences

Real Estate Agent with Your Family Realty llc

Yesterday one of my clients asked me why you couldn't negotiate for a home the way that you negotiate for a car.  In particular, he was talking about a negotiation between two individuals, not an individual and a company or bank.

For example, say my client wanted to by a used car (after all houses are used products too), he would go and observe the car and then determine the value he wanted to pay for the vehicle.  He would offer the seller the amount and receive an immediate acceptance, rejection or counteroffer.  Say the car was listed at $2000, he offered $1500, and the seller took it.

Here's his dilemma.  We are looking at a home in the $200,000 dollar price range and he wants to know why he can't offer $150,000 for it.  It's only been on the market 22 days.  I've indicated to him that too low of an offer will not even receive a response from the seller.

Here's are three ideas of what I've told him about why real estate negotiating is different than vehicle negotiating.  Maybe you could share others:

1) Real Estate is unique, vehicles are not.  If your vehicle seller rejects your low offer, you can probably find approximately the same car somewhere else.  The home he wants is one of a kind.  If the seller ignores your offer because you low balled and that's the home you want, you have weakened your negotiating hand considerably.  If you come back with another offer they will be even more motivated to bargain hard.

2) Car sales don't have contingencies.  When you buy a house you are also asking the seller to endure some serious inconveniences.  Sale of home contingency, financing contingency, home inspection continecy, closing cost credits, etc...  Asking the seller to bear some of these weakens your ability to low ball a deal.  It's like saying you want all the benifits without paying for them.

3) The seller may not be able to accept a low offer, even if it's cash.  So many families have taken out 100% loans or second mortgages that they need a certain amount to be able to satisy all their debts.  In a used vehicle transaction, if the car if paid for, the seller can do what he/she wants.

In all real estate negotiating the best tactic to take in negotiating is to seek a win-win situation.  What this means is the deal is essentially fair for all involved.  Get what you are willing to pay for, and then pay for it.

Comments (9)

Jason Romrell
Business Attorney and Success Advisor - Los Angeles, CA
Nice post!  In my opinion, the best way to negotiate anything is to know what you want, why you want it, and what you're willing to "pay" (monetarily and emotionally) to get it.  If a buyer is looking for a killer deal, they're out there, but you can't love a property and expect to steal it (that would be a wonderful coincidence, but unlikely).  So if it's just a deal you're after, maybe the $150k works and you move on until you find that perfect investment.  Otherwise, when it comes to negotiations, it's best to come from a position of knowledge and strength.  What will the market bear?  What are the comps?  DOM?  Does the buyer love the property?  Etc.  This info can help agents know better how to help their own customers through the negotiation process.
Oct 02, 2007 03:42 AM
Robert Johnson
Your Family Realty llc - Eau Claire, WI
Great comment Jason.  I think you said it better than I did.
Oct 02, 2007 03:49 AM
Jason Romrell
Business Attorney and Success Advisor - Los Angeles, CA
Thanks for your kind reply.  LOL...nope...I liked your post!  I always have something to say (isn't that because lawyers are paid by the word?)  Your last paragraph is dead-on!  That's what it all comes down to.  Create a win-win...
Oct 02, 2007 03:55 AM
Chad Baird
Re/Max Spirit - Dayton, OH

Some sellers are willing to give a huge discount.  You never know. 

If my buyer wants to lowball I will present the offer.  Sometimes with a helmet on and knowing full well a rejection will be coming back, but at least counter.  I also advise my buyer client that it could backfire and the seller may never entertain another offer from us.  It's then a gamble.  Take my advise or leave it, and we can do it yourway.  I advise my sellers that if there if no other offers are out there dont be offended, counter.  As long as all are talking, lets try to find a middle ground. 

In my experience the first offer is just an offer.  I never get excited until we start negotiating.  After the first counter offer, we can start to tell if there is a chance in hell that a deal will come together. 

Oct 02, 2007 04:13 AM
Robert Johnson
Your Family Realty llc - Eau Claire, WI
Chad,  I see from your profile that you work primarily with investment buyers and I think the negotiatiing style you've indicated is what makes you successful among them.  However, the guy I'm working with lives 6 blocks from me and has a big network of friends.  If I lose a house for him, I lose the whole network.  I need to help him see the consequences at least.
Oct 02, 2007 04:19 AM
Vicente A. Martinez
Prudential Douglas Elliman Licensed Real Estate Salesperson - Woodhaven, NY
Realtor, Brooklyn - Long Island - Queens Homes
Let's not forget that real estate is a product  that they aren't making anymore (of-course I'm referring to land). Keep doing what you do.
Oct 02, 2007 04:34 AM
Donna Harris
Donna Homes, powered by JPAR - - Austin, TX
Realtor,Mediator,Ombudsman,Property Tax Arbitrator

What do you mean that you "can't offer $150,000 for it"?  As the buyers' representative, you are obligated to present any and all offers the buyers want you to.  You might not agree with their offer, but you must put it in writing for them because you work for them, according to a buyer's rep agreement.

Sometimes, no matter how much we educate, they're not going to listen.  I have a guy coming in town today to look at a house his wife saw when she was in town.  The house was on the market for 2 days and they wanted to come in at 90% of asking price when the neighborhood sells for 98%.  They've lowballed 4 houses thus far, and they don't really care what I have to say, as they're from a different market where it  happens and they're waiting for that one very motivated seller who will go for it.

Oct 02, 2007 04:52 AM
Robert Johnson
Your Family Realty llc - Eau Claire, WI
Absolutely Donna, I'll present whatever offer they desire and fulfill my fudiciary duties, but I will also try to educate and influence because I happen to make my living by selling houses, not by making offers on them.
Oct 02, 2007 04:57 AM
Todd Clark
eXp Realty LLC - Tigard, OR
Principle Broker Oregon

I have some investors that I just have to go with the bids they put in, if they see on a listing that a 3rd party approval is needed then they don't care if they offend the sellers or not, they feel they are negotiating with the bank and not the home owner. They don't realize the home owner still has the right to refuse it, no matter how many times I tell them this.

Great post!

Nov 10, 2007 06:36 PM