Many years ago I attended a conference
held by one of the masters of the real estate industry, Ron LeGrand.
There is very little this guy hasn't done in the business and very
little he doesn't know. I picked up quite a few bits of information
that week, but one, in particular, has stuck with me over the years,
and I've used quite often to my benefit.
High and Low Anchors
When you look to buy a property you
will, many times, run into a high anchor. A high anchor is a price a
seller knows is more than a property is worth. They do this with the
idea of coming down some to give the buyer an impression that they
got a good deal and also to discourage all but the most confident
from coming in with a low-ball offer. It is a negotiators mental
game. They take you from what you think is a reasonable price and
often suggest you split the difference... and you lose.
Conversely, often a buyer will come to
a seller with a low anchor – a price that is obviously unreasonably
low, but helps put the negotiation in a downward direction. Again,
they don't necessarily expect to get the low price, but use it as a
place to start and adjust the sellers thinking.
Other Factors
Obviously, there are other factors in
negotiating a sale or purchase, and understanding these factors can
only help you come to a more satisfactory outcome. For instance,
when Pete Fortunato, another real estate wizard from Tampa Bay area,
looks to buy a property, he will often ask the seller, “Why would
you sell a beautiful house like this?” This gets people talking
and often reveals the strength of their motivation and other needs
that let you, the buyer, make a more informed offer that best meets
those needs.
Sometimes you can get this information
from an agent, but keep in mind that even the guy showing you the
house is working for the seller – the one who pays them. Beyond
that, there are some things the agent is not aware of, and they are
trained to deflect some of these information gathering questions.
The Magic Words
The magic words work best when you are
dealing face to face with the buyer or seller. When you are talking
about price, which ever side of the table you are on, listen to the
number thrown out. Think about it with no reaction and ask in a
non-confrontational tone, “Is that the best you can do?” Then
close your mouth.
The other party may try to justify the
price as you listen quietly or will say they can take less if they
are selling or pay more if they are buying, One of the largest
drops, percentage wise, I got right off the bat was a probate condo
that needed some work and the heirs were looking to get rid of. I
knew what the asking price was because I saw it in their Craigslist
ad. However, after looking the place over, I asked the lady about
the price.
She told me they were asking $35,000.
I paused and looked around the room and asked, “Is that the best
you can do?” She thought for a moment and came back with, “we
can take $30,000”. That was a 15% price drop just by asking one
question... and the negotiations were off and running.
This works best when you are working
with individuals, but variations can be used with agents, but with
lesser impact. It's always worth a try, except when they try to get
you into a bidding war with escalation clauses and other people
bidding against you. If it's a place you really want to live in and
are willing to pay top dollar – go for it. If it is an investment,
you probably want to keep looking.
Other Uses
This magic phrase is not restricted to
real estate negotiations. It can be used anytime you deal directly
with a seller or even a business with variable prices,
Years ago I used to make several trips
a year up and down the east coast on I-95. I would drive for a while
until I felt myself getting too tired to go on safely. I would get
off at one of the exits surrounded by hotels and motels. I would
pick on of the mid-range to nicer places and ask the clerk about the
price. Whatever they told me, I would ask, “Is that the best you
can do?” and more times than not, they would give me a lower price,
just for “wagging my tongue” as Ron would say.
There is nothing wrong with places like
Motel 6 or Super 8, but don't expect to get much of a discount there.
They just don't have that much room to adjust.
Biggest Takeaway
A lot of people are put off by the idea
of negotiating a price – that is why many car dealers advertise a
“no haggle” price. There are many skills involved in getting the
absolute best price, whether you are buying or selling. This is a
good place to start and the worst that will happen is you will be
told, like I often told realtors, “That IS my highest and best
price.” No one has smacked me upside the head yet.
As they used to say on the old TV
commercial, “Try it, you'll like it.”
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