Watch Your Net, Not the Details
Financially, real estate negotiating is a zero-sum game. Do not focus on where every dollar is gained or lost. Focus on your net.
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In a real estate deal, hopefully both the buyer and the seller get what they want. So one can make a very strong case that this is not a zero-sum situation. Both parties gain. And this chapter is not intended to challenge that.
Rather here, let us look at the negotiation that takes place from a financial perspective. Remember, it takes place on a platform, the standard form offer and contract, with or without any additional addenda. And however long and detailed the resulting document may be, it is a finite agreement with a finite set of terms, and certainly a finite set of financial terms.
Is it possible that a term, or a negotiated change in a term, can benefit both parties? Absolutely. But most often, terms or changes benefit one party or the other.
And it is easy to get bogged down in each and every term. How much do we gain here? How much do we lose there?
Now one negotiating approach would be to address each and every term, driving all of them individually in your favor. Of course you can do this, but you run the risk of your counterpart feeling abused, or worn down, or even beaten up. And they may become defensive. So this strategy may actually work against you. And some people get rattled by even the most seemingly innocuous details.
The point here is to worry less about each and every term, and more about the net result. But we take it a step further. Our practice is to write the cleanest possible offers with the fewest possible terms. Obviously this is done on a case by case basis, but our goal is always the same.
Maybe an example is in order. Sure as a buyer, you are going to propose a Purchase Price, but need you ask for a $1,000 home warranty? Or, for the seller to include his obviously brand new appliances or patio furniture? Do you really need the seller to pay $5,000 of your closing expenses?
This simplifies the offer. And because of that, it allows you to say to the other side: You’ll notice how clean and simple our offer is. We really want to make this deal work.
So give them an offer with as few detailed terms as possible, because the details are subject to further negotiation. If it is the other side adding the details, hold firm on the major terms and ask them to drop the smaller ones. Say: Well, you could get your additional $1,000 over here…. Let’s make this as clean and as simple as possible. Because we really want to make this deal work and we know you do too.
Now why is this important? I think most people, including many brokers, just find the real estate negotiation process intimidating. And therefore, they respond positively to simple. Or well, simpler. Plus some people will view the smaller terms as an attempt to get a better deal. And while they may or may not be watching their own net, they will be concerned that all this little stuff is adding up. So remove their concern.
In any case, you don’t really care one way or the other. Because from start to finish you are only looking at your net figure. If people respond well to simple, and most do, fine give them simple. If you can, remove their concerns. Not for their benefit, but for ours.
Are there people who want, even insist on, all the little detailed terms? You bet. But again, worry less about each detail and focus on your net. Plus notice this: If they insist on some detail, ask yourself why. Maybe they really need (not want, but need) you to pay $5,000 of their closing costs. In which case, it is probably worth more, to the buyer, than $5,000, in other terms. So it is possible to accede to their request and your net still goes up.
The reverse is also true. If new appliances would cost the buyer $2,000, but he would accept the seller’s set, surely this is worth a thousand dollars to the buyer, in some form or another. And still, the buyer's net goes up. And I am always surprised how often the sellers will let go of appliances or other assets for little or nothing.
One final point, sometimes what the other side requests may be quite valuable to them, but costs you very little. An example: It is not worth moving your patio furniture across the country and you were planning on giving the furniture to your brother-in-law. Right? But if the buyer is asking for them, maybe you agree if the buyer drops his request for that expensive home warranty. Simplifies the deal and you come out ahead. You may be surprised at how frequently these opportunities present themselves. Watch for them.
So in a real estate negotiation, this is just good psychological and financial strategy and practice. Notice also that it will appeal to the quick and easy brokers. Watch your net and give them what they want.