Let me start today’s blog post with a rather childish example. For a change…
Remember when you were younger and you met a girl who you really liked?
You hit it off. You had a great time.
You immediately felt some chemistry and you were pretty sure that she felt the same way.
You asked her for her phone number and she gave it to you.
You told her that you wanted to see her again.
You told her that you’d call her.
She liked that. She smiled and said, “I’d love to hear from you.”
And based on all this, and the fact that you really liked her and really wanted to see her again, you did the only rational, sensible, logical thing there was to do:
You deliberately waited six days to contact her.
Ring any bells?
I’m a product of the 2000’s dating scene, so I don’t know what the move is today, but back in “my day,” this is how people were expected to act.
And since I absolutely hated people who did this, acted like this, and subscribed to this school of thought, I think we can draw the ire and blame to one specific source.
These guys:
Mike Peters and Trent Walker, of course.
Characters from the 1996 movie, “Swingers.”
In the movie, Mike is desperately trying to get over his ex-girlfriend, and he finally chats up a lady at an evening lounge and obtains her phone number, but when he asks Trent and their other buddy Sue (this was a guy – named after a Johnny Cash song…) how long they would wait to call the girls whos phone numbers they obtained, Trent and Sue both blurt out:
“Six days.”
Both of them, at the same time, in perfect harmony.
Did any of your friends, girls or guys, ever tell you that you need to “act unavailable?” Yeah. That’s where all this comes from.
It might surprise you to know that “back in my day,” I never subscribed to any of this nonsense.
I specifically remember meeting a girl and having a fun evening then saying, “I’ll call you in six days.”
She asked me what I meant by that, and I asked her, “Haven’t you seen Swingers?”
She had not. She was younger than I was…
I explained the joke to her and she understood.
About five minutes after the cab pulled away, I sent her a text message and said, “Has it been six days yet?”
I just had no time for the nonsense.
I used this as a weeding-out process of sorts, since I wouldn’t be interested in a person who subscribed to this, and therefore if “seeming too available” or “texting too soon” backfired, then all the better!
But I was clearly in the minority here. This was just the way the dating scene worked, unfortunately. At least in my age group, in my demographic, in mid-2000’s Toronto. I’m not sure how it works today, but I bet there are a lot of government forms to fill out…
The parallel I’m drawing today is an odd one, and I know that. But the regular readers will also know that in order to introduce a real estate concept, I often like to use a real-world and/or societal example as an analogy.
When it comes to negotiating in our real estate market, there’s a particular “style” among some agents that has always bothered me.
I understand there are different types of negotiating. There are different personalities, different goals, different strategies, and often completely different agendas.
“Negotiating” itself is hard to define.
Just the other day, my 8-year-old daughter accused me of lying when I tried to explain to her what negotiating was.
But not everything in a negotiation has to be give-or-take.
If you’ve taken a negotiating course before, you’ve heard this one…
There are two boys. There is one orange. They both want it. How do you decide who gets the orange, and why?
Picture a class full of people throwing out ideas.
“Who called it first?”
“Which child is older?”
“Who will make better use of it?”
“Who truly needs it more?”
“Is there another orange somewhere else?”
“Does either of the boys prefer a different fruit more?”
Eventually, you get to the crux of the matter and somebody asks, “Do we know why each boy wants the orange?”
Ah, of course.
The first boy is making orange cookies, and he wants the orange because he needs the peel.
The second boy is thirsty and he wants to make fresh juice.
In the end, both boys can have the orange – the parts that they want, and because their needs are actually different, each boy gets exactly what he wanted.
This is where most courses introduce the concept of “integrative negotiation,” which is where the parties seek to find mutually-beneficial solutions in a win-win outcome.
This differs from our classic “distributive negotiation” which is simply dividing up the proverbial pie; for every amount that one party gets, the other party loses by the same amount.
Very few negotiations are strictly distributive, and even when you think they are, there’s always smaller pieces to the bargaining that can play a role.
In the purchase and sale of real estate, price is always the largest factor and it’s the one part of the negotiation that’s wholly distributive.
Closing date, conditions, clauses, deposit amount, inclusions, exclusions, rental contracts, and a host of other factors come into play, all of which could be used in a negotiation in an integrative manner.
“We can give you the July 10th closing date that you want, even though we prefer August 31st, but you’ll have to come down on the price a little.”
There’s a classic example of the integrative negotiation at play, even though one party is gaining on price while the other loses.
It’s bargaining at its simplest. It’s negotiating, yes, but it’s more like collaborating.
But riddle me this:
What happens when one party comes into the negotiation with an artificial number of “barriers” simply as a way act as though he or she is making concessions later on?
Does this provide the individual with a leg-up and leverage at the onset?
Or did this individual just get in his or her own way, widening the gap between the two parties, and making a deal less likely?
Listing agents will know the following example all too well.
A condominium has been listed for sale for $799,900 and has been on the market for three weeks. It’s not an eternity, but the listing isn’t new either.
An offer is submitted for a paltry $710,000.
There are three conditions in the offer: financing, review of the status certificate, and home inspection.
The seller has stated in the MLS listing a preference for a 30-60 day closing.
The buyer has offered a 150-day closing.
The seller has stated in the MLS listing that the dining room light fixture is excluded.
The buyer specifically included the dining room light fixture.
The deposit offered is very low: only $10,000, which is 1.4% of the offer price.
Now, imagine that the seller signs the offer back for $780,000, leaving all the other terms and conditions the same.
The buyer then signs back at $715,000, only increasing by $5,000, when the seller just came down by $20,000. However, the buyer removes the condition on financing and the condition on home inspection.
What do you think of this negotiation so far?
Hold that thought for a moment as we continue.
The seller, who is not pleased with the sign-back, comes down in price by $5,000 and counters at $775,000, all other terms and conditions the same.
The buyer then counters at $725,000, increasing by $10,000 compared to the seller’s sign-back, which only represented a $5,000 concession. The buyer also increased the deposit to $35,000 and removed the dining room light fixture from the “inclusions.”
Is the buyer making headway here?
Hold that thought too.
The seller counters at $770,000, and all other terms and conditions are the same.
The buyer then counters at $730,000 but moves the closing date up by ninety days and removes the condition on review of the status certificate, making the offer unconditional.
The buyer says, “This is my best and final offer.”
The seller doesn’t love the offer and the listing agent explains this.
But the buyer agent offers the following:
“Since we started this negotiation, we have increased our price, removed two conditions, increased our deposit, excluded a light fixture that we wanted, increased our price again, removed another condition, increased our price again, and then accelerated the closing date. I don’t know how many more concessions you can possibly expect us to make!”
Now, what’s your read on this?
Is the seller getting a “good deal” at $730,000, which is 10% below list price, because the buyer removed three conditions, increased the deposit, agreed to leave the dining room light fixture, and moved up the closing date?
I call “bullshit.” Don’t you?
This is the type of negotiating that I absolutely loathe in this business for two reasons:
1) It’s exceptionally see-through.
2) It always makes the transaction harder.
The second part is a function of the first, of course, and it’s tremendously ironic.
The party making all these make-believe concessions always acts like it’s genuine. So much so, in fact, that much of the time I believe that party starts to believe it him or herself!
That just complicates the process even more as it starts to become emotional. When you’re a seller in this situation, even with little experience, you know exactly what’s happening.
I had a situation just like this back in January. The seller, who had never sold a property before, told me, “If I was going to play nice, I’m sure not going to now. These idiots have dragged this out for four days with their stupid conditions and clauses, and their petty price increases, and if they think I’m the idiot, then I’ll show them. I don’t want to work on this anymore. Forget these guys.”
That’s exactly what you don’t want. Now one party wants to “show” the other.
But it’s what happened!
The buyer tried to play the seller for a fool by including terms and conditions in the offer that the buyer didn’t actually want, and the seller knew it.
Meanwhile, the buyer felt like he or she was making headway, essentially “drinking their own Kool-Aid,” but with every additional move, the buyer just alienated and offended the seller even more.
Once the “final” offer came in, the seller was far less likely to work with the buyer and their offer than had the process not played out as it did beforehand.
Perhaps this is a perfect time to remind you of the old adage:
You catch more flies with honey.
On that note, let me tell you another story.
Earlier this year, I had clients interested in a house in the midtown area. The house was up for sale in November and December but didn’t sell, and it was re-listed with an improved price in January when we went to have a look at it.
My clients absolutely loved it. They simply had to have it.
In fact, when we started to talk about the terms of our offer, they said, “Honestly, let’s offer them the full list price. We don’t want to lose this house.”
I played devil’s advocate with them. I said, “Would you like to get $50,000 off the list price? What if I could do that for you?”
They said, “That would be great, but honestly, it doesn’t move the needle for us. We want this house. It’s literally perfect.”
So we drafted the offer accordingly.
We offered full price, which was about $4,000,000, and included a 10% deposit, which was substantial, and rare.
Our offer was unconditional.
We included all the chattels and fixtures per the MLS listing.
The only place that we wavered was with respect to the closing date, since the seller wanted May 1st and my clients wanted June 27th.
But we were giving them EVERYTHING they wanted, right? This was a slam-dunk!
I sent the offer to the agent and gave him a call.
He thanked me for the offer, said it was great, and said he would “discuss” with the sellers.
I was somewhat direct and told him, “I certainly hope there’s no ‘discussion’ to be had here; this is a perfect deal, served up on a silver platter.”
He replied, “Yes, well, I’ll do my best.”
About three hours later, I received a sign-back of my offer.
A sign-back.
As in: “We reject this offer of FULL PRICE with NO CONDITIONS and a ridiculous TEN PERCENT DEPOSIT and provide you with a counter-offer.”
They changed the closing date to May 1st.
Unreal.
Imagine giving somebody everything they could ever want and then having them ask for more?
But if you’re following today’s stories, analogies, and metaphors closely, it all comes back to Swingers, doesn’t it?
“Wait six days to call your girl.”
“Act unavailable.”
This idea of gaining what you want by making the situation unnecessarily difficult.
Is that negotiating?
In the end, we signed the offer back as it was, with our closing date, and we gave them a 45-minute irrevocable.
They accepted.
But it never should have gone that far.
The only reason, in my opinion, that the seller and the listing agent risked a picture-perfect deal was because everything seemed “too good to be true” from the onset.
Therein lays the rub: lead with your best foot forward, and often, the other side believes there may be a better one, still.
What’s the moral in that?
My cynical takeaway might be something like, “It’s human nature never to be satisfied,” or perhaps, “Be honest with people, tell them you’re being honest, and expect them not to believe you.”
But this isn’t the outcome in every situation; it just happened to be a perfect story to balance the first one.
In fact, if agents are both doing their jobs, and doing them effectively, situations like this wouldn’t happen.
Call me old-fashioned, but trust is still the most important facet of any negotiation, and without trust, it’s a major uphill battle.
The second-most important facet of any negotiation is respect.
When an agent believes so whole-heartedly in “distributive negotiation” that he asks for ten things in an offer, planning to strategically give up the nine that he doesn’t actually want, there’s no trust and there’s no respect.
You can call this “strategic” but it’s not.
It’s lazy.
It’s basic.
And it’s so exceptionally transparent that listing agents like myself laugh when we see it coming.
To be more frank:
This is a tactic that’s usually used by agents who lack any ability to actually negotiate, but who also lack the personality, social skills, decorum, awareness, and often language skills necessary to converse with another human, let alone a fellow industry professional. In lieu of those abilities, they think of the offer and negotiation as a simple mathematical equation whereby they remove “x” number of items from their initial offer in exchange for “y” dollars off the list price.
If only it were that simple.
Not every transaction can be with a “friend” on the other side; somebody with whom you’ve successfully transacted before, who you trust, and who you respect.
But in lieu of that, perhaps the worst move a buyer agent can make is to basically punch the person who opens the door on Halloween…
