You Should Base Your Negotiation Strategy on the Seller’s Actions: Here’s Why

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Ben Leybovich Read More

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There have been a couple of different threads this week on the forums concerning negotiation, and more specifically the offer/counter-offer process. Folks want to know how much to offer relative to their ceiling. Is it wise to low-ball and come up, or is it better to shoot it straight?

Or perhaps there is another way. Let’s talk about this.

Two Approaches

There are two ways to think about a negotiation. Some people see the process as a mental and psychological exercise: a game of a sort. Others — and I tend to belong to this camp — feel that a straightforward approach is better, as in, here’s what I think this thing is worth, and here’s my offer. If we are really close, I’ll do my best to work with you. But no games.

Does it Even Matter?

The thing to understand about negotiations is that it is less about making someone to do what you want and more about leading them to make that choice on their own. In other words, the opposing side’s frame of mind is of utmost importance. Successful negotiation is a function of you being able to recognize their speed and direction — and being able to match it!

Related: The Top 5 Ways to Negotiate Major Discounts On Your Next Property

As such, the seller’s attitude tees up the strategy behind your negotiation, which means that it really doesn’t matter which of the two methods you prefer. It’s not about you and what you like; it’s about them. The boat is moving, and you’ve got to jump in and row in the same direction if you hope to get anything done…

Conversation With J Scott

On Sunday afternoon, at exactly 4:02 p.m. according to my phone, I called my BFF Brandon Turner. You know, just to say hi and tell him I miss him.

He didn’t pick up… again. Sent me a text that he was too busy with the Superbowl festivities to talk to his friend Ben Leybovich. Funny, Serge S is never too busy for me… makes you think!

Anyhow, I was about to feel rejected. But then at 4:26 I received an email from J Scott. After a few emails we ended up on the phone talking about a bunch of different things, and at one point I told him that I submitted an LOI for some apartments in a great state of Arizona, and that I’ve been instructed by the broker in very clear terms to pursue a strategy of “playing the game.”

I told Jason that I hate that. I like to be able to tell people where I stand and let them make a decision. I like to say to people, Here’s what I can pay, and here’s how I arrived at this. No gimmicks, no games.

But the broker, who is clearly more familiar with the situation, clearly told me that the seller wants (or needs) to play. I told Jason that the broker instructed me to make an offer that he thought would get accepted and then re-trade based on inspection. Dirty, dirty game we play in REI, but everyone does it. This is why I get outbid so often. Everyone offers full price — or close to it — and then re-trades significant margins.

Oh well, the game it is! The LOI is 35% lower than the asking price. And at that, it is an OK deal. However, to really make sense, we need to knock off about 15%. We think we can do it if the LOI gets accepted. But that’s the key: until we get an accepted LOI, we have nothing. So we play the game…

Related: How I Negotiated a 30% Price Reduction and Saved $100,000… During a Bidding War

Conclusion

A successful outcome of a negotiation is a function of the meeting of the minds. Where the seller’s mind is at the outset of the negotiation has to dictate the strategy you pursue. There’s more than one way to Rome, and roadblocks of the seller’s psychological conditioning often prevent us from taking the highway. Fine — I’ll play along, and you should too.

P.S. I’ll tell you more about this if the deal goes anywhere…

What do you think: Do you agree with my negotiation philosophy? Do you usually play along with the seller’s game?

Leave a comment, and let’s discuss!