My husband Dave and I just returned from a week of vacation in Mexico. As I tried to use my rusty Spanish with various locals I thought back to a decade earlier when I had spent several months backpacking around Guatemala and Central America. One of my past times during that trip was to practice my Spanish as I bargained for Mayan souvenirs or fresh fruit. My goal was to pay the same price as a local.
I was having fun playing this little game until my new Australian friend witnessed me in action, bargaining for a beautiful hammock. As I was walking away because the vendor wouldn’t lower her price a little more, my friend said, “You realize that you are getting all worked up over what is about 10 cents. At home, you would pay 50 times that much for a hammock like that, so this is a great deal.”
I suddenly felt a bit silly. I felt even worse when I was unable to find another hammock quite like that one for anywhere near the price I had negotiated with that one vendor.
To this day I regret not buying that hammock.
But that whole incident helped me learn an important lesson that I try to remember when doing real estate deals.
The lesson I learned: as soon as your negotiation becomes about winning, it becomes emotional.
Even if you think you’re looking for a win/win deal you’re probably really looking for a win for yourself and if it works out that it’s a win for the other party – great! But the word “win” does funny things to us as humans. It makes us feel competitive and it makes us a little less rational.
When you get emotional and competitive good judgment goes out the window. Emotions in real estate will cause you to enter a bad deal for the wrong reasons (greed and fear of loss are the two deadliest emotions that will lead you into bad deals). And, if you’re emotional as you try to negotiate the best deal possible you’re quite likely to miss out on a good deal too.
I was trying to win by “buying at the same price as a local,” just like many people negotiating real estate deals try to win by selling at the absolute highest price or buying at the absolute lowest price.
As a buyer the best thing you can do to remain cool when you negotiate is to run your numbers before you make an offer. We do our best to figure out what would be a good deal before we enter the negotiation. Then we don’t focus on winning the deal we focus on putting together a deal where the numbers work.
Yesterday we made two offers on two different homes. In both cases it’s the deals will work for us if we pay something in the $280,000 to $290,000 range for the homes (or less of course!!). If either seller comes back to us with a counter offer of $290,000 or less we’ll accept. We could try and squeeze a few more thousand out of them but at $290,000 the deal makes sense for us.
We don’t feel the need to try to force the seller to take just a little bit less unless there is a good reason to do so (for example, after an inspection turns up major repair issues we will always go back and ask for a price reduction because we haven’t factored that surprise issue into our budget).
The point is simply that we’re not trying to WIN at negotiations. We are putting together good deals. That’s it. And thinking that way helps us minimize the amount of emotion we feel during an negotiation. And hopefully that helps us avoid sitting around 10 years from now regretting the deals we walked away from like I regret leaving that beautiful blue and black hammock with the vendor in Antigua, Guatemala.
Image Credit:© Jara3000 | Dreamstime.com