[quote=XBoxBoy][quote=urbanrealtor]
Again, not to be dense but there are only a few strategies to get people to come down in price. [/quote]
We might be arguing over what we mean by strategies, but in negotiations, there are often a number of strategies that can be used. First and foremost, try to find out what is important to the seller. Price might not be the only thing. They might be strongly in need of a short escrow, or maybe that doesn’t matter much. Maybe they want no fix ups, or contingencies. Finding out what they want and trying to trade those items for a lower price is always a first step.
[/quote]
No. See this does not work. We are not looking at an open ended business transaction with infinite or even numerous variables.
There are 3 primary variables to real estate transactions:
1: Price.
This includes credits, requested repairs, closing costs, or anything else in addition to initial dollar amount.
2: Timing (escrow or market time)
An offer with short escrow is better. An offer that leaves the listing active during escrow is good as well.
3: Purchase/purchaser quality.
The seller needs to have an idea based on the structure of the offer that it is likely to be completed. This variable includes the buyer being qualified and the offer having a large enough cash component. Again, this can tie back into market/escrow time.
[quote=XBoxBoy]
Second, if you want to drive a low price you need to think about how low you want to go in at. If you go too low, you can insult them, not go low enough and you won’t get as good a deal as you might have. Trying to get a sense of how motivated they are can be helpful. Another consideration on this path, is how long to let the offer stand. I made an offer years ago, just when the market was starting to have bidding wars, that was good for only 2 hours. It was a good offer, but it didn’t allow the sellers time to get other offers to compare. They had to take mine or know that I might be gone. (They took it btw and the sale went through)
[/quote]
Regarding offering strategically. This negotiating tactic is pretty basic. Most agents (even newbies) can do it. It is not as complex as you describe. Usually limiting a low ball to about 20% below asking for an offer with good non-price terms is sufficient. 10% is a good limit for offers that do not offer compensating non-price terms.
Regarding addressing buyer motivation:
The buyer is not supposed to get a sense of how motivated the seller is. The seller may be crying to their agent every night on the phone. It is a violation of the agents fiduciary duty to the seller to expose a client’s weakness.
Regarding your anecdote:
I believe your anecdote about getting a high-pressure offer accepted. However, typically these offers end up screwing somebody. I would present such an offer but the market fundamentals that go into consideration of such an offer would still apply. If the agent in the transaction you describe was worth his salt, he probably said, “Look, this guy is offering at or above market and thinks he is rushing you. Accept it and if it closes, get that new Alienware you were thinking about.” The problem with pressure-driven offers like this is that there is a high likelihood either that you screwed someone (which is ethically questionable) or that you screwed yourself.
As a professional, I love aggressive offers from non-pros. Either they are laughably one-sided in favor of the buyer or they are arrogant and suicidal (eg: an offer I saw with 10% off an obscenely high asking price with no contingency period and 7% earnest (Shucks, well, I guess we’ll accept it mister.)). Seriously, these are the kind of things agents laugh about after a bottle of wine.
[quote=XBoxBoy]
A third thing that comes to mind whenever negotiating is to show some of your cards to build trust and rapport. But which cards? Therein lies the strategy.
[/quote]
This rapport is contrived and silly. The seller is not in this situation because he wants a buyer to be a friend or confidant. He wants money. Same as the buyer wants not to spend it. This reminds me of the conversation where a landlord says “I would like to give you a helping hand.”
What he means is ” I would like to charge you above market rate.”
[quote=XBoxBoy]
A fourth technique used in business negotiations, is to try and establish multiple fronts. Good cop/Bad cop being the most well known one. But there are other ways to set up multiple fronts.
[/quote]
Again this does not apply to real estate. There is only one real front. It is defined by 3 primary variables. Everything else is largely irrelevant. This is real estate. A book report applying Sun Tzu to property is not a relevant or useful exercise. Part of the problem you are having is that you are seeing this as war. It is not.
[quote=XBoxBoy]
Another thing that I’ve seen done is for the offer to be “presented”. In this case, the offer was not merely faxed from one agent to the other. The buyer’s agent put together a variety of printouts, comps, market overview, and then details of the offer and asked to make a presentation to the sellers themselves, (with the seller’s agent present) Think of it as a marketing presentation. While this might not always be that helpful, in a market with lots of offers it helps to distinguish your offer. (Maybe not relevant now, but would have been several years ago)
[/quote]
This is an oldie but a goodie. As I have said before, my family has been in this for 102 years. So many drunken anecdotes. Probably my favorite version of this was my grandad’s stories of bringing the earnest in cash (20’s usually) and opening it at the meeting. Then he would stumble and spill 20’s all over the table. Again possibly helpful for a buyer but of no advantage for a seller.
[quote=XBoxBoy]
Okay, so those are just a few strategies that come off the top of my head spur of the moment. There are more to be sure. And each negotiation presents and opportunity to develop its own strategies.
[/quote]
Of course. That is why the agents are here.
[quote=XBoxBoy]
The tough part here is that most agents aren’t familiar enough with negotiation techniques, and are afraid of them. Consequently, they do everything they can to keep you from sellers and to let you know nothing for fear of giving you some kind of advantage that you will manipulate them with. It’s too bad, because while there is some info that should be kept confidential or close to the chest, there is other info that when shared can help a seller get an offer that is more attractive to them. I guess my experience (albeit mostly non-real estate business negotiations) has shown me that the best deals involve a good bit of strategy and a good bit of information sharing.
[/quote]
The examples you have given are all ones that have to do with irrelevant issues. While I can’t speak for the experience of most agents, I know all of these tactics. They tend to leverage a lot of emotion and personality. I have both practical experience as well as book knowledge and classes on these. I expect most agents have at least one of these types of knowledge. Agents are not afraid of them. They just don’t care about them. They don’t help the client. One of the important functions of an agent is to take the personality and emotion out of the sales process. This is one of the most relevant lessons I learned while working as an office manager at a discount firm. We let sellers host thier own open houses. This was a train wreck. Buyers say all sorts of things while house-hunting. Some are snide or even malicious comments. Several times I got to witness firsthand as these personality-driven interactions crashed right into the mountain.
[quote=XBoxBoy]
So, sorry, but I disagree. There is lots to negotiating, and despite the reluctance of agents to allow negotiating, there are definitely strategies that can and should be employed in any negotiation. And in my book, any buyer’s agent who thinks the only strategy is to make a full price offer and hope they’ll accept it isn’t doing their job.
Just my two cents though,
XBoxBoy
[
ps. not aware of any of the REO formula strategies you mention so can’t comment on them.
[/quote]
You are certainly entitled to your opinion. Much of the negotiating techniques you mention would be very effective in business transactions. They would also be very effective in real estate if you approached the seller directly. However, one of the reasons the agent exists is to keep the client from being manipulated. If you approached me with these options, I would do my best to keep my client as prepared as possible. Nothing and I mean nothing you have presented here benefits anyone but you and some do not even do that very well (eg: the pressure offer by an inexperienced non-pro or the development of “rapport”).
The most effective environments for these tactics (which are remarkably reminiscent of books about Donald Trump’s negotiating style or any other cliche business tycoon) are those in which the negotiations are principal to principal. They don’t really apply to professional negotiators with a small set of relevant variables.
There are 2 primary poles of market types. On one end are multiple sellers of interchangeable goods with many buyers (polyopoly/polyopsony) and the other end are few sellers of unique goods and a few buyers (oligopoly/oligopsony). Generally real estate is right in the middle with many sellers and buyers of idiosyncratic and unique goods.
The types of negotiations you describe are appropriate to business transactions, which are of the second type and have lots of extra variables. This does not describe CA real estate.
By not recognizing the type of field you are playing (or doing battle) upon, or by doing things that are considered out of bounds (trying to find personal connections to subvert the market-driven imperative) you would get laughed off the field or smacked down fast. But good luck. I strongly encourage you to distance yourself from any agent who actually backs you up on this.
