Negotiating Better - Fundamentals of Effective Negotiating

I'm gonna do another "buy my book" plug, because even though it's a memoir, there's a decent amount in it about negotiating -- http://tinyurl.com/2ag28z

In general, most people do not negotiate well for themselves (as an example, the original thread was about my rejected bid to buy a co-op -- and I'm a broker!)

There are, however, a couple of fundamental principles to keep in mind whether you use an intermediary or not.

The first is to know what you want. The second is to ask for it. You will not get what you do not ask for.

The third is to put yourself in the other guy's shoes. As an example, so many buyers come to this board and say, "I'm in contract to buy a new condo, and I think the value has dropped, why doesn't the developer give me a discount?" The answer is, "what's in it for him?"

In general, you always want to be mindful of what the counterparty wants, and how you can give it to them. That's often a great way to maximize getting what you want.

ali r.
{downtown broker}

The best advice I've ever received re negotiating is the BATNA concept--best alternative to negotiated agreement.

In other words, if, during a negotiation, both sides can't reach a mutually acceptable agreement, what is your best alternative? More succinctly: never go into a negotiation without a backup.

Regarding what the counterparty wants--it's all well and good to keep that in mind, but you also have to convince the counterparty that what you are offering them addresses their needs in an acceptable manner.

I could go into an interview and say to the interviewer: "Look, clearly, you're interviewing me because you need labor. Tell you what. I can meet your needs--for $50 million per year."

But if my labor is not worth $50 million to the counterparty I will get nowhere by being mindful of what the counterparty wants.

Great thread kyle, and nice to see a non market related topic for a change.

As for suggested reading material, "Getting to Yes" is indispensable.

Ali, that's good advice. Frankly, the biggest mistake you can make before even starting negotiations is to adopt an "us vs them" attitude. That creates bad vibes all around - you have to think of it as a joint effort to get all parties involved what they want. It's amazing how commitment to that notion can set the tone for successful negotiating.

Excellent thread. I look forward to learning from it.

One small clarification on terminology: Kylewest, you referred to "selling brokers using the 'fictional other bidder' ploy." I think you mean listing brokers. It's conceivable that a selling broker would use this ploy, but much less likely. The selling broker is the one who brings the buyer to the transaction. This party is often erroneously called the buyer's broker. S/he may reprepresent the buyer or the seller, depending on the agreements in place. By default, she is a sub-agent of the listing broker and represents the interests of the seller.

The reason this point is worth noting here is that a lot of buyers rely on the selling broker to handle their negotiation, without realizing that s/he works for the other side. That's a pretty good recipe for INeffective negotiating.

I think it is important to understand what buttons to push for all people involved in the transaction. Even though you are the buyer, you are constantly selling. I think one good example is how to treat seller’s agents. First, understand what they want. Seller’s agents want a fast deal with a qualified candidate. They do not want a buyer to fail a co-op board or not be able to secure financing. They hate complicated deals. Price (within reason) is not at the top of the seller’s agents list of priorities. They want a deal as quickly as possible with as little trouble as possible. The easier the deal for the seller’s agent, to more willing they will be to fight for your price concessions.

How should you approach? Make the sellers agent feel that you are the easiest and most qualified person on earth to sell the apartment to. Convince him that you can afford the apartment (it helps if this is true), you have spotless references, clean credit, lots of cash, etc. Eat up all of the agents malarkey, make him think he/she is the smartest person on earth. Compliment him on his firm, his past listings, his wife, etc, etc. Never let the seller’s agent stand in the way of a deal. Get the agent to sell for you.

It may sound cheesy, but I once received a thank you card from a sellers agent telling me how easy it was to deal with me. I got a great deal on the place, the agent got his commission, and I got some really cool bar stools thrown in. The agent was never in my way and my focus was only on what was important to the seller, not the agent drama.

To west81st's point, I am referring to the listing agent in my post.

This may seem like an abvious point, but information is key when negotiating. Know how much the apartment is worth within a reasonable range. Be educated. You cannot negotiate if you don;t have your facts straight.

If your initial offer could be perceived as low, give supporting data as to why the offer is coming in at this specific number. It isn't because you are trying to "put something over" on the seller. If they come back with a counter-offer that is reasonable and supported by their own data, then you know that you are dealing with a workable person and the chances for a sale increase.

Following up on Kylewest's and JuiceMan's points, you should take ownership of setting the tone of the negotiations to be one of mutual respect and consideration. You may be surprised how much more flexible a person can be when they see that it can help get a deal done and that the other person is not just digging their heels in out of spite.

The first key to negotiating is to present your offer as the best thing that the other side can hope for - and totally bash the alternative scenario - that is, what will happen if they don't accept your offer. In other words, if a seller thinks you are bidding low, you can point out the negatives about the property, insist you are actually overpaying, and point out that if they reject your generous offer, their alternative will be to keep the property on the market for a few more months, and end up accepting an even lower offer from someone else. Always make sure they know how crappy their alternatives are.

Other keys are: (i) be willing to walk if you don't get your way, (ii) always leave room for negotiation, (iii) try to find things you can give to the other side that don't mean much to you, but might mean a lot to the other side (so-called win-win), and (iv) keep emotion out of it.

pjc: A seller who has occupied a property usually has an emotional attachment to their home. Stating you are the best thing they can hope for comes off as arrogant. If there is a laundry list of negatives, why would want to purchase the property? If your low-ball offer is overpaying, why did you not put in a lower offer? If you walk because you don't get your way, where is there room for negotiation? In the current market concessions tend to come from the seller, paying the flip tax, lowering the price, etc., what concession could you (the buyer) give?

I think it's okay to introduce comps into a discussion -- "given that the fifth-floor apartment just sold for $400K with a renovated kitchen, we're bidding $390K for this apartment with an unrenovated one" -- but I do think you want to be kind of neutral about it. It is a business negotiation, but people are conducting it, and no seller wants to hear that their baby is ugly.

Being "willing to walk" brings us back to BATNA -- the toughest buyer negotiators are those who are willing to live in Apartment B if they don't get Apartment A. And as many on this board have pointed out, not playing is often an alternative too. Many potential buyers prefer to rent, and many potential sellers don't actually want to let their properties go at steep discounts.

ali r.
{downtown broker}

I am not sure that I agree with pjc. That seems to be setting things up to be more adversarial than they need to be. Also, a "so-called win-win" is not likely to work since it isn;t actually one and will be seen as such...both adding fuel to a fire that didin;t need to be started in the first place.

Awesome thread Kylewest. Thanks!

Question about BATNA - not sure I get it. "never go into a negotiation without a backup". I only see two options, 1) keep negotiating, or 2) walk. Am I missing something?

Also, Ali R. - "the toughest buyer negotiators are those who are willing to live in Apartment B if they don't get Apartment A". - - How does this make them the "toughest"? Do you mean most effective in getting what they want? If so, what is the rationale? Are they really more effective or are they just better at handling the loss?

bjw2103 - "you have to think of it as a joint effort to get all parties involved what they want. It's amazing how commitment to that notion can set the tone for successful negotiating." - - So true! This is why my husband is a much more effective negotiator than me. He's the good cop :). I'm full speed ahead like a train wreck :)

bjw - your advice is also great for dealing with inlaws! It works if you let it :)

Two points I have always adhered to in my own negotiations are the following. 1. Never get to the finish line on the first go round, give the other party something they want while getting something you want and progress from there. 2. Always give your opponent an out, an ability to counter or redirect without capitulation. It is a very difficult situation when they HAVE to accept your terms, or walk. Think about sex in high school, 1st base, 2nd base, etc..etc.. You have a final goal, but you don't need to get there on the first date. peace...going to dinner with MY homerun! c u tomorrow!

WOW! i just saw this. haven't read yet but thanks for this kyle!!!!!

kyle - where are you answers to some of the questions you post? i want to drink from the fountain of your wisdom.

FIRST RULE (I'll post others as I have time): He who reveals a deadline or time pressure will be at a disadvantage.

This is a general rule for all negotiations. Before you pick it apart with examples of exceptions, consider the general principle. If you MUST sell or buy or close a deal or sign a contract within a certain time frame, the other party can use that to his/her advantage. They will string you along until the last minute when they know you have no options except to make the deal. Or they'll toy with you and eat up time to up the pressure on you so it is more likely you'll have to to make bigger concessions to get a deal done.

In RE, time "deadlines" are often revealed implicitly. They are revealed when it is clear that every minute that passes puts the seller or buyer in a worse position. For example, an estate sale by its nature reveals the beneficiaries are likely anxious to stop spending money every month on the apartment and to reap their windfall with a sale quickly. An empty apt indicates the owner has moved and is shouldering extra rent or another mortgage while having to still pay for the empty place--the owner loses money every week that passes. Other examples of implicit time pressures being revealed abound: a pregnant buyer or seller who needs a bigger place SOON or who needs to find a nest asap before the baby comes; someone transferring to NYC to start a job and reveals they really want to be settled before the job starts; a couple who need to get a place before the school year begins for their kids; apts clearly too small for the growing family living there.

Whatever the scenario, revealing the time pressures you are under generally does not work to your advantage and great pains should be taken to avoid revealing any such deadlines when chatting at open houses, with brokers, etc. Loose lips damage your negotiating position.

Kyle, that is extremely smart, and seems to have applications to many other aspects of life. Thank you for this great thread.

Front-porch: in regards to being neutral about the unrenovated kitchen etc. I would go so far as to say that when you are bidding low, also say something nice about the property. "We love the paint colors, the master bath, the decor etc." You are so right, nobody wants to hear that their "baby is ugly." When the agent presents the low ball offer, they should state the reason its low (ie the kitchen is outdated) and then say, "the potential buyer can see how you've created such a beautiful family home and can really see their family living there...they just can't pay top dollar due to the changes that need to be made." Obviously this needs to be something truthful. I am just giving one example. People are very emotional about their real estate and can shut down negotiations if their feelings are hurt.

Well UWS Mom, in any one isolated real estate transaction, you actually have three options: 1) buy at the set terms 2) negotiate new terms or 3) walk.

BATNA is used to help you make that decision: Let's say you see an apartment that you like, and it costs a million dollars, and you have a million dollars . ..do you buy it?

Probably instinctively, your answer is going to be, "only if I've shopped around first!" If you know that there's another apartment you like that costs $800K, you won't pay a million for the first one.

You see how important the acquisition and analysis of information is to this process -- you make a decision by knowing your alternatives, and because markets change, so do your alternatives.

By "toughest" I do mean most effective at getting what they want, at the best price. Real estate is illiquid enough that there's generally no one price that a seller is willing to sell at -- unlike a share of Microsoft, which someone may realize is trading at $18 so they want $18 for it, most sellers of real estate have a zone -- they might list at $750K, but be willing to sell at $735K. It is the buyer's job to try to get to the low end of that range!

But the most effective way of doing that will vary -- many people on this board think starting at $600K will work, and sometimes it will and sometimes it won't.

Similarly, sellers negotiate, and their first move is generally list pricing. If you have two sellers of apartments that are "worth" $735K, who is going to end up getting more money -- the one who lists at $900K or the one who lists at $750K? The answer is that it depends, but the one who lists at $900K is counting on bs-ing their buyers with the "false" data point that they are getting an over 20% discount!

ali r.
{downtown broker}

RULE TWO: Avoid making the opening bid.

This is also a general principle of negotiating. Making the opening bid yourself reveals a great deal of information to the other side while you have no information. (Info is golden in negotiations.) It can show the bidder to be very aggressive (lowball) or unrealistic, it can show them to be poor at negotiating by coming in where the other party initially was planning to end, it can turn off the other party completely...

There is virtually nothing to gain by bidding first.

In the RE context, the seller is forced to essentially bid first by selecting a listing price. And the ball is technically then in the buyer's court. But the skilled buyer will not just offer up a bid reflective of their appraisal of what the RE is worth. Before bidding, the skilled buyer will attempt to gain as much information as possible about the listing price--that is, about the "opening bid" of the seller. Agents betray all sorts of info if you JUST ASK QUESTIONS! It isn't rude to ask questions! And if you don't ask, you don't get. If you ask and only get answers 10% of the time, that is 10% more answers than you'd get if you asked nothing!

Ok, so what info do you want? What is the seller's thought on the listing price? Is it a hard price? Open to negotiation? How was it arrived at? How has the seller taken into account the current market conditions? Will it pay to put in an offer even if it is far away to see where it goes? Is the price the reason the property hasn't sold for so long? Agents will often give clues/hints in response to let you know some of the seller's mindset. If the agent is really just conveying the agent's mindset, that helps too since the agent will be the conduit through which you must pass all info to the seller. All of this figures into the buyer's decision on what his/her first bid should be.

So while in the NYC RE context the seller is always bidding first, realize this puts the seller at an immediate disadvantage. Stated another way, the nature of the beast gives the buyer a little bonus position at the outset. The buyer can determine with his/her own bid what type of negotiation is likely to follow and be prepared to have a strategy in place.

And Ali, I like your contributions here!

"The reason this point is worth noting here is that a lot of buyers rely on the selling broker to handle their negotiation, without realizing that s/he works for the other side. That's a pretty good recipe for INeffective negotiating."

West81st-I had no idea the sysem worked this way. if the agents on both sides of the deal essentially work for the seller, do you think it is a bad idea for buyers to be completely open with their brokers? For example, if i'm willing to pay up to a certain price for an apartment, can i trust my agent not to share this information with the seller?

typo "system"

Negotiation is a big part of my job, but I still find that I have a lot to learn. Great thread here, applicable for RE as well as other walks of life.

One specific point. I actually agree with pjc about bashing the seller's alternatives, as long as you do it in a balanced and diplomatic way. In other words, rather than call their baby ugly, say that their baby is wonderfully adorable, but, say, has a crooked tooth which looks endearingly but makes them difficult to place in a commercial. When we bid for a company with serious problems, we always start out by extolling their virtues (storied history, brands, market share, great management/employees), and immediately follow that up with all the challenges facing the company and all the work that we will have to put in to fix them. That's how we set up the low bid, the implication being that anyone else will have to deal with the same "challenges" and if they're telling you they'll pay more, they're lying.

In the context of real estate (admittedly much less my comfort zone), maybe praise the great building/location, then mention how small the kids' bedroom is and how much work you'll have to do on the kitchen. Something like that.

Oh, and I love kylewest's suggestion of asking questions. I've been amazed at how much information agents will reveal when you draw them into a conversation, for both sales and rentals.

Also totally agree with BATNA and being prepared to walk. I always find myself negotiating much more effectively when I am willing to walk.

Azil: That's a very complicated topic. Rather than provoke a debate that might hijack this excellent thread, I'll start a new discussion to address your question.

azil,
You're absolutely correct. I don't think you should share any information with your buyer's broker. As a matter of fact, that's why I refuse to work with a buyer's broker. A buyer's broker doesn't represent me, the buyer, after all, they're working for the seller. The whole system is rigged against the buyer. Don't play their game. Negotiate directly with only one broker, the listing broker, and there might be more price flexibility then if there are two brokers in the mix. That's my opinion, this has been hashed out in other threads.

"RULE TWO: Avoid making the opening bid."

I taught a negotiations class and this is definitely not true. In fact, it is very important to make an opening bid because that serves as a negotiating anchor point. It's actually called "anchoring." You are right that you should not have your opening bid be close to your "reservation price" - which is the price you are willing to walk at. It should be lower so that you will appear to be working constructively toward a sale rather than give an opening bid and then say "that's my best and final, take it or leave it." that type of strategy is simply not-effective.

So, Special_K
What happens after the buyer advances their first bid, their anchor, the seller counters with something less than ask, and the bidding just stops, with neither side willing to move. Is there some magical formula for getting past this sticking point?

I had some guy bidding on my place. He advanced his first bid and then would not move an inch. He was some financial analyst guy who told me all about the financial models he had built, of the apartment, the neighborhood, the macro situation, the micro situation, the whole deal. Well, models are worthless if buyers and sellers cannot agree on a price.

I find I have fewer variables to deal with when the opposing party sets the "anchor" price. In the most rudimentary type of negotiation, I could then open by bidding far enough away from the opposing party's bid to be able to say, "Hey, you think x, I think z, so let's just split the difference." See, it isn't that tough to "anchor" myself and inject another "start" point. I prefer to know what type of negotiation I'm getting into--are we miles apart, inches apart, do we already agree? When I bid first, I have no idea.

This is obviously not a key to debate too much, though, since in NYC RE the seller always bids first by virtue of listing the property.

407, not all negotiations work. sometimes the gulf is simply too big. in your case, seems like your ask and his bid are close to your respective reservation prices. that's fine. maybe there is just no deal.

by the way, i would caveat my comment by saying that an asking price for an apartment really is sort of a first offer in real estate. but to the extent that you can do your work as a buyer and figure out which ones even have reasonable asks that are "in the ballpark", then you can anchor with your initial bid. it's sort of anchoring with a first counter-offer so to speak.

the other thing to realize is that with real estate negotiations, it is virtually a zero sum game between two parties. so what goes in one person's pocket comes out of the other person's. so negotiating tactics are more straightforward. obviously it is ALWAYS in your interest to get as much information as possible out of the other side. but remember to use all your levers to find "joint gains." these are situations where both sides can give up something to the other side and still be better off.

examples: seller wants no mortgage contingency, buyer wants one. maybe a "joint gain" is to have buyer give all their info to a seller and have seller talk to their mort broker to get comfort that financing is not an issue here and give a contingency. or maybe have no mort contingency but extend the close date to accomodate potential one-off issues with a bank or whatever that the buyer fears may happen in this market. etc. or you give no mortgage contingency but have a smaller deposit in case things don't work out or give one and demand a larger deposit.

another example. buyer has no broker, seller and buyer are close together but can't get over the finish line. have the sellside broker chip in a percent or so to help bridge the gap. sure, broker has a contract in place but their commission will still be higher than if there IS a buyside broker and they have the benefit of getting a deal done now.

it's important to remember that the first thing to do is to understand what is driving the other side. what their perspectives, motivations, and concerns are. once you understand that, you should try to be as creative as possible to get something done. remember that just about everything can be negotiated regardless of "how it's usually done" or that "it's industry standard"

good article on anchoring:

http://hbswk.hbs.edu/archive/4302.html

RULE THREE: Do not bid against yourself!!!

Bidding goes back and forth. If you let the other side "skip a turn" then you are going twice in a row. Read another way, you would be making one concession, then without anything in return, you make another concession. When I come across someone who I can get to bid against themselves, I usually end up owning whatever we're negotiating for. It is an awful, rooky mistake.

In RE, this comes up when you agonize and strategize over a bid, convey it to the seller's agent, and the seller's agent responds by telling you they think it would be viewed much more favorably if it were $x higher with no mortgage contingency. Here, the seller hasn't conceded a thing and they are getting you to go up. Whether it is done via guilt, pressure, yelling, insults, you must not bid against yourself.

Buyers and seller find themselves bidding against themselves when they haven't thought their strategies through early on, haven't concrete ideas of where they want to end up, or didn't think about how they would try to get the other party to that point. RE must be treated as business. Feelings are tools--factors to use in the negotiation. It serves no business transaction to depart from logic and act on emotion alone. Perceived attempts to play to your emotions ("guilt" you into bidding against yourself so as to not "insult" the other party), are ploys. Recognize this ploy and flip it around if you like. For example: "I certainly don't want to insult anyone. That isn't how I am. You know I like the "bones" of the apartment very much, but the amount of work it needs worries me. I guess if I had an indication of the seller's willingness to at least negotiate I'd reconsider my bid. But I really need a serious counter-offer to show the seller's good-faith before I can do that."

People who bid against themselves get taken to the cleaners.

kyle - great stuff. how many rules are there? if it is cool with you I am going to assemble the rules in a nice little pdf when you are and will email it to any one who would like it.

also, out of curiosity, you obviously know the rules but how has your own experience been in sticking to most of them while in negotiations. have you ever cursed yourself knowing that you just broke one of the rules or slipped up? if your answer is "no," have you ever considered negotiating for people for a fee?

kylewest,
Exactly, it is like when I was bidding on an apartment against the fictional other bidder. I could not get a counteroffer out of the seller, even though I asked a number of times, and the whole process ground to a halt. I didn't feel that the seller was acting in good faith by not counter offering.

As for my other buyer, I think he violated one of the rules by coming out with an initial bid that was the same as his final bid. I guess there was nothing that could be done to bridge the gap. The potential buyer had also let slip that he had bid on four identical apartments as mine, on different floors, and had lost all of them. I was left with the feeling that there was no way he was going to advance an offer that would make me happy.

klye, no offense but the notion that you ask for $100 and i bid $50 and we are supposed to go back and forth until we reach $75 is just plain wrong. things don't always go back and forth and you shouldn't expect them to. sure, you should negotiate in good faith, but sometimes a "weaker" side has to give in more to get something done. sure, you could ask for the moon as a seller and try to give away nothing. have your place sit on the market for 6 months with little traffic and you'll soon realize that it would have been better to "bid against yourself" a little more early on.

i would say that the asking prices for most apartments are pipe dreams in this environment. and for those that are, bidders simply ignore them for more appropriately priced apartments. so really the buyer's bid does serve as a powerful anchoring tool.

one of the worst things you can do on either side is to have an overinflated sense of what your negotiating position is. clearly, it's a buyer's market. those that don't realize simply won't sell, which for each seller has it's own consequences. just like from 02-07 it was a seller's market and those that didn't buy had to not own and face those consequences.

here's the reality. according to streeteasy, there are now 10,170 apartments on the market in manhattan. as many people have mentioned before, that figure likely underestimates true inventory since many new construction condos don't fully release units and not all apts for sale are on the site. anyways, lets just use that data. additionally, 400 apartments sold in the past 30 days. that makes 25 months of inventory. and as we all know, inventory keeps coming online at a frightening pace.

what does that mean? it means that roughly 4% of apartments are selling each month. so if you want to sell, you must be ready to move the "value proposition" of your apartment to the top 4% or so. it's as simple as that. if you try to stick around asking "median prices" or "median value", you'll never get there. and look, for many, maybe that's fine. maybe they don't need to sell and if so, fine.

do you think that in this environment, sellers should use blanket tactics such as "don't bid against yourself"? are you kidding me? that's grade school denial that will only lead to you selling your place in 12 months at a far lower price than you could have gotten today. it's all relative to the "value" you are providing to buyers. if you are asking $1,300/sq ft for a 5th floor walkup on 95th st, then you better bid against yourself quite a bit. if you are asking $700/sq ft for a doorman building in a good location, maybe you don't need to give up an inch.

Special_K,
Having buyers low ball against properties that have already had their prices reduced due to the market conditions is probably not going to get any deals done. Just saying it is a buyer's market is not enough. This would lead us back to the nonsensical thread of figuring out what percentage under ask buyers should bid. In the end, buyers should bid what they think apartments are worth, considering what else they have seen on the market.

407, i agree that blanket lowball offers are not the best way to proceed as a buyer. if you go around asking 35-40% below ask right now and are unwilling to budge, you are probably wasting your time. i think its better to wait for asks to fall to a level where you are comfortable buying at a smaller discount to ask, whatever that may be.

this is why i don't visit apartments that are just not even close from a value perspective. it's a waste of everyone's time.

I can give a recent example of anchoring, which is that when I was selling in SoHo in 2008 we started at $1.995 (low, to generate a bidding war); generated the bidding war; had both those bidders collapse; went back on the market at $1.995; kept getting offers at $1.9M that we didn't like; and RAISED the price to $2.195M. (We cleared at $2.075M).

One problem for buyers is that 1) listing agents generally have more-finely grained information on an apartment's true value than buyers do (when I list something I've spent three hours running comps on it, so I know PRETTY SPECIFICALLY where it should clear) and 2) a buyer comes in and deals with a property once, whereas a listing agent has the feedback of multiple offers over time.

However, the rep of real estate agents is so bad that buyers don't know whether to trust the listing agent's feedback. In SoHo, I said, "don't bid $1.9mm cash, seller has turned down $1.9mm cash before and he'll do it again" -- and still I got those bids. Wall Street guys, especially, felt pretty sure that once the seller saw "their" $1.9mm cash he would be magically swayed -- and it never, never happened. But they always had to find out for themselves.

ali r.
{downtown broker}

ali, congrats on that sale. but somehow i don't think that will work in this market very well.

All sellers are looking for some point on the supply/demand curve. How we get there is the trick. The "price low to generate a bidding war" model seems to backfire when buyers feel they have bid too high and drop out of the game before a contract is signed.

On the other hand, we are now in a situation where the seller's prices are much more realistic than they have been in the past. Some people may disagree with me, but that is the way I feel. Yet, buyers are still not bidding because they feel they can get the place cheaper in a year or two.

So, we have a stagnant market with very few deals being done. That leaves only distressed properties moving, with everything else sitting there. How do we get ourselves out of this ditch?

Special_k and Kylewest - I think you are both right about the initial bid, because I think that part of negotiating is also working to your own strengths. Some people can give-up the "upperhand" at various stages of the negotiations because they know that they can get that control back when they need to....others cannot do this. There is no 1 way fits everyone. Rather, I believe, there are basics that must conform to a person's style and personality for good success and consistency.

The "feel" part of negotiating comes from experience, as I am sure that anyone who negotiates for a living will attest to. There are times that I am working on a deal and I know from the initial stage of the negotiation how things will go at every point and how we can get things back on track if there are bumps in the road (and there always are). The only way to have that confidence and knowledge is from doing it for years. It's like a pool player taking a shot while they have their next 4 shots planned in their head and they are able to anticipate what will happen. Like the old adage, "You can't teach experience."

special K said: do you think that in this environment, sellers should use blanket tactics such as "don't bid against yourself"?

what about in reference to buyers? does it make more sense? (although i agree there is no one-size-fits-all)

There isn't just one market; there are many. The upper end is going to stay stuck till credit comes back.

However in the lower end (up to $625K conforming plus) there is still some credit, and as a result, properties are still moving - slowly. The buyers are mostly first-time buyers who are understandably hesitant about buying something that may be cheaper in a year -- but as those buyers see things they like, and bid on them, and lose them to someone else -- the pace will speed up. Once they get their hearts broken, they'll take their wallets out of their pockets.

ali r.
{downtown broker}

"So, we have a stagnant market with very few deals being done. That leaves only distressed properties moving, with everything else sitting there. How do we get ourselves out of this ditch?"

The same way we always get out of this ditch. The 4% of apartments selling each month will drive prices lower as some portion of the other 96% will invariably need to sell for one reason or another. Prices will fall until activity picks up and we reach more of an equilibrium months of inventory. Think about it this way. In the run-up from 2002-07 on a nationwide basis, months of inventory fell steadily until it hit about 4 months, which caused significant price increases. 6-7 months is equilibrium. the 10-11 months we've seen since the peak has caused prices to come down 25% nationwide. so what do you think 25 months of inventory in manhattan will do?

"what about in reference to buyers? does it make more sense? (although i agree there is no one-size-fits-all)"

i just think as a buyer or a seller that you shouldn't have pre-set rules to not bid against yourself. if an apartment was priced fairly and i want it and try to lowball with 30% under, maybe i should either be more reasonable and raise my offer more than the other side should give up ground because it's already priced fairly. obviously in this market, buyers have the edge, but it's not an absolute advantage by any means.

sjbh - sorry to take so long to respond. You state: "pjc: A seller who has occupied a property usually has an emotional attachment to their home. Stating you are the best thing they can hope for comes off as arrogant."

Answer: You don't state that, verbatim. But the point is you definitely have to bash their alternatives. If they feel hurt or angry about that, and respond accordingly, they are not going to succeed at getting a deal done since they are bringing emotion into it.

You ask: "If there is a laundry list of negatives, why would [you] want to purchase the property? If your low-ball offer is overpaying, why did you not put in a lower offer?"

Answer: They already know you like the place (that's why you are bidding), but you should act like there are many negatives, and that you are nice enough to put up with the negatives. Whereas other buyers might not be so nice. (Again, bash the alternative.)

You ask: "If you walk because you don't get your way, where is there room for negotiation?"

Answer: Always leave room for negotiation, but definitely have a cut-off point, and be willing to walk if the negotiations never get there. Once you show that you are willing to walk, the other side may suddenly come chasing after you.

You ask: "In the current market concessions tend to come from the seller, paying the flip tax, lowering the price, etc., what concession could you (the buyer) give?"

Answer: in this market the buyer doesn't need to give any concessions, their willingness to be a brave soul and put their hard-earned money (probably a large chunk of their life savings) into this insane market is concession enough. What kind of concession do you suggest a buyer should make?

By the way, I approached this question not strictly or solely in the context of real estate, but in business negotiations generally, which is what I do for a living.

I want to correct my last post, regarding what concessions a buyer can offer. I said, in effect, none. A better answer -- from the thread "What do sellers want" - is to make an all-cash offer (or at least a low LTV mortgage), and be willing to close quickly. If I were a seller I would value that, since there is less risk the deal will tank sometime between signing and closing.

Re: Rule Three (Don't bid against yourself). Sniper, you misunderstood me. I didn't mean that making a counteroffer and saying "let's split the difference" will work all or even most of the time. I meant only that it "anchors" the negotiation as effectively for the counter-offerer as for the initial offerer. And if the "split the difference" strategy is to be used, it let's the one to go second to set the low point in such a way that s/he can meet the initial offer price MORE than HALF way and thus appear to conceed more than the opponent (a nice tool to have in the negotiating arsenal). My point is that it simply opens possibilities and options.

Ali, you got ahead of me. But we can thoughtfully disagree on the benefits of being first to "set an anchor point."

Sniper and others: As I said at the beginning, these are general priciples. Exceptions exist just as in chess there are basic strategies and tons of variations depending upon how the game develops. But to be an effective negotiator, first most people need to understand fundamentals. To teach exceptions and find ways in which the general principle doesn't exactly apply doesn't really help if you don't understand why the general rule exists.

Closing quickly is pretty much a joke in Manhattan, at least when speaking about coops. By the time the lawyers have negotiated the contract, the board package has been submitted and approved, you're probably talking at least 60-90 days, not exactly a quick settlement.

FUNDAMENTAL RULE FOUR: MAINITAIN CREDIBILITY. Do not lie or deceive. Do not unfairly exaggerate and overstate things. Do not ignore facts that you wish didn't exist. Do not mischaracterize the opposing party's position--view it in the light most favorable to the opponent. Dishonesty will be sensed, exposed, found out. You will lose credibility, seen to have no integrity. You will hamper yourself in all further negotiations with the opposing party and agents. Your word is your bond. If the deal falls through, what are you going to do when someone familiar with it appears at the next deal you want to do? Once you break this rule, you for the most part cannot recover from the breach.

Effective negotiations need not depend upon deceptions. HOWEVER, that is not to say you must put all your cards on the table and act as if Jack Bauer has pumped you full of phenobarbitol truth serum. Witholding information and selectively disclosing it may be fine and important. But that which you do choose to communicate must be the truth in a practical and technical sense.

kylewest - you state rule two is to not make the opening bid - I don't think this is relevant to the RE market, since the seller always makes the opening bid when they set the asking price. The negotiations are anchored by that.

pjc: I understood your points, I was hoping you would not present them in a caustic manner. I was suggesting you not get the seller on the defensive as it potentiallly causes unneccessary ire. Why go there? The seller (who is emotion prone) doesn't neccesarily know you like the property if you are really negative. They think you are a bottom feeder. Not fair, but whatever. You were the one who brought up making a concession (win-win). Yes, you as the bidder are putting your hard earned money into the market, but so did the seller (we can't assume s/he is a bad guy).

I agree that an all-cash offer and ability to close quickly is very seductive.

Pjc: Rule Two may or may not be directly relevant to RE as I noted. The point is that it is, IMO, a fundamental of negotiating that is worth understanding the implications of. How this plays out in a RE context can then (and has to some degree already) be discussed. My aim is to start here with the fundamentals. Later move into the exceptions and ways the fundamentals may play out in the context of NYC RE.

Like grammer and knowing the 21 technically proper uses of a comma before using poetic license to deviate, you should know the basics so you fully understand the implications of deviating from them. Same with painting: great abstract painters of the 20th century were for the most part perfectly able to paint a classicly--they learned the old-school methods and then took it all to a new place. They didn't just throw paint at a canvass one day. I'm a strong believer in learning the basics as a first step to developing expertise.

kyle - i think you are referring to Special K's "split the difference statement, not mine.

pjc - kyle states exactly that:
"In the RE context, the seller is forced to essentially bid first by selecting a listing price. And the ball is technically then in the buyer's court."

In real estate, I feel like it's the buyers who does have to make the first bid. I think the way we adapt Kyle's rule two (which is the first thing you'll read in, say, a book about salary negotiations) is that you make it unanchored by the data of the seller's asking price or their history of price changes.

Unlike, say, human resources, where a firm might pay one candidate $100K and a different candidate $150K for the same job title, there is a range of determinable value for a real estate asset. Buyers need to comp out an apartment and "know" what its market value is before they try to snag it at that value or less.

Another point to make is that there aren't only two parties here. Value of seller's apartment changes as competitive inventory goes on sale (or comes off). In a co-op, value of buyer's bid changes as the board reads market conditions and sends pricing signals based on other transactions. The river always moves.

One STRONG argument for the value of an agent is that even if a buyer immerses themselves up to their eyeballs in computer data, and goes out and bids on three apartments and gains the information from those three auctions, that's still less aggregate recent market info than me working three properties, and then walking into my office and asking Gil how his week was, Daisy how her week was, Dan how he his week was, David how his week was, etc.

ali r.
[downtown broker}

Kelsey Grammer knows the 21 proper uses of a comma? (just yanking your chain, it's grammar).

I misuse commas constantly, however I failed my poetic license test. :)

Obvious confession and mea cupla: I have no innate spelling ability and am at a loss without my spellcheck in email or Word. Grammer=grammar....and countless others, no doubt. I typically also do not end sentences with prepositions, but I give myself a little slack on here and opt for fast typing over proper style often enough. :)

RULE FIVE: NEVER OPEN WITH YOUR FINAL POSITION. Do this and while you may close a deal 1 in 1000 times, you will never even get one started 999 times. It doesn't matter how "right" your offer is, how wrong the other party is, how fair you are being, or how you package what is essentially an ultimatum. People need to feel there was a give and take and that if they had to give something up, that you did too. And most want to feel that they gave up less than you did.

When you give a bottom line offer as your opening bid, you leave no room for compromise or for the other party to feel they shaped the deal, too. They are left feeling dictated to and cut out of the process even though they are 1/2 of the deal. If the other party has an agent, and the agent conveys your ultimatum, how do you think it will be conveyed? Positively? The other party will surely ask the agent, "Why am I paying you if all you do is act as messenger for an ultimatum?" The agent needs to appear to have "done something" for the other party.

So accepting that there will be a give and take is key. How much back and forth and the degree of movement can be strategized. But if you think you can convince everyone that negotiations are stupid and we should all just get honest and get right to the bottom line immediately, your quest to change how the world thinks will be a short and unfulfilling one.

agreed. i sold FSBO recently and dealt directly with the buyer during the negotiations. they were often times quite fun and good-natured. we both enjoyed the art of the negotiations. i think we both knew that we would have a deal but just want to spar with each other a bit before we got there. we ended up with a price we agreed on and a case of "fine wine" to boot.

when I first went into sales the client asked for my rock bottom price and i gave it to him...he then said now the neogitations begin; unfortunately I gave him my rock bottom price to early..I let him lead the sale and I learned a valuable lession.

julia, i couldn't have given a better example of what happens than you just did. it is a rookie mistake i too made early in my career. after looking around and realizing everyone else was getting things done and my desk just kept getting higher and higher piles of unresolved matters, i knew i must be doing something wrong. my hopes of increasing efficiency by eliminating the negotiating process was well-intentioned but ignorant of how humans behave in the real world.

I'm in sales, but not in real estate. I largely concur with the essence of PJC's points, but I think they could be expressed more effectively.

I think the first rule of any sale is gather as much information as possible. The more you know about the seller, what is motivating them to sell (divorce, new kid coming, lost their job), the better your negotiating position will be. Similarly, the more you know of the market -- comps, rental prices, etc. the better position you will be in.

Second, let the sellers agent do their job -- I see no reason to "explain" an offer to a sellers agent -- it's the seller's agent to "sell" the offer to their client. The seller's agent knows the market, knows the comps in the neighborhood and probably knows what will motivate the seller, they don't need you to tell them how to do their job. When people who are looking to buy or sell to me try to tell me how to sell the product, I realize they don't understand how deals get done -- and when I see that, I take what they say less seriously and i know that it's easier to negotiate with them. Again, you can use the seller's agent also to bring up the negatives -- before you put an offer down, even during an open house, feel confident to say things like "thought the 3rd bedroom was too small" "would have to update/redo the kitchen," etc. Agents aren't stupid, they see the same things you see and will appreciate knowing your thoughts.

Third, you have to commit but be willing to walk away. In Ali's recent attempted coop purchase, she did just this -- made a compelling, detailed offer and when the other party wasn't interested, she walked -- she didn't ask, "how could I make this offer more appealing?". Nothing shows me a weak negotiator more than someone who, when they hear "No" they come back with a new offer.

Four -- this is a different take on Kylewest's rule three -- always use reason. When people become emotional in negotiations, inexperienced people tend to get emotional back -- it's the natural human reaction. By responding a neutral or empathetic fashion, you go against the expectations of the emotional person. This puts the other party off balance which is generally a good time to figure get the truth out of a person. More information puts you in a better negotiating position.

Five -- Confrontation -- this does not need to be emotional, but if you think a seller is playing games, confront them on it. If the selling agent is telling you how great the 3rd bedroom that is 6x9 is, tell them that it's small.

Five rules:
1) Be informed
2) Let the broker do their job
3) Make a committed offer, but be willing to walk away.
4) Always be rational
5) Confront any mistruths, lies, etc.

RULE SIX: DO YOUR HOMEWORK.

Before entering a negotiation, become an expert on what you are negotiating for. If in a foreign market and want the little horse trinket and know you have to haggle for it, what do you do? Walk up and down some aisles, assess asking prices, see what others are paying, observe a couple of deal, study if all the little horse things are the same or different quality, and figure out what the trinket you want is worth to you and what it's likely to sell for.

If buying a car, you go on Edmunds.com and you read Consumer Reports, and maybe you check out Kelley Bluebook, and you visit websites and go to one or two dealers, and talk to friends and stop people on the street who drive the car you like...only then do you go into a showroom and begin the process.

"Knowledge is power" is no joke. Another poster was 100% correct-everything may be important to know--leave no rock unturned. The lazier you are, the more at risk your ability to effectively negotiate.

In RE, this mean of course the standard study of your market niche using all the websites and forums and newspapers and tons of open house visits. But when you find the unit you like, the real detective work begins. I do not advocate anything underhanded or invasive, but public info is there for the taking. Who owns the apartment? Does the building intercom have their name listed? Did you run it in ACRIS? Did the person just buy another apartment? Where did they live before? Did the owner used to live with another person (a spouse perhaps?) who now is listed in ACRIS as living elsewhere (a divorce?)? Google the name. What occupation? Press release about a new job position out of state they are to start in 4 weeks? You can uncover TONS in ACRIS in many cases. Knowing the other party's circumstances is like learning their time frame--a possible advantage that can't hurt to know.

What is outside the windows? Do those buildings have landmark protection? Do they have developable air rights? How protected are your views? Is that parking garage ripe for becoming a 50 story building as soon as the economy turns? Church outside--is there a soup kitchen there? Who does it serve? Does this matter? Go by the place at different hours during week days and weekends. Where is the garbage piled up (hopefully not under the window of the 2d story unit you are looking at). TONS to learn! It's fun. Dive in with both hands. Perhaps there are things you learn that impact value and the other party hasn't even considered these things when valuing the place.

You can negotiate without doing all this. You can also hurl a dart at a barroom wall with your eyes closed and still hit the bulls eye. The odds, however, are that you will not perform well and will just be recklessly posturing.

Kyle, I generally agree with your rules, but there are always caveats. A couple examples, basically from work:

We've bid against ourselves in auction situations. It goes exactly like you said "your bid would be better received if you changed x. y and z". We do it to show good faith. Yes, the seller has not, but the seller is in a better position - he has an asset/company we want, and so do other buyers. We have to deal with him, and he doesn't have to deal with us. So it's worth it to give up a few unimportant things to show good faith. As someone else pointed out, the key is maintaining control, and getting back in the driver's seat once you regain leverage (usually further along in the process).

And I've successfully used starting with the lowest bid on occasion. I agree that it's a mistake most of the time. The exceptions are situations where you (a) really don't want to waste the time and (b) are perfectly happy to walk away - i.e. you like your BATNA. For instance, I sometimes "negotiate" confidentiality agreements, which are mindless and annoying. In the case of a deal that we could look at or leave, I mark the CA up, send it over with my signature. If the guy calls me back and has an issue, I say tough, take it or leave it. Sometimes they take it, other times they leave it - I am ok either way.

Julia - the answer to your "rock bottom price" story is simple. When someone says "now the negotiations begin" you respond that they don't, you gave the rock bottom price. If you weren't ready to walk away when the other side wanted lower than "rock bottom" then he was right, it wasn't your rock bottom price.

newbuyer99 wrote: "[Sometimes] it's worth it to give up a few unimportant things..." Exactly, which lead to the next basic principle:

RULE SEVEN: GRACIOUSLY GIVE AWAY THAT WHICH YOU DON'T NEED.
In any deal, there are things each party couldn't care less about but that are of varying degrees of importance to the other party. Identify these things. Hold them in your pocket. When you need to show movement, when it is your turn to make a concession, when you need to sweeten the deal or offer a bit, you rummage through these things in your pocket and decide which one or ones to pull out. You serve it up. For example, when you have both "met half way" and the other side needs to feel they got a little more from you than they gave to close the deal, you give away these silly things.

In NYC RE, what might such a thing be? Agreeing to "an early closing" or a "late closing." Allowing the seller to store some things for a month after the closing in the storage unit of the apartment. Agreeing to leave air conditioners you didn't want anyway and were dreading having to remove. Smiling and saying "absolutely no problem for your architect to come and take measurements as often as they like before closing." If the buyer is hung up on the Special Assessment that runs another 4 months for $89/mo., you offer to pay it or credit them. Key here is even if you were going to give these things up without a thought, GET CREDIT FOR IT! Make a little show of graciousness and largess--don't poo-poo what you are giving as insignificant. Treat it at least as significant as you know it is for the other party, but don't break their nuts before you give it to them. Give it kindly to enhance your "good faith" and desire to do the deal.

Graciously giving away silly things makes you look like a good guy/gal instead of a dick, it makes the other party feel like they are doing a good job of negotiating, and it aids in sealing deals.

AvUWS: you are 100% correct. You are also very likely to do a lot of walking away from deals that could have been had for the same price you wanted if only you had approached the negotiation differently.

Thank you to all who take and make time to post this useful information.

kyelwest wrote: "AvUWS: you are 100% correct. You are also very likely to do a lot of walking away from deals that could have been had for the same price you wanted if only you had approached the negotiation differently."

How would you, kylewest, approach a negotiation when someone asks for your rock bottom, you give it, and they say negotiations begin now?

It may seem obvious to many but I'm just not sure the best way to approach this.

Thank you for your help.

The fault in the AvUWS example of negotiating was capitulating to the initial "bottom line" which I'd have said is more a gambit by the bidder than truly the bottom line. There needed to be either more dialogue first ["My wife/husband/investment advisor is going to have a cow over that offer...how do you suggest I explain how you arrived at that number?" or "My wife/advisor {whatever} is going to ask about comps--how do I square the bid with the comps?" to draw the bidder out a bit and foist cause for delay on others. Or even better the seller should done essentially nothing by saying: "Wow. That's pretty far from where I was thinking [indicating you are open to some movement]...I need to talk about this a bit it and get back to you [not rejecting or accepting]." Then I'd let some time pass. Regain control of the timing and get off the "now or never" track which will rarely end well. Ultimatums in negotiations are like double-or-nothing bets: traps for suckers. Here, I'd buy time. Draw it along a little. Let the other party wonder what is happening. See if they get antsy and come back to you with a softening of their "first and final" position. Silence is a wonderful tool--it's like WD-40 in its ability to loosen things that are stuck. Then, if nothing happens and you feel this is a bidder you want to engage in further negotiations, I'd eventually counter offer only nominally lower than my ask price but just enough to show it is a serious counter offer. If the other party wants to engage, fine. If not and they reiterate the initial offer, it depends on whether that initial offer is acceptable to me. If yes, then I hem and haw and go through the motions of a "negotiation" letting the bidder "convince me" so when I accept it the price is one we have in fact negotiated and that the bidder feels they worked to get me to accept. At that point, if the bidder says, "Good, we agree, now give it to me for even less," then this isn't a realistic purchaser and I'd move on unless after my refusal they backedown and said, "Ok. Deal's a deal, let's do it."

Negotiating is like dealing with an alcoholic: you can't control the other party. You can only control what you do.

Hubby and I just looked at a co-op which is a FSBO. Seller said, "I need to get out of this at $XX."

We liked the apartment. We are taking seller at her word as to her price, so our next step will be tocomp the apartment versus other apartments in that neighborhood. If it comps well, we will attempt to buy it; if it comps poorly, we will not.

In other words, we know her position, and we believe her assertion that we have no control over it; we can only control ours.

Similarly, if the counterparty says "what's your rock bottom," and you give it -- there's nothing more to negotiate. It is up to them to control their actions now, and the fact that they want you to bid against yourself means that they're not going to be an easy counterparty to deal with. You can see if they get back to you, but in the meantime, assume that they won't, and go find another deal.

ali r.
{downtown broker}

"Negotiating is like dealing with an alcoholic: you can't control the other party. You can only control what you do." - - good god ali r! lmao (w/ you not at you)

kylewest, thank you very much for your detailed answer and for the examples. "Silence is a wonderful tool--it's like WD-40 in its ability to loosen things that are stuck." What a beautiful line.

front_porch, thank you very much. Great analogy and you make a trenchant point with "and the fact that they want you to bid against yourself means that they're not going to be an easy counterparty to deal with."

This is an excellent thread and very helpful. I agree 100% that savvy negotiating can get you a deal you might have otherwise lost and agree with many of the suggestions as to how to approach a transaction. Ali and a very few others excluded, I think a big part of why this thread is even necessary is because the brokers aren't very effective negotiators. There is a perceived conflict of interest (they both represent the sellers) but ultimately they just want to get deals done. Given the high inventory levels, many listing brokers are beating down sellers before they even list the place.

I do think though that both sides need to take the negotiation less personally. Fankly, although I'd rather not hear it, I don't care if you think my baby is ugly as long as you want to buy it. Furthermore, the rationale for your pricing does not interest me much if you are not even meeting my rock bottom. If I am getting proper advice, there must be a logic to my pricing and it is highly unlikely that your rationalizations are going to change my mind.

As to how to handle someone who wants to negotiate below your rock bottom, if you are convinced that this is your rock bottom and it is justifiable, then you walk. Both sides can walk, not just buyers. The market is very lousy but you don't need to give things away. There are a lot of bottom feeders out there and unless you absolutely must sell at ANY price, you just need to weed them out and not get offended. None of this is personal.

Kylewest - There is no "fault" to my way of negotiating since I never told you how I would negotiate. I only gave advice about what one should do if one really has given the "rock bottom" price and that isn't good enough for the buyer. If one gives a best offer (and there are times when you would want to do this, or at least when you end up at this point), then you need to know your alternative is to walk.

In the case Julia gave I have met people like her prospective buyer. If I was in the position of having given my "last and best" offer and it was not good enough, I walked. That is the definition of last and best or rock bottom.

(I am not in real estate, I am a manufacturer.)

lo888. It is great that you can depersonalize the negotiations but chances are the person or people on the other side of the negotiations will take things personally. You have to be willing to take that into consideration during the negotiation process. Homes,to most, are more than just bricks and mortar. Have you ever driven by the house you grew up in or to the apartment you lived in when you were first married? The experience, to me, is a strangely pleasant mix of happiness and melancholy.I even think an attachment can form before a contract is signed. Couples picture their future children in the nursery or playing in the park across the street. A mother pictures her child walking to the neighborhood school or a man sees himself entertaining friends in the well designed kitchen or on the terrace.

Buying or selling a home is a very emotional process and to say "none of this is personal" sounds good on paper but is just not true in reality.

"This room here once had childish laughter
And I come back to hear it now and again
I can't say that I'm certain what you're after
But in this room, a part of you will remain."
Peter,Paul and Mary

What about the 'time sensitive bid'?
Although I have never actually done this it has occured to me that before I make a bid I might ask the seller's broker if the owner is currently available to entertain a bid. If the answer is yes, I would make a bid with a 72 hour expiration attached to it. I thought this might help control the process. In a sence, you force the seller to show their hand. They can't let you hang or they might loose you plus you combat that 'oh, we just got another offer BS'.
Any thoughts?

Negotiation works on the margins -- so your job is to get the other side to give as much as they can give. However, there's probably a limit in their head as to what they can give.

So a time-sensitive bid will work if it is close to what the side wants -- if it's far, then no.

As a recent example I'm going to cite my SoHo deal, where I repped the seller. We had turned down $1.9M. A Corcoran broker who was very, very good came in repping a buyer, with a cash bid of $1.9M with a 24-hour expiration.

If it had been $2.0, he might have had us, at a lower price than we eventually got ($2.075).

However, $1.9M just wasn't our number, so the time element ended up being meaningless.

ali r.
{downtown broker}

RULE EIGHT: THE "NIBBLE"

When the deal is all but done, and 99% of terms agreed to, it is time for the "nibble." You can only get one nibble, and it has to strike the right balance between something little that you didn't want to quibble over during the negotiations-in-chief, but that can be asked for without upsetting the whole apple cart. In purchasing a car, the nibble would be something like asking for free floor mats or an extra free service visit before you sign the contract of sale. In RE, the nibble can be asking for a credit for the dying dishwasher or broken window seals. As a seller, the nibble can be that you can continue to use the storage locker for 2 weeks after the closing to make coordinating your move easier. The nibble can be a seller asking to leave something in the apartment the seller doesn't want to move, or can be the buyer asking for something to be left by the seller that the seller probably doesn't want anyway. The nibble is the kind of thing that when requested makes the other party say, "Fine, take it if you will sign the contract today and be done with this back and forth."

How big a bite to take when nibbling is a judgment call--the bigger the bite the higher the risk of unraveliing the deal and completely pis-ing off the other party. Some people have more chutzpah at this step than others.

Hint: When negotiating, be prepared for a nibble from the other side by having your own nibble ready. You can then both trade nibbles and all are happy. Or neither of you gets the little bit extra if you can't agree. Done right, mutual nibbles make everyone smile with mutual understanding that the negotiating has come to a close and the deal is done.

RULE NINE: SOMETIMES THE PRICE IS RIGHT AND YOU SHOULD PAY IT

We bought our last apartment directly from the owner. She gave us the price, we thought about it for a day, and then said we would go ahead with the deal. We didn't spend hours agonizing over whether we should try to get her price down by 3%, 6%, or whatever. We felt the price was fair and we paid it. After we closed, the owner told us that she had been approached by four other people who had wanted to buy the apartment but she was not the kind of person to get into a bidding war. We met her closing deadline and everybody walked away happy.

Of course, the market was stronger then, but I think the principle still applies. Sometimes, the negotiating should stop and you should commit to buy, and proceed in good faith to complete the transaction. There is a point when you will risk losing a deal because of intransigence or haggling over small issues.

If rule three is "maintain credibility" -- then let's make that rule ten, and make rule three: ESTABLISH CREDIBILITY.

We have been talking a lot in our rules about what we as a negotiating party want, and how to get it -- but let's think for a minute about how to present ourselves to the counterparty. My favorite anecdote about this is that when I was a landlady, I picked a stranger as a renter because he wore a tie (turned out to be a good tenant, too).

In terms of negotiations, this used to mean showing up with a mortgage preapproval letter -- now I think a financial disclosure form is even better. Be polite, don't use harsh language, show that you've done your homework.

ali r.
{downtown broker}

I thought Rule 9 might apply to dating...once.
'Let's skip all this dinner and drinks stuff and just have sex.'
I'm not saying that plan never worked, just not often enough to make for an effective strategy.
Some of us get by on our good looks or ability to dance.
If I got action...it's because I closed a deal.
Rule 9 is statistical improbablity...plot enough points...one will hit the line.

falco,
I don't know why you came up with this whole sex argument to attack my point. I don't get it. All a seller needs is one person to like the deal, he doesn't need ten people to like the deal.

Regardless, the principle is simple, buyers should figure out that sometimes they have found a good deal and go with it or they risk losing it to someone else.

doesn't your story really indicate that the seller was a BAD negotiator?

407,
In a perfect world...
We are talking NYC remember?
I was just indicating that in the current market,'not negotiating' is not a fundamentel of negotiating.
I was just doing it tongue and cheek.
Next time I'll be more direct.

agreed. maybe BAD negotiator was the wrong way to put it. more like a NON-negotiator.

agreed falco - "Don't Negotiate" is not a fundamental of negotiation. by the way, are you still receiving royalties for "Der Kommisar?"

"How would you, kylewest, approach a negotiation when someone asks for your rock bottom, you give it, and they say negotiations begin now?"

I think this is a good example of a party that is trying to exercise undue control over the negotiation. Every so often you will come up against a party who, whether due to excessive self-regard or lack of respect for their adversary, will try to run you over. This is what somebody is doing when they ask for your bottom line right out of the gate. Not only can you not play their game, but I think you have to make a bit of a show of not playing their game. The first thing I would do in response to such a question is chuckle, which indicates that you recognize the game they are trying to play and respond with something to the effect of "Instead, how about you give me your top line offer?" or "OK, does $X work for you?" where X is clearly at the very top of the market value. With each of those responses, you've given up nothing and put the ball back in the buyer's court. But this will be a difficult negotiation because you are likely dealing with a person who doesn't respect you and appears to want to win more than they want to make a deal.

falco,
I agree, this is not a strategy for this market, unless you're in a situation where the sale is obviously distressed and the price is a slam dunk. This doesn't play for the run of the mill property with an inflated price. Obviously you have to negotiate in those cases.

I suppose my seller was a non-negotiator or someone who did not want to spend the effort to bid people against each other in order to get top dollar. Maybe she would have gained 3% and lost a deal a month down the road with a flaky buyer. I am not a flake. I committed to buying the property and met her tough deadline for closing. Sometimes one solid buyer at a lower price is worth three possibly weak ones at higher price.

I am rereading this post and finding it extremely helpful. A question-Kyle points out one tip which is 'not to bid against yourself'...well....what if you pose an offer you are thinking of offering and the seller's agent says that it is too low (this is before an official offer in writing is made). What is the next step? I don't want to insult the seller with a too low offer, but can I ask the seller's agent at this point to 'guide' me in the right direction. If I put in the official offer at higher then the original amount that the seller's agent knocked down--am I bidding against myself? Do I need to put in an official bid in writing to get the process going?

good question. i look forward to the responses.

the issue of "insulting the owner" is an interesting one. odds are they are priced too high (sellers seem to be the last to know) to begin with. they may be insulted but chances are they are not getting a lot of offers. if this market doesn't feel like 'buyers better start considering all offers they get or they will surely end up with less a few months or years down the road" then i don't know what would.

what would be the reverse of "buy now or be priced out forever?"
"sell now or take 25-50% later?

uwswannab: Two things to keep in mind about the seller's agent.

1) She is the seller's agent.
2) Whether your offer is too low is not for her to say.

I agree with West81st. The seller's agent is not your ally.

Don't worry about 'insulting the owner'. That's a load of crap, especially in this climate. If anything, the seller should be worried about insulting YOU with an overinflated asking price.

Do your research and then offer a bit below what you're willing to pay.

I placed a bid on an apartment that the seller first told me to jump in the lake .Then over the last 6 months the seller agent has come back 5 times to ask if I wanted to go higher.They have not received any additional bids.You need to just wait and soon the seller's will get the picture or a bigger stretch maybe the brokers.

I'm just not sure if I should push for them to come back with a counteroffer? Do I need to make the offer in writing to get that process going?

You're not insulting anyone, you're asking for something. Some brokers will want you to give them a verbal offer to see if you are in the ballpark. This is not a good idea for you if you are the buyer,

Maybe the owner said to their broker, "Don't bring me anything below this price." This is a big mistake because the owner unwittingly may be losing a very good prospective purchaser.

If type up your offer with supporting reasons for your offer, in addition to your qualifying data, the chances are higher that the owner will get your offer (even if it's below their threshhold) because your offer, plus your qualifying data, may be worth more to the owner than just a number over the phone. And they'll know you are serious.

You can give a verbal offer if you're ok with it, but there's more chance for error and confusion if things are communicated verbally - - in such high-priced transactions.

I find that Sniper and Squid give good advice.You are in the driver's seat.You need to look at what it sold for in 2004 and realize it will likely go lower.There are very few people buying,so you may not have much competition,that is except yourself.Donot bid against yourself.How long ago did you place the bid,and did your buyer's agent in dead give the bid.I hope they are not from the same agency.

isn't it true that it is the selling agent's responsibility to give the owner ALL offers?
am i wrong on this? could some agents chime in?