Is it too much to ask in this business for somebody to take you at your word?
Draft an offer, submit it, and tell the other side “Please accept this or reject it, but don’t sign it back. This is our first and final offer.”
Expect a sign back. Nobody thinks you’re being honest…
Everybody has a different definition of “negotiating.”
Personally, I think signing a piece of paper back and forth represents maybe 1% of the negotiating in real estate.
The mind-games and conversations with the parties involved are where you can really earn your keep as a “negotiator.”
But not everybody thinks like that, and it became very evident to me in my first year of real estate when a colleague helped me with a deal.
At the risk of sounding culturally-insensitive, I will say that different cultures and/or races have different ways of doing business. A few years back, a girl in my office who is of a certain cultural persuasion told me that I had to proceed with my offer in a certain way if I was going to be successful, as the sellers were also of her persuasion.
The property was listed at $1,199,000, and it had been on the market for SIX months with no price reduction! I figured they would sell it for $1,100,000 in a heart-beat, so I figured we should just put that down on paper and tell the other side “Take this and run with it!”
But my colleague told me that in her culture, people pride themselves on how many times they sign-back an offer! Back home, she said, you were frowned upon if you accepted the first offer no matter how good it was. You were seen as weak. But people would sit in the locker room at the club or at the dinner table and brag about the negotiation that took place over three days and was signed back seven times.
So, we offered $975,000 on the property listed at $1,199,000. I was almost embarrassed!
The seller called me directly and screamed at me for ten minutes. I think I actually put the phone down, went and made a tuna sandwich, and came back – and he was still going…
My colleague told me not to worry and that it was part of the game. Sure enough, two days and four sign-backs later, we settled on $1,100,000 even.
Looking back on it now (or then, for that matter…), the whole thing seemed like a giant waste of time.
Why couldn’t we just offer $1,100,000 and be honest with them? Tell the other side that this was it?
I wish it worked like that.
It still doesn’t today, apparently.
Last week, a client of mine wanted to make an offer on a property listed at $459,000 that had been on the market for 13 days. In our market, 13 days isn’t a long time, but it’s long enough to know that you aren’t getting multiple offers, and you likely aren’t getting your asking price.
My client told me he would pay the $459,000, but I urged him to go in under asking, and I told him, “Let me show you my value as an agent; let me go out and get this for less.”
He agreed to offer $455,000, and then on the day of the offer, I told him, “Let’s offer $453,000 and I’ll ram it down their throat. Trust me.”
Another day and another time, perhaps agents would offer $440,000 with the idea of “working towards” an eventual price of $453,000.
But I figure, what’s the point?
It’s a waste of time and paper, and I’d rather just say, “This is our offer, take it or leave it.”
So that’s what I did.
We offered $453,000, and I submitted the offer at 12:30PM with a 5:30PM irrevocable, even though it said “Please Allow 48 HRS” on the listing.
I decided to be completely honest with the agent, and I told him that while I could come in at $440,000 just to sign it back and forth a few times, I figured I’d save us all some time. I told him that this was our first and final offer, and I’d appreciate it if he would instruct his buyer to either accept it or reject it. I told him not to sign it back.
And guess what?
At 5:10PM, he sent me a sign back of $456,500.
$3,500 goddam dollars.
I guess you just can’t be honest with people, eh?
Well, before I spout off about honesty, I should tell you the rest of the story…
I told the listing agent that the reason we had given the 5:30PM irrevocable was because we were also interested in a King West property that was priced low and accepting offers at 7PM that night – there would likely be multiple offers.
So if his client didn’t accept our offer by 5:30PM, then we would try our hand with the King West property.
His seller was either greedy, stupid, or both. To sign back for more money when an offer expires in a half hour is cocky to say the least.
I called the agent at about 5:45PM and said, “Well, you and your client have made your feelings known. You obviously want us to try our hand with the King West property, so that’s what we’ll do.”
I went on to explain that offers were being reviewed at 7PM, and we’d likely know by 8:30 – 9:00 whether we got the property or not. If we didn’t, then I’d speak to my client, and we’d decide whether to come back to the table with our original $453,000 offer on his property.
The listing agent knew his client should have taken our offer, and he let me know.
I told my buyer what the plan was, and he was in.
I went to the gym and worked back and biceps, and then rode the bike for forty minutes. I believe I was listening to Phil Collins. “In Too Deep” is the most moving pop song of the 1980’s, about monogamy and commitment. The song is extremely uplifting. Their lyrics are as positive and affirmative as anything I’ve heard in rock. Then I went to return some video-tapes…
At 9:30PM, I emailed the listing agent our original offer of $453,000, and I gave him an irrevocable of 11:59PM.
Maybe that’s mean, but that’s the business…
This time around, however, the seller knew that we were serious.
I can picture him looking at his watch over and over as he waits for his agent to arrive at his house….9:45…..9:50…..9:55…..10:00!
Surely the five hours that passed between his sign-back of $456,500 and our re-submission of the offer played with his head.
As you might conclude on our own, they accepted our offer.
It wasn’t a monumental sum – either the $3,500 that the seller tried unsuccessfully to squeeze out of us, or the $6,000 that we negotiated under the asking price.
But it felt good to know that my client would have gladly paid the $459,000, and we were able to get it for less.
A comparable and upgraded unit sold for $482,000 when the market was red hot, so that was the icing on the cake.
I really wish that “co-operating” agents would cooperate a little better.
The idea of a first-and-final offer has to be worth its namesake.
And what’s more is that buyers and sellers have to check their egos at the door and understand that while mind-games and negotiating are part of the business, being cocky might cost them a deal.
Honesty truly is the best policy.
Then again, I suppose that depends on your definition of “honesty”…Back To Top Back To Comments
at 8:19 am
So, on the subject of honesty, was there another property in King West? 😉
at 11:13 am
Read the story again….notice how I was at the gym, and quoting American Psycho while I was supposed to be working on another offer?
at 11:36 am
Seller caved. Your buyer didn’t. Simple. No negotiating as far as I’m concerned.
It’s not up to the other agent to choose not to follow your instructions. Ultimately, if his or her client wanted to sign-back, he/she had to follow those wishes. To assume the agent wasn’t co-operating is presumptuous, especially given the fact you implied he/she agreed that his seller should have accepted.
It’s a lot easier to negotiate when you’re representing a client who is unemotionally attached and the opposing agent is representing a client who is.
Your buyer could have and likely would have caved to a higherr sign back based on your comments. Would that have been a reflection of your “poor negotiating”?
To your defence, I would say NO. You just happened to the on the right side of the chess board.
at 4:38 pm
Hmm that’s not fair. What then is considered “negotiating?” You out-gamed the other agent plain and simple. You BS’d him and won. You got the property for less than your client would have been happy paying. That’s negotiating.
at 7:40 pm
I always say to a seller, “the minute you touch this offer, you’re buying your house back for $453,000”.
Most of them get it when it’s framed like that.