1650 E. River Road
The Poker Game of Real Estate Negotiation
For those who don’t know, I like to play cards (a lot) and can often be found on Pokerstars. If you’ve never played poker, its basically just a negotiation game centered around guessing whose hand “seems” to be the best based on bets and other factors. Many times the winner is determined before all the cards have even been played. What does this have to do with real estate? Well, nothing directly, BUT home negotiation — negotiating anything really — is played the exact same way. The following tips are what I think are among the most important.
Tips for Sellers
Selling tip #1: Make sure your home shows the best possible. While this may not seem like a master negotiating tactic, in fact it is. A $200 cleaning of a home may make buyers realize a home is the best fit for them just because of the cleanliness factor. Who really wants to buy a home that makes you wonder? A clean home is your way to show buyers that you are a serious seller who keeps a clean house. And a clean house translates directly into a well taken care of home every time! A well taken care of home will always produce more motivated buyers, which sets up your “hand” for the later negotiations, netting you more money!
Selling tip #2: When placing a home on the market, only include the essentials in the price. Unless a home is vacant and it’s obvious that the stuff is staying, leave out the washer, dryer, fridge, and anything else a buyer may want with your home. Don’t include them even if you want to leave them in the house and already have new ones picked out. Why? Well, one hundred percent of the time, you will be able to use these used appliances that may not be worth much as bargaining chips. Say the buyer wants 5k off the selling price of the home. You can counter, “How about 1k off and the washer, dryer, and fridge?” The buyer might just say, “Well, we would have to go out and buy all those items, plus they are being reasonable, so let’s just accept that.” You may have given up 2k total — 1k off the price and 1k for those used appliances that you didn’t want anyway — which was a NET 3k in winnings for you. And the buyer feels good because you worked with them to make a deal. I could go on for pages about negotiation techniques, but those are two simple ones for sellers.
Tips For Both Buyers and Sellers
DON’T ACT AS IF THE HOME NEGOTIATION IS A LIFE AND DEATH STRUGGLE THAT HAS TO BE WON! The best poker players in the world will act like winning or losing a big pot is just part of the “fun” even when they know their livelihood depends on winning. By being friendly and cordial even when on a huge losing streak, it makes the game more entertaining and prevents the less able players from wanting to go play with someone else they enjoy more. The same applies in home negotiation. You must act as if you could not care less about the outcome! This is huge. Get too worked up and desperate to make a deal and you will not come out ahead if the other party can sense this. I GUARANTEE IT! You may not get all the items you desire in the negotiation, but there is no telling how much you hurt yourself when you let the other side know you want to buy or sell more than the other guy. The best negotiators can feel “wants” and “needs” of the other side. Believe me, I do. I know when we can get another 5k out of a seller on the buy side or get the buyer to come up 5k from the sell side. I would say 90% of the time, a good agent or negotiator will know just how far they can go before they blow the deal apart.
Tips for Buyers
Buying tip #1: In a buyer’s market, go slow in negotiations. The best approach is a slow move up in price versus a quick one. Example: Buyer submits an offer on a home for 500k. The value of the home seems to be 535k, so this is in the area of a “lowball” offer. The seller responds and counters with 525k. The buyer should only come up 5K-10K in price, depending upon different factors. Meaning the counter to the counter (I hope you can all follow me) should be around 505k-510k. At that point, the seller has a decision to make. He can perhaps do a quick deal at 510k or counter back at a 520k. Either way, you the buyer are most likely going to win at least another 5k to 15k off the asking price of the house. This is why negotiation is very similar to poker — understanding how to work the other side into a winning situation for yourself. GO SLOWLY when negotiating, at least in this market, as a buyer.
Buying tip #2: MAKE A BLUFF! In this buyer’s market, you can bluff a seller and say, “Look, this is our final deal. Take it or leave it.” If they take it, you win. If they leave it, then you have a decision to make. How badly do you want that home? How easy would it be to find another one just as good? Last week, I was representing clients on a new construction home. We wanted the best lot in the neighborhood for free! It was priced at 12k. The client was already getting a ton of other incentives to buy, free options money, closing costs money, and a couple of other items. But I realized that it might work to also ask for a free lot, so I did. The builder came back and said, “Sorry, we cannot do a free lot. We have to charge for the lot, no exceptions.” So, after the client and I discussed it (they were on board with it all the way), I told the builder, “If the lot cannot be thrown in for free, then the client does not want the house. Period!” Now, I have no clue if the client would have still purchased it if they had to pay for the lot, but it didn’t matter. After two days of the builder sitting on the deal, they decided to throw in a free lot. This was an amazing deal, and I am very happy it worked out as well as it did. But the moral of the story is that — believe it or not — many potential buyers would not allow the negotiations to occur. They would just fold to the idea of having to pay for the lot, costing themselves 12k in the process. This is why a non-emotionally tied real estate agent working for you can be a lot of help. I personally have no emotion when doing these deals. If the buyer gets the house, great! If not, no biggie. I usually try to stay out of it and just work it from a numbers point of view. If your real estate agent of choice gets emotionally committed to the deal, then they will be of little value to you.