Published 10 September 2022
There’s no denying that the supply and demand pendulum is swinging in the direction of Las Cruces-area homebuyers. While sellers whose homes are “the best for the money” continue to benefit from a high level of demand, sellers on the other end of the spectrum are finding that it is now necessary to enhance their offerings. Price reductions, closing cost incentives and repair allowances are all on the table. So is the art of negotiating. The story you’re about to read ran in this space a little over a year ago. Given the significant changes occurring in our marketplace, I thought this would be a good time to give it another run.
An agent I worked with years ago received a call from a frantic homeowner who needed to sell his house — now! He had purchased a newly constructed home in Arkansas but would lose it to another buyer unless he was able to produce a bona fide purchase contract for his Las Cruces home within fourteen days. To add a little perspective to the story, the time required to sell a similar home in his neighborhood at that time was in the 150-day range.
Once the agent understood what the seller wanted to accomplish, she put together a plan to help him get the job done. Her idea was to identify the highest possible price at which buyers would be willing to compete against one another for the property. After that, an aggressive marketing plan was employed to alert realty agents and the public to the terrific buy that was literally beckoning from around the corner. To make a long story short, the plan succeeded, and the seller received three offers within 72 hours of the day the property was listed.
Two of the buyers included in their offers information regarding their loan qualifications and ability to perform. The third offer was from a buyer who “really wanted the house because he has relatives living on the street,” but who had not yet applied for a mortgage. Additionally, his offer was well below the asking price and supported by a very small earnest money deposit. We in the biz call that a weak offer. After eliminating buyer number three, mostly due to lack of qualifications and commitment, the seller negotiated with the remaining two purchasers and ultimately struck an agreement with the one whose combination of price and terms most closely met his needs.
After the negotiations were complete and news of the outcome had been disseminated to the three buyers’ agents, the seller’s broker asked agent number three why his buyer’s offer was so weak. After all, there were two competing offers and the buyer truly wanted to live on that street. The agent’s answer: “My job is to get him a good deal.”
What buyer number three’s agent failed to realize was that without a clear understanding of the seller’s needs, there was little chance his buyer could prevail. In this scenario, the seller desperately needed a qualified buyer in order to secure his new replacement home. While the buyer in question may have indeed been well qualified, he and his agent totally missed the opportunity to incorporate that fact into the offer. In the end, a qualified buyer was clearly more important to the seller than the price he received.
One of the best examples of the importance of understanding the needs of a negotiation counterpart involves a single piece of fruit — an orange. The juicy fruit was the subject of a Massachusetts Institute of Technology basic negotiating class outline having to do with two persnickety chefs who worked at the same high-end restaurant. Each was preparing a VIP recipe that included a whole orange as one of the ingredients. All was going well until the chefs realized that there was only one orange left in the fridge.
The two argued vigorously over who would get the fruit. After much haggling, the decision was made to slice the thing in half. What neither chef took into consideration, however, was why the other one needed the orange. Had they taken the time to inquire about their respective needs rather than who was more deserving of the orange, they would have realized that one of them needed the juice for a special sauce he was preparing, while the other intended to use the zest in a dessert recipe.
Thanks to the chefs’ failure to effectively communicate, neither ended up with what they wanted. The chef needing the juice only got half of what was called for in the recipe. The same was true for his cohort, who only had at his disposal half the zest called for in his recipe.
What some negotiators tend to forget is that there must be something in the offer that appeals to the other party. One of my favorite observations is that if an agent can figure out how to give each person what they want, they’ll hurry up and sign before somebody changes their mind. That’s what I call a win-win situation. The opposite of that scenario is the win-lose; wherein one party imposes their will on the other, without the benefit of any positives for the imposed-upon party.
The bottom line here is that buyers and sellers are each entitled to “good deals,” whatever that means to them. In the book Done Deal: Insights from Interviews with the World’s Best Negotiators, by Michael Benoliel (Platinum Press, 2005), top negotiators agree on three negotiation components:
- Negotiate from both sides of the table. To be a master negotiator, you need to come to the table with a clear understanding of not only what your objectives are, but also the other side’s interests and goals.
- Map out your strategy. Before entering any negotiation, be aware of all the possibilities that exist. Examine all the options and determine which ones are most likely to help you reach your overall goal.
- Increase your negotiating power. The outcome of any negotiation will not be determined by who has the most total power, but who has the most power that is specifically relevant to the negotiation at hand.
Whether you’re buying, selling or cooking, it’s never too late to brush up on how to successfully negotiate. Learning how to identify what makes the other party happy can make it far easier to achieve that which makes you happy.
See you at closing!
Gary Sandler is a full-time Realtor and president of Gary Sandler Inc., Realtors in Las Cruces. He loves to answer questions and can be reached at 575-642-2292 or Gary@GarySandler.com.