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Real Estate Negotiation - The Compromise

By - 2008

Why are there whole books and course on real estate negotiation? Because it is too big a subject to cover in just an article. This is one of those reasons why it can sometimes be a mistake to sell your property on your own. A real estate agent - at least a good one - should have some good negotiating skills learned from experience. Fortunately, though, some things can be learned a piece at a time, and this is one of them.

Of all the techniques of real estate negotiation, the compromise is one of the most common. It is so much a normal part of negotiation, that people often forget that it is a "technique." Both sides in a negotiation expect to compromise on many points, and it is the easiest way to settle a difference. However, how you arrive at that compromise is crucial.

Arriving at a Compromise

It's common to say something like, "Look, we're only $6000 apart now. You want to $204,000, and I want $210,000. Why not split the difference? That would make it $207,000." "Splitting the difference" has become a cultural norm. It seems reasonable and non-offensive to suggest it.

The question for the smart negotiator, is "how is this 'difference' is arrived at?" Where did negotiations start from, and how did they proceed? Did you start with a price of $230,000, with the other side offering $200,000? Did you yeild a little bit or a lot at each step? And the other side?

In the example above, suppose you only dropped your price to $216,000, instead of $210,000. The difference between that and $204,000 on the other side would be $12,000 in this case. "Splitting the difference," would mean a price of $210,000. It's important what you do before the compromise.

Extreme initial positions can help here - if you don't chase the other side away. Buyers use this technique all the time, because it works. An investor or home buyer doesn't expect to get a property for 20% less than the asking price, but offering that price plants a seed of doubt in the sellers mind as to the value, and it lowers his expectations. Soon he might be happy with a compromise that gets him 10% less than the asking price - even if he would have rejected 8% less out of hand as a first offer.

Another trick is moving in smaller increments. For example, if you are selling a property, you can let the buyer come up $2,000 at a time from his first offer, while you drop your price by only $500 with each counter offer. At some point you might arrive at a compromise, and it will be at a higher level thanks to your strategic moves.

However, being too obvious in using a negotiation technique like this can scare the other side away. To be more subtle, negotiate for other points that are of little concern to you. This gives you something you can "throw back in the pot" when it's time for a compromise.

For example, suppose a buyer expressed some interest in having the washer and dryer in a house you are selling. Politely dismiss the idea - even if you have no use for them. Now you have something for later. If you are getting close to a deal, and the buyer hesitates over a proposed compromise, you can say, "Look, take the washer and dryer too, and we can sign this right now."

You should learn at least several real estate negotiation techniques if you are an investor, or even just selling your own home. Why not start by learning the art of the compromise?


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