The 10 ways to negotiate a better deal in property: Neil Jenman

Most communication involves negotiation. Aside from ‘splitting-the-difference’ most people don’t know a lot about negotiating. They are not very good at getting very good deals for themselves.

One of the most important things to remember when negotiating is to ask lots of questions. Very often, you need to ask questions of yourself. Why do you want to buy? How much do you want to pay? When do you want to have it? Try and remember what the writer Rudyard Kipling once said: ‘I keep six honest servants; they’ve taught me all I know. Their names are what, why and who. And when and where and how.’

Most people make the mistake of thinking that negotiation is a complex science. It’s not. It’s usually just two people both trying to get the best deal for themselves: the person who is selling and the person who is buying. And there is no honest reason why both sides can’t reach a price which makes both of them happy. Here are 10 of my favourite points about negotiation.

1. FAIRNESS

First, don’t even consider ripping off the other person. If you’ve got a good product that’s priced higher than it can be bought elsewhere, then you’d better have a very good reason to justify your higher price. What are you offering that the other seller is not offering? If nothing, then all you’ve got to offer is price. If you are in a price war – as so often happens today, especially with cars and white goods – there’s only one way you can be sure of winning. Guarantee the best price.

That’s right; don’t just say that your price is best. Guarantee it. If they buy from you and later (within, say, 30 days), they see it advertised cheaper with someone else, then say you’ll refund the difference. I love honest guarantees in negotiation. They instantly move you closer to closing the transaction and they make you feel good. You don’t go away with that nagging feeling that maybe you could have got it even cheaper elsewhere. So this sort of negotiation is simple. If you’re the seller, offer the best price possible. If you’re the buyer, do some research and get to know the prices.

There is, however, one wonderful seven-word question which you should ask the other party, regardless of whether you are buying or selling. That question is: ‘Is that the best you can do?’ You’ll be astounded how many times this soft little question saves you a stack of dollars. One final tip on this question: Ask it a second time with one more word added. Once you’ve got what you are told is ‘the best’ that can be done, ask this eight-word question: ‘Is that REALLY the best you can do?’

I estimate that the first time you ask this question, you’ll get a better deal at least 50% of the time. The second time you ask the question – with the word ‘really’ added – you’ll get a better deal (in total) about 75 per cent of the time.

 Finally, the most important word in negotiation is ‘fairness’. It’s the first and final rule.

2. VARIABLES

Second, look for variables – something you can add in as an extra if you’re selling or something that you can take out if you’re buying. For example, a home may have some expensive light fittings. If the buyer makes an offer which seems too low, the seller can say, ‘We accept the offer but we need to exclude the light fittings.’ There are a whole host of other extra things you can include or remove if you are selling or buying a house. During tight times in real estate, some property developers offer a ‘free car’ if you buy one of their properties. With such a large inclusion, though, it’s hard not to think that the price of the car has been added to the price of the property. Once again, do your own research.

3. RESEARCH

Third, become a superb researcher. You know who always gets the deal from a negotiation? The person who’s the best informed. Depending upon what you are selling or buying, the more research you do, the more knowledge you’ll acquire. With negotiation, knowledge is power.

Here’s an example. There’s another home for sale in my street. It’s just been built. It’s a gorgeous looking home but it’s located in the middle of a bend coming down a hill. As you drive down the hill, it’s easy to imagine a car losing control, failing to take the bend and ploughing into this house. This is a valid concern which can be used by buyers to secure a lower price. But if the sellers have done their research, they’d be able to tell the buyers that the council is going to close the street at the top of the hill. Cars will only be able to go one way – up the hill. Presto, knowledge has saved the sellers from having to give a hefty discount.

4. TIME

Fourth, be careful of time. The longer you spend in a negotiation, the more likely you’ll capitulate. When you invest a lot of time with people, you think: Well, we’d better do a deal now or else we’ve wasted all these hours/days/weeks. A car salesman once told me that some buyers will point to a car in the middle of many cars and ask the salesperson for a test drive. The poor salesperson may spend 20 minutes shifting cars around. He expects to make a sale. He has invested time and whoever invests the most time is the one most likely to surrender conditions. Some car buyers get salespeople to bring cars to the buyers’ homes. All the buyers do is sit at home and wait. The car salesperson uses up a heap of time, especially if they have to go back and forth to the buyers’ home with several types of cars.

So be careful. The longer the negotiation goes for, the less chance one side will have of getting the best deal. Make sure it’s not your side that’s invested huge chunks of time.

5. TERMS

Fifth, consider terms. Often, negotiation involves a financial focal point. For example, the price asked for a home may be one million dollars. Buyers are only offering $900,000. The sellers reduce their price to $980,000. The buyers increase to $920,000. Stalemate. Sixty thousand dollars short. The buyers say they have run out of money. With their savings, they have reached the maximum that the bank will lend them. The sale is about to fall over. But, suddenly, the sellers offer to ‘lend’ the buyers the $60,000 shortfall. The sellers may say, ‘Okay, we are $60,000 short, but we’ll let you pay us $12,000 per year for six years.’ If the buyer agrees, which they often do, the sale is saved. There are a myriad of combinations that can be used with financial terms.

6. STEADY

Sixth, be careful how you say ‘yes’. Let’s say you like something that has an asking price of one thousand dollars. You may offer eight hundred dollars. The seller gives you a big smile and says, ‘Yes, I accept,’ and out comes the proffered hand to shake. What’s your first thought? Yes, it was all too easy; maybe you should have offered less.

If you are the seller and someone makes you any offer that you want to accept, never look delighted. Take it steady. Maintain a stern, almost worried look. Ask for a few minutes alone with your partner. If you decide to accept the offer, always try to get the other side to make one more, final, concession. Here’s what you would go back and say: ‘Look, it’s not what we are hoping for, but we have decided to accept if you will pay for postage and packing [or whatever concession you seek].’

7. CONTRA

Seventh, if you give something, make sure you receive something in return. That’s right, every time you agree to some point or condition in the negotiation, the other side, in return, should agree to compensate you for that. Don’t ever give anything away without getting something  in return. A contra arrangement. For example, you might increase your offer by $10,000 if they agree to leave their ride-on lawnmower and all the gardening implements.

8. QUESTIONS

Eighth, ask questions instead of making statements. Let’s face it, almost no one feels comfortable looking another person in the face and saying, ‘I want to give you $10,000 less than you are asking.’ 

So instead of making such ‘in-your-face’ statements, try asking a few soft questions.

For example, you can look at the asking price and then look puzzled before you ask, ‘Why are you asking this price?’ Amazingly, rather than try to justify why they are asking a certain price, many people will immediately reduce the price. It’s easier for them to reduce than defend their price.

And let’s say you are checking in to a hotel. All hotels have a series of set rates they charge. All hotels are flexible on their rates, no matter what they tell you. After all, they can’t sell the previous night’s empty room at any price. The worst rate that hotels have – and the one they’ll try to get you to pay – is what’s called their ‘rack’ rate. If you know what you are doing you will never pay the rack rate. So all you do is ask the desk clerk, ‘What special deals do you have on at the moment?’ If they say there are no deals and then they quote you a rate, you should immediately say, ‘Yes, but that’s your rack rate!’ (Say it as if only mugs would pay a rack rate.) All hotels also have a corporate rate, which is anywhere from 10 to 30 per cent cheaper than the rack rate. So you should ask, ‘What’s your corporate rate?’ When they tell you, then say – almost grudgingly – ‘Okay, I’ll take that then.’

But you’re not finished yet. Have you got one of their premier rooms or just one of their mediocre standard rooms? It costs a hotel nothing to give you one of their better rooms. To get a better room, just politely say, ‘Could you please give us a nice room?’ You’ll be surprised how often hotels will upgrade you at no extra cost. And what about breakfast? Ask the question in a positive manner and you’re more likely to get a positive result. For example, ‘This includes breakfast, doesn’t it?’ 

And finally, don’t forget to get a late check-out. Conrad Hilton was the man who got the masses to check out of his hotels on time. People used to be told that ‘check-out time’ was 11 am. But hardly anyone took any notice. He was having terrible trouble. And then he decided to post signs at the reception desk and in the rooms, saying ‘Check-out time strictly 11 am’. Suddenly, because it was in writing, everyone obeyed.

So be careful. Don’t ever let written words intimidate you to do what the written words want you to do. With negotiation, just about everything is negotiable – except your integrity, of course. Never do, or even hint at doing, anything unethical.

Recently I was at one of the big city car parks. I couldn’t find my car so I asked one of the attendants to help me. He was not only helpful with directions, he also took my money which saved me going to the cashier. It wasn’t until after I drove out that I realised what had happened. He had acted nervously and he moved behind a large concrete post when he looked at my ticket and got my money (I later realised to hide from the security camera). He took two 20-dollar notes from me which, at the time, I thought was quite reasonable, considering I had been parked there for most of the day. When he took the money, he said: ‘That’ll do.’ I thought he had given me a special rate. But he had actually given me the thief’s discount because he kept the money for himself. The real rate was around 70 dollars. As I joined the mass of city peak hour traffic, I slowly began to work out what had happened. He had pocketed my money. I fumed. I felt like going to his employers and setting him up in a hidden camera sting. I hate dishonesty, wherever it’s found or however it’s perpetrated. And, as in this case, I hated being almost a partner in this crook’s crime. I drove home feeling guilty myself. I couldn’t stand it and so the next day I rang the large car park company. To my shock, they weren’t interested. Perhaps they were all doing it all the time. Who knows?

9. ODD

Ninth, don’t negotiate in even numbers, particularly near the end of the negotiation. Have you ever noticed that when people tell you their highest or lowest price, it almost always ends in a round number? Such as $10,000 or $12,000. But seldom $10,277. If people really were stretched to their limits, they’d be offering an odd amount – a sign that they had virtually emptied their purse.

Often, when you offer an odd amount, the other side will say something such as, ‘Why are you offering me $10,277?’ You then reply: ‘Because that’s all I can afford. I just can’t go any higher. If that’s not enough for you, then, I’m sorry, I’ll have to let it go.’ Again, you’ll be surprised how many times people will accept a price with an odd number, even if they may have refused a higher price with an even number!

10. EXPERTS

The 10th point is: consider using experts. I have done a lot of negotiation in my life but never felt comfortable negotiating for myself. I can get great deals for the sellers of real estate but when it comes to myself, I often end up feeling sorry for the buyers. I sold my last family home for almost $20,000 less than an earlier price I had been offered. Yes, I had two buyers. Instead of taking the buyer with the higher amount, I took the offer from the mother with a mentally disabled daughter. The agent introduced me to the lady. She was lovely and my heart melted.

It has been a different story, though, whenever I have been buying real estate. On the last three occasions that I or a close family member have bought property, we have always used the services of a Buyers’ Agent. In every case, we have saved more money than the amount we paid the expert. So, if you don’t feel 100 per cent comfortable doing the negotiating yourself (on big items only, such as houses or cars), I recommend that you hire a skilled negotiator.

Neil Jenman is a property commentator, consumer advocate and investigative writer. 

This is an excerpt of his book Success Takes Character: Winning and Losing in the Game of Life