Let me start today\u2019s blog post with a rather childish example.\u00a0 For a change\u2026<\/p>\n
Remember when you were younger and you met a girl who you really liked?<\/p>\n
You hit it off.\u00a0 You had a great time.<\/p>\n
You immediately felt some chemistry and you were pretty sure that she felt the same way.<\/p>\n
You asked her for her phone number and she gave it to you.<\/p>\n
You told her that you wanted to see her again.<\/p>\n
You told her that you\u2019d call her.<\/p>\n
She liked that.\u00a0 She smiled and said, \u201cI\u2019d love to hear from you.\u201d<\/p>\n
And based on all this, and the fact that you\u00a0really\u00a0<\/em>liked her and\u00a0really\u00a0<\/em>wanted to see her again, you did the only rational, sensible, logical thing there was to do:<\/p>\n You deliberately waited six days to contact her.<\/p>\n<\/blockquote>\n Ring any bells?<\/p>\n I\u2019m a product of the 2000\u2019s dating scene, so I don\u2019t know what the move is\u00a0today<\/em>, but back in \u201cmy day,\u201d this is how people were expected to act.<\/p>\n And since I absolutely hated people who did this, acted like this, and subscribed to this school of thought, I think we can draw the ire and blame to one specific source.<\/p>\n These guys:<\/p>\n Mike Peters and Trent Walker, of course.<\/p>\n Characters from the 1996 movie, \u201cSwingers.\u201d<\/p>\n In the movie, Mike is desperately trying to get over his ex-girlfriend, and he finally chats up a lady at an evening lounge and obtains her phone number, but when he asks Trent and their other buddy Sue (this was a guy \u2013 named after a Johnny Cash song\u2026) how long\u00a0they\u00a0<\/em>would wait to call the girls whos phone numbers\u00a0they\u00a0<\/em>obtained, Trent and Sue both blurt out:<\/p>\n \u201cSix days.\u201d<\/p>\n Both of them, at the same time, in perfect harmony.<\/p>\n Did any of your friends, girls or guys, ever tell you that you need to \u201cact unavailable?\u201d\u00a0 Yeah.\u00a0 That\u2019s where all this comes from.<\/p>\n It might surprise you to know that \u201cback in my day,\u201d I never subscribed to any of this nonsense.<\/p>\n I specifically remember meeting a girl and having a fun evening then saying, \u201cI\u2019ll call you in six days.\u201d<\/p>\n She asked me what I meant by that, and I asked her, \u201cHaven\u2019t you seen\u00a0Swingers<\/em>?\u201d<\/p>\n She had not.\u00a0 She was younger than I was\u2026<\/p>\n I explained the joke to her and she understood.<\/p>\n About five minutes after the cab pulled away, I sent her a text message and said, \u201cHas it been six days yet?\u201d<\/p>\n I just had no time for the nonsense.<\/p>\n I used this as a weeding-out process of sorts, since I wouldn\u2019t be interested in a person who subscribed to this, and therefore if \u201cseeming too available\u201d or \u201ctexting too soon\u201d backfired, then all the better!<\/p>\n But I was clearly in the minority here.\u00a0 This was just the way the dating scene worked, unfortunately.\u00a0 At least in my age group, in my demographic, in mid-2000\u2019s Toronto.\u00a0 I\u2019m not sure how it works today, but I bet there are a lot of government forms to fill out\u2026<\/p>\n The parallel I\u2019m drawing today is an odd one, and I know that.\u00a0 But the regular readers will\u00a0also<\/em> know that in order to introduce a real estate concept, I often like to use a real-world and\/or societal example as an analogy.<\/p>\n When it comes to negotiating in our real estate market, there\u2019s a particular \u201cstyle\u201d among some agents that has always bothered me.<\/p>\n I understand there are different types of negotiating.\u00a0 There are different personalities, different goals, different strategies, and often completely different agendas.<\/p>\n \u201cNegotiating\u201d itself is hard to define.<\/p>\n Just the other day, my 8-year-old daughter accused me of\u00a0lying<\/em> when I tried to explain to her what negotiating was.<\/p>\n But not\u00a0everything<\/em> in a negotiation has to be give-or-take.<\/p>\n If you\u2019ve taken a negotiating course before, you\u2019ve heard this one\u2026<\/p>\n There are two boys.\u00a0 There is one orange.\u00a0 They both want it.\u00a0 How do you decide who gets the orange, and why?<\/p>\n<\/blockquote>\n Picture a class full of people throwing out ideas.<\/p>\n \u201cWho called it first?\u201d<\/p>\n \u201cWhich child is older?\u201d<\/p>\n \u201cWho will make better use of it?\u201d<\/p>\n \u201cWho truly\u00a0needs<\/em> it more?\u201d<\/p>\n \u201cIs there another orange somewhere else?\u201d<\/p>\n \u201cDoes either of the boys prefer a\u00a0different<\/em> fruit\u00a0more<\/em>?\u201d<\/p>\n Eventually, you get to the crux of the matter and somebody asks, \u201cDo we know\u00a0why<\/em> each boy wants the orange?\u201d<\/p>\n Ah, of course.<\/p>\n The first boy is making orange cookies, and he wants the orange because he needs the peel<\/em>.<\/p>\n The second boy is thirsty and he wants to make fresh\u00a0juice<\/em>.<\/p>\n In the end, both boys can have the orange \u2013 the parts that they want, and because their needs are actually different, each boy gets\u00a0exactly\u00a0<\/em>what he wanted.<\/p>\n This is where most courses introduce the concept of \u201cintegrative negotiation,\u201d which is where the parties seek to find mutually-beneficial solutions in a win-win outcome.<\/p>\n This differs from our classic \u201cdistributive negotiation\u201d which is simply dividing up the proverbial pie; for every amount that one party gets, the other party loses by the same amount.<\/p>\n Very few negotiations are\u00a0strictly<\/em> distributive, and even when you think they are, there\u2019s always smaller pieces to the bargaining that can play a role.<\/p>\n In the purchase and sale of real estate,\u00a0price<\/em> is always the largest factor and it\u2019s the one part of the negotiation that\u2019s wholly distributive.<\/p>\n Closing date, conditions, clauses, deposit amount, inclusions, exclusions, rental contracts, and a host of other factors come into play, all of which could be used in a negotiation in an integrative manner.<\/p>\n \u201cWe can give you the July 10th closing date that you want, even though we prefer August 31st, but you\u2019ll have to come down on the price a little.\u201d<\/p>\n There\u2019s a classic example of the integrative negotiation at play, even though one party is gaining on price while the other loses.<\/p>\n It\u2019s bargaining at its simplest.\u00a0 It\u2019s negotiating, yes, but it\u2019s more like\u00a0collaborating<\/em>.<\/p>\n But riddle me this:<\/p>\n What happens when one party comes into the negotiation with an artificial number of \u201cbarriers\u201d simply as a way act as though he or she is making concessions later on?<\/p>\n<\/blockquote>\n Does this provide the individual with a leg-up and leverage at the onset?<\/p>\n Or did this individual just get in his or her own way, widening the gap between the two parties, and making a deal less likely?<\/p>\n Listing agents will know the following example all too well.<\/p>\n A condominium has been listed for sale for $799,900 and has been on the market for three weeks.\u00a0 It\u2019s not an eternity, but the listing isn\u2019t new either.<\/p>\n An offer is submitted for a paltry $710,000.<\/p>\n There are three conditions in the offer: financing, review of the status certificate, and home inspection.<\/p>\n The seller has stated in the MLS listing a preference for a 30-60 day closing.<\/p>\n The buyer has offered a 150-day closing.<\/p>\n The seller has stated in the MLS listing that the dining room light fixture is excluded.<\/p>\n The buyer specifically included the dining room light fixture.<\/p>\n The deposit offered is very low: only $10,000, which is 1.4% of the offer price.<\/p>\n Now, imagine that the seller signs the offer back for $780,000, leaving all the other terms and conditions the same.<\/p>\n The buyer then signs back at $715,000, only increasing by $5,000, when the seller just<\/em> came down by $20,000.\u00a0 However, the buyer removes the condition on financing and the condition on home inspection.<\/p>\n What do you think of this negotiation so far?<\/p>\n Hold that thought for a moment as we continue.<\/p>\n The seller, who is not pleased with the sign-back, comes down in price by $5,000 and counters at $775,000, all other terms and conditions the same.<\/p>\n The buyer then counters at $725,000, increasing by $10,000 compared to the seller\u2019s sign-back, which only represented a $5,000 concession.\u00a0 The buyer also increased the deposit to $35,000 and removed the dining room light fixture from the \u201cinclusions.\u201d<\/p>\n Is the buyer making headway here?<\/p>\n Hold that thought too.<\/p>\n The seller counters at $770,000, and all other terms and conditions are the same.<\/p>\n The buyer then counters at $730,000 but moves the closing date up<\/em> by ninety days and<\/em> removes the condition on review of the status certificate, making the offer unconditional.<\/p>\n The buyer says, \u201cThis is my best and final offer.\u201d<\/p>\n The seller doesn\u2019t love the offer and the listing agent explains this.<\/p>\n But the buyer agent offers the following:<\/p>\n \u201cSince we started this negotiation, we have increased our price, removed two conditions, increased our deposit, excluded a light fixture that we wanted, increased our price again, removed another condition, increased our price again<\/em>, and then accelerated the closing date.\u00a0 I don\u2019t know how many more concessions you can possibly expect us to make!\u201d<\/p>\n<\/blockquote>\n Now, what\u2019s your read on this?<\/p>\n Is the seller getting a \u201cgood deal\u201d at $730,000, which is 10% below list price, because the buyer removed three conditions, increased the deposit, agreed to leave the dining room light fixture, and moved up the closing date?<\/p>\n I call \u201cbullshit.\u201d\u00a0 Don\u2019t you?<\/p>\n This<\/em> is the type of negotiating that I absolutely loathe in this business for two reasons:<\/p>\n 1) It\u2019s exceptionally see-through. The second part is a function of the first, of course, and it\u2019s tremendously ironic.<\/p>\n The party making all these make-believe concessions always acts like it\u2019s genuine.\u00a0 So much so, in fact, that much of the time I believe that party starts to believe it him or herself!<\/p>\n That just complicates the process even more as it starts to become emotional.\u00a0 When you\u2019re a seller in this situation, even with little experience, you know exactly what\u2019s happening.<\/p>\n I had a situation just like this back in January.\u00a0 The seller, who had never sold a property before, told me, \u201cIf I was going to play nice, I\u2019m sure not going to now.\u00a0 These idiots have dragged this out for four days with their stupid conditions and clauses, and their petty price increases, and if they think I\u2019m\u00a0<\/em>the idiot, then I\u2019ll show them.\u00a0 I don\u2019t want to work on this anymore.\u00a0 Forget these guys.\u201d<\/p>\n That\u2019s exactly what you\u00a0don\u2019t<\/em> want.\u00a0 Now one party wants to \u201cshow\u201d the other.<\/p>\n But it\u2019s what happened!<\/p>\n The buyer tried to play the seller for a fool by including terms and conditions in the offer that the buyer didn\u2019t actually want, and the seller knew it.<\/p>\n Meanwhile, the buyer felt like he or she was making headway, essentially \u201cdrinking their own Kool-Aid,\u201d but with every additional move, the buyer just alienated and offended the seller even more.<\/p>\n Once the \u201cfinal\u201d offer came in, the seller was far less likely to work with the buyer and their offer than had the process\u00a0not<\/em> played out as it did beforehand.<\/p>\n Perhaps this is a perfect time to remind you of the old adage:<\/p>\n You catch more flies with honey.<\/strong><\/p>\n On\u00a0that<\/em> note, let me tell you another story.<\/p>\n Earlier this year, I had clients interested in a house in the midtown area.\u00a0 The house was up for sale in November and December but didn\u2019t sell, and it was re-listed with an improved price in January when we went to have a look at it.<\/p>\n My clients absolutely loved it.\u00a0 They simply had to have it.<\/p>\n In fact, when we started to talk about the terms of our offer, they said, \u201cHonestly, let\u2019s offer them the full list price.\u00a0 We don\u2019t want to lose this house.\u201d<\/p>\n I played devil\u2019s advocate with them.\u00a0 I said, \u201cWould you like to get $50,000 off the list price?\u00a0 What if I could do that for you?\u201d<\/p>\n They said, \u201cThat would be great, but honestly, it doesn\u2019t move the needle for us.\u00a0 We want this house.\u00a0 It\u2019s literally perfect.\u201d<\/p>\n So we drafted the offer accordingly.<\/p>\n We offered full price, which was about $4,000,000, and included a 10% deposit, which was substantial, and rare.<\/p>\n Our offer was unconditional.<\/p>\n We included all the chattels and fixtures per the MLS listing.<\/p>\n The\u00a0only<\/em> place that we wavered was with respect to the closing date, since the seller wanted May 1st and my clients wanted June 27th.<\/p>\n But we were giving them EVERYTHING they wanted, right?\u00a0 This was a slam-dunk!<\/p>\n I sent the offer to the agent and gave him a call.<\/p>\n He thanked me for the offer, said it was great, and said he would \u201cdiscuss\u201d with the sellers.<\/p>\n I was somewhat direct and told him, \u201cI certainly hope there\u2019s no \u2018discussion\u2019 to be had here; this is a perfect deal, served up on a silver platter.\u201d<\/p>\n He replied, \u201cYes, well, I\u2019ll do my best.\u201d<\/p>\n About three hours later, I received a\u00a0sign-back<\/em> of my offer.<\/p>\n A sign-back.<\/p>\n As in: \u201cWe reject this offer of FULL PRICE with NO CONDITIONS and a ridiculous TEN PERCENT DEPOSIT and provide you with a counter-offer.\u201d<\/p>\n They changed the closing date to May 1st.<\/p>\n Unreal.<\/p>\n Imagine giving somebody everything they could ever want and then having them ask for more?<\/p>\n But if you\u2019re following today\u2019s stories, analogies, and metaphors closely, it all comes back to\u00a0Swingers<\/em>, doesn\u2019t it?<\/p>\n \u201cWait six days to call your girl.\u201d<\/p>\n \u201cAct unavailable.\u201d<\/p>\n This idea of gaining what you want by making the situation unnecessarily difficult.<\/p>\n Is\u00a0that<\/em> negotiating?<\/p>\n In the end, we signed the offer back as it was, with our closing date, and we gave them a 45-minute irrevocable.<\/p>\n They accepted.<\/p>\n But it never should have gone that far.<\/p>\n The only reason, in my opinion, that the seller and the listing agent risked a picture-perfect deal was because everything seemed \u201ctoo good to be true\u201d from the onset.<\/p>\n Therein lays the rub: lead with your best foot forward, and often, the other side believes there may be a\u00a0better one<\/em>, still.<\/p>\n What\u2019s the moral in\u00a0that<\/em>?<\/p>\n My cynical takeaway might be something like, \u201cIt\u2019s human nature never to be satisfied,\u201d or perhaps, \u201cBe honest with people, tell them you\u2019re being honest, and expect them not to believe you.\u201d<\/p>\n But this isn\u2019t the outcome in every situation; it just happened to be a perfect story to balance the first one.<\/p>\n In fact, if agents are\u00a0both<\/em> doing their jobs, and doing them effectively, situations like this wouldn\u2019t happen.<\/p>\n Call me old-fashioned, but\u00a0trust<\/em> is still the most important facet of any negotiation, and without trust, it\u2019s a major uphill battle.<\/p>\n The second-most important facet of any negotiation is\u00a0respect<\/em>.<\/p>\n When an agent believes so whole-heartedly in \u201cdistributive negotiation\u201d that he asks for\u00a0ten<\/em> things in an offer, planning to strategically give up the nine<\/em> that he doesn\u2019t actually want, there\u2019s no trust and there\u2019s no respect.<\/p>\n You can call this \u201cstrategic\u201d but it\u2019s not.<\/p>\n It\u2019s lazy.<\/p>\n It\u2019s basic.<\/p>\n And it\u2019s so exceptionally transparent that listing agents like myself laugh when we see it coming.<\/p>\n To be more frank:<\/p>\n This is a tactic that\u2019s usually used by agents who lack any ability to actually\u00a0<\/em>negotiate, but who also lack the personality, social skills, decorum, awareness, and often language skills necessary to converse with another human, let alone a fellow industry professional.\u00a0 In lieu of those abilities, they think of the offer and negotiation as a simple mathematical equation whereby they remove \u201cx\u201d number of items from their initial offer in exchange for \u201cy\u201d dollars off the list price.<\/p>\n<\/blockquote>\n If only it were that simple.<\/p>\n Not every transaction can be with a \u201cfriend\u201d on the other side; somebody with whom you\u2019ve successfully transacted before, who you trust, and who you respect.<\/p>\n But in lieu of that, perhaps the worst move a buyer agent can make is to basically punch the person who opens the door on Halloween\u2026<\/p>\n\n
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2) It always makes the transaction\u00a0harder<\/em>.<\/p>\n\n