Mood of the Market
I was one of those kids who was mortally embarrassed by my parents. (I later realized that their fashion choices were not bizarre -- they were just '70s chic held over a tad bit too long.) My mother seemed always to gravitate to the yellow 'sale' signs on top of retail racks -- which seemed horrifying back then.
And my Dad? Horror of horrors, he tried to negotiate everything -- and I mean every single thing. He would actually bargain for things like TVs and computers at stores like Sears, and I would grow hot with embarrassment, detouring into what we'd now call the "tween" section, hoping no one would know we were related.
Fast forward 10 or 15 years, and you'd find me, at an appliance outlet, getting my washer and dryer for 50 percent off because the front windows had been scratched, and negotiating for them to order and install new windows before delivering the machines to me.
Or maybe you'd find me shopping my favorite consignment stores (where I still negotiate, despite the already discounted pricing) or walking straight into my favorite retail establishments and taking my familiar route straight back to the sale section, and back out when nothing strikes my fancy.
Or haggling for my car, which I bought for 60 percent -- you read that right! -- of the Blue Book price. Or watching my kid's mouth gape open when I got the sales clerk to throw in the two flannel shirts he wanted with the sneakers I'd just bought him. Score more notches on my negotiating belt.
No matter how flush with cash I am, I love a deal (no, I mean, I love a deal!). I'll spend, but I want to feel like I'm getting more than the "average bear" (to quote a famous Yogi) for my dollar.
In my adulthood, my Dad and I have often worked together on strategies for negotiating our largest purchases -- particularly when it comes to real estate. (My Dad is a prolific investor, and I've negotiated for a hundred or so homes myself.)
I've noticed that my Dad and I have distinct negotiating styles. I tend to gravitate toward properties that are already value-priced, get as much information as possible about the seller's situation, and negotiate a reasonable discount plus as many perks and incentives thrown in as I can.
I like places with major upside potential, so I can control how their value increases, no matter what's going on in the market.
My Dad tends to run all sorts of numbers and analytics, plus wield the fact that he pays in cash, as major bargaining leverage. And his constant refrain is "Buy it right." He wants to feel that he is buying a place that already has lots of equity and/or cash flow potential because he bought it for such a low price -- it takes the pressure off when he later wants or needs to sell.
We share in common that we never make our best offer on our first offer (except in a seller's market, when all the rules change) and we virtually never accept the first offer we receive.
We both place a strong priority on neighborhoods, have a tendency to avoid getting emotionally involved or attached at all to homes, and insist on starting the negotiation off being very clear and realistic in our own minds about the contours of our own personal top or bottom lines.
As I contemplated how my father's negotiating skills and my own negotiating styles are similar and dissimilar, I could not escape noticing how other buyers' and sellers' negotiating styles can be grouped into profiles, so to speak.
Some I've run into more than a few times in my real estate lifetime include:
1. "The Faux-gotiator." The Faux-gotiator makes a minimal effort at negotiating, because she knows that's what she's supposed to do. Like my Dad and I, this breed of negotiator tries to abide by the never-take-the-first-offer rule. But the Faux-gotiator caves at the slightest sense of resistance from across the negotiating table. And devotees of this style come in two varietals: lazy (they simply don't want to do the work of negotiating, so they barely bother) and attached (they just love the house too much -- or need to sell too much -- to give more than a modicum of negotiating effort).
2. "The Drama Queen or King." These wannabe royals are, in some ways, the opposite of the Faux-gotiator. They make a big hue and cry about how "hard core" their bargaining skills are, about how the other side's issues or interests are just "not relevant" to them, and about how outraged they are when they receive resistance from across the negotiating table.
Yet all that drama tends to be a front behind which they hide truly poor negotiation skills. After they wax hyperbolic, they tend to cave and strike deals not too far from the original list price or offer. Methinks they doth protest too much; often the drama is driven by a premature attachment to the property or sale, or the fact that they have no basis in market data or facts for their negotiation demands.
3. "The High-Rolling Lowballer." These folks pull up to view a modest starter home in a rapper-style Mercedes Benz, and literally drip logos in their wake as they tour the home. Though they seem to have the highest possible ratio of status symbols per square inch of body area, when it's time to actually buy or sell a home, they insist on overpricing or lowballing the seller beyond all reason.
These folks cause lots of head-shaking by the agents and other parties in their transactions, as it seems that a slight reprioritization of their real estate matters over high-status consumer goods might make them better able to make reality-based offer and pricing decisions.
4. "The No-gotiator." These are the folks who offer to pay the list price or take the first offer, as a matter of course, even when the market or transaction dynamics suggest that they could get better terms. Some No-gotiators find the confrontational, adversarial connotations of negotiationg distasteful or anxiety-creating. Others are so attached to a certain outcome that they fear the deal falling apart too much to try to push back against the list price or buyer's offer.
5. "The Reality Checker." Finally, there's a fifth type of real estate consumer negotiation profile, which I'll call the Reality Checker. These negotiators do the research. They know how long the place has been on the market, relative to average in the area; and they're well aware of how much list prices are usually able to be bargained down in that neck of the woods.
They have asked for information about the other side's priorities and, to the extent they received any, they have taken that information into consideration in formulating their offer or response. They are clear about what they can afford to do, and how much they simply want a particular property or outcome, but they are not overly optimistic about their negotiating prowess or unrealistic about what the market will bear.
And they don't go in with rules of thumb -- always trying to get 20 percent off, or some such. They make a smart offer (or counteroffer), or accept the other side's position when reasonable and affordable. And, not surprisingly, they often succeed in both striking a good deal and actually getting what they want.