Negotiating is Complicated
By Diane Saatchi
Negotiating is complicated.
And when the stakes are high — it’s even more so. But often, the complicating factors are not about money. In real estate deals, it is not uncommon for the negotiations to take a path far afield from dollars.
Rene Magritte, Empire of Light, 1954-1954
Before I explain, let me caveat. In my experience, at the outset most negotiations are about the money. And, in many transactions they remain focused on what purchasers will pay and sellers will realize.
However, sometimes the negotiations become about something other than money: maybe about power, maybe pride, maybe sport. Sometimes this deviation from dollars is caused by uncertainty. Perhaps one party does not want to buy or sell or has doubts about the house. But, for this blog, let’s assume the parties are committed to the transaction. In such cases, the people buying or selling a second home for millions of dollars are not on such a tight budget that a few thousand (or more) dollars is material. Sure, the money matters but is also about something else.
Let me take my best stab at explaining how this pattern can make the final negotiations the hardest part of a deal, and what a broker can do to smooth it over.
In all relationships, everyone wants to be heard.
When it’s clear both parties are motivated to transact but are at a financial stalemate for no apparent reason — the money isn’t going to make or break either party, and one or both want something that has yet to be articulated, the broker’s skills come into play. A win-win solution can usually be found by listening to what is said … or not said. It’s time to put email and text aside and have real times conversations. When you find out what really matters, it’s pretty easy to break the logjam.
Here’s just one example of what I’m talking about: I was brokering a deal for a couple selling a house in which one person was taking care of the negotiation, and the other was convinced she could do a better job. The deal had stalled at less than a 1% spread between the parties. Bearing in mind that this was a multi-million-dollar sale, I asked the seller: Is the extra $100,000, after closing costs and gain tax, really going to make a difference in your life? What’s this really about?
The answer was no, it wouldn’t make a difference. I can’t repeat what the client told me in confidence but suffice it to say that it was about personal issues, not about real estate or the cash.
Knowing the buyers were stuck on the price but were not in a hurry to close, I suggested another solution: What if we let that $100,000 go in exchange for a delayed closing? The client and partner could rent the house for the summer and likely realize way more than the $100,000 difference.
It worked. The couple rented the house for a net of $165,000 that summer. The negotiating partner got even more than expected, the non-negotiating partner was pleased, and the buyer got the house for the desired price.
After the final negotiation, more negotiations
Negotiation doesn’t end when the contract is signed. It comes into play until and including the day of the closing, as there is always something one party or the other wants. Perhaps it’s visiting the property, sending vendors in to measure, or a different closing date or location.
That’s why, up through the closing and well beyond, I also consider it the broker’s job to listen carefully to the manifest and latent messages.
For example, here’s a deal I had that illustrates what I mean pretty clearly: After the price and terms were agreed upon, the buyer kept asking for things. He wasn’t necessarily asking for freebies, but from first offer to just before the contract was signed, there always seemed to be another hoop the seller was asked to jump through. The day the buyer was to sign the contract, he asked for an itemized list of everything he should expect to be in the house, from each light fixture to the bathroom fixtures and kitchen appliances. It sounded like the demand of a difficult, perhaps not trusting person, but when I learned that the last and only house he purchased did not come with those items, I realized he was not being difficult — his experience was just different.
Instead of telling the seller that the buyer had demanded a painstaking inventory that would take hours to assemble, I told him that where the buyer came from — he was from outside the US —attached fixtures and appliances did not typically come with a house. Because he wouldn’t have the chance to visit again until closing, he wanted to know what he needed to bring or purchase. A small change in perspective made the purchaser seem like he was responsibly planning ahead, not making unreasonable demands.
And there are a whole host of considerations when you’re buying and selling Hamptons real estate in particular. Why is the client negotiating over money that ultimately won’t make a difference? Sometimes, I’ve found, very wealthy people feel like they’re being taken advantage of because they’re so wealthy, so they’re going to draw the line and not let it happen. The less wealthy party may feel or wish the other should or will be more generous. For other people, it seems like it’s in their DNA that they’ll be asking for concessions at the closing table. And then, there are people who are so easygoing that the other side feels like, even though they don’t tend to be that kind of negotiator, they can take advantage. A real estate deal involves all sorts of personalities, needs, and dynamics.
Like I said: Negotiating is complicated.
© 2018 Diane Saatchi