Tips and Traps When Negotiating Real Estate: Always Ask “Why?”

Learn to Act: Always Ask “Why?”

Sometimes seemingly impossible demands will threaten to shut down a deal. For example, you’re a buyer and the seller keeps insist­ing that you be ready to fund your new mortgage within 14 days. You’ve already contacted a mortgage broker and know that it’s going to take a month or more, given the volume of loans being processed at that time. You say you need longer, but the seller keeps hitting you over the head with that two-week limitation. No, he won’t give you more time. The demand is sucking the energy right out of the deal.

To keep things alive, you may say you’ll try to get funded in two weeks, even though you know full well it’s impossible. You’re hoping that after the time is up, the seller will give you some more time.

Instead, you could simply ask the seller, “Why are you insisting on 14 days?”

“Why?” is often the biggest single weapon in a negotiation. Yet many people are simply afraid to ask. I suspect they don’t want to know the answer for fear it will ruin the deal entirely. Maybe there’s an absolutely immutable reason the seller must have 14 days. And as soon as you hear it, you’ll know the deal is blown away. But isn’t it better to know up front where you stand than to wait two weeks to find out? Besides, there are very few absolutely immutable reasons.

The seller may say, “I’ve got a backup offer and if you don’t qual­ify, I’ll take it.” Now, at least, you know what you’ve got to deal with. Asking why has revealed the problem and maybe there’s a solution.

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Perhaps you could show the seller your credit report and credit score as well as a preapproval letter from the lender saying you are well qualified. Yes, your deal will go through, but you need four weeks instead of two. Maybe you could increase the deposit as assur­ance of your confidence?

The point is, if you don’t ask, “Why?” you won’t find out. If you do, chances are you’ll learn useful information.

Let’s consider a different example. The buyer insists on a price lower than market, even though as a seller you’ve already offered to sell for what recent comparables have gone for. Instead of continuing to argue, you simply ask, “Why do you really insist on such a low price?”

Again, you might not like the answer. Perhaps the buyer will say, “My brother bought a house for that price in this neighborhood two years ago. I’m not paying more.”

You might point out that two years ago the area was in recession. Today it’s recovering and prices are higher. But chances are that this buyer is determined not to be “bettered” by his sibling and won’t budge. Now it really is a brick wall you’re up against.

However, a person who finds price all important is often more than walling to dicker on the terms. You might ask the buyer to give you a second mortgage at an interest rate well above market. If he does that, maybe it’s worth your while to give him his price. You get terms that make a lower price worthwhile to you. Of course, it never would happen unless you asked, “Why?”

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One problem with the “Why?” question is that as negotiations get tougher, the other party is less and less inclined to be forthright in answering. When asked, ‘Why?” in the middle to the end of a nego­tiation, many people are immediately suspicious of the question and the questioner. Is the other party trying to learn information that will give him or her an edge? Why should I tell them anything that might give them ammunition for gelling a better deal?

Trust is now7 all important. If you established trust early on, if you’ve stuck to the moral high road, you probably will get a straight answer. If not, asking “Why?” in the middle to the end of negotia­tions might produce a guarded answer.

TIP

Most people arc afraid to reveal their true motivations. Asking “Why?” may get them out into the open. However, many times it is a mistake to conceal your true motivations. If the other side knows what you truly want, they may be able to give it to you.

TRAP

Sometimes you do want to keep your motivations to yourself. Maybe you’ve learned that a new commercial center is going in next to a store you want to buy and ” it will double the store’s value. To reveal your motiva­tion will cause the seller to refuse the deal or to increase the price.