Tips and Traps When Negotiating Real Estate: Strive to Be Innocent

Learn to Act: Strive to Be Innocent

Have you ever noticed that as soon as someone admits they really don’t understand something, a lot of people rush in to help him or her out? Try it with a group of friends. The subject doesn’t really matter, but wait until real estate comes up and then say something like, “I hate to admit it, but a lease/option is over my head. What exactly is it?”

You’ve just given all the people around you who know (or think they know) what a lease/option is the opportunity to shine. They can suddenly show off their knowledge and be “good guys” at the same time by helping you out. It’s hard to turn down such an appeal­ing role. Of course, now you listen and learn what they know .. . and don’t know. Appearing innocent is a great way to learn a lot.

I have a friend in real estate, Chet, who is both a broker and an investor. When it comes time to negotiate, he kind of turns the toe of one foot inward, looks a little shy, and in the best country boy fashion says something like, “Shucks, I’m just the new guy here. You people are all the experts, so you’re going to have to help me out understanding this deal.”

The others usually smile to each other thinking that they have this pigeon just where they want him. Then they take Chet under their wings to “help him out.” Of course, that’s usually just when Chet has them where he wants them. In the course of their explaining the deal to Chet, the others often reveal much more than they’d care to about their own needs and what they’d be willing to concede.

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After a while, Chet knows a whole lot more about them and what they want, must have, and can afford to give away than they do about him. In fact, they usually know nothing at all about him or his thinking. So when he kind of smiles self-consciously and says with humil­ity, “Shucks, I don’t really know if this is a fair offer, so you tell me because you know a whole lot more about these things than I do, but why don’t you give up this . . . and this . . . , which you just said you don’t care about, and take this . . . and this . . . , which you just said you want, and maybe then we can all shake hands and go home?” They are often taken completely by surprise.

TIP

Watch out for anyone who starts out by saying, “Shucks!” There is no real meaning for this word! It’s just a cover for establishing the role of an innocent. And in real estate negotiations there are very few inno­cents left.

Sarah was a real estate investor with more than 30 years of solid experience. Yet she never came into negotiations bragging about her knowledge. In fact, she tried to conceal it in a most unusual way. She would feign deafness in one ear.

Have you ever noticed what happens when someone deaf is trying to hear what’s being said? Everyone around suddenly speaks not only louder and slower, but also in easier to understand terms. Yet the deaf person is only hard of hearing, not stupid.

Once I was present when Sarah was negotiating to buy a duplex. She had been presented as a tough negotiator and the seller was obviously worried about how big a price concession he would have to make.

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Sarah simply came in, shook hands, and presented an offer for $325,000. The seller had been asking $357,000. It was a significant $27,000 price reduction.

The seller put up a good show and said, “My price is $357,000.”

But every time the seller told her his price, she would lean for­ ward and say, “What?” The seller would repeat the price, only some­ how each time it was just a little bit lower.

“What?”

“I said my price was $357,000,” the seller repeated, “but I am will­ing to drop it down to $355,000 to make the deal.

” “What?”

“$355,000, I said I was willing to take $355,000. Of course, I sup­ pose I could go lower.”

“What?”

“I said I could go lower, maybe $354,000?”

“What?”

“Oh, all right. My bottom price is $330,000. I can’t afford to go any lower than that. ”

“What?”

The seller picked up the offer, looked at the $325,000 bid, shook his head, and simply signed.

I always wondered just how low that seller might have gone if Sarah had continued to “What?” her way through the negotiations.

TRAP

Most of us are too eager to show off just how much we know. This can work against us. For example, what if the other party says that since we’re acting the expert we should tell them how to proceed? If we jump into the breach, we can often reveal too much too soon about what we’re willing to give up to get the deal. Let go of the ego-satisfying position of know-it-all and instead assume the profit-making position of innocent.

TIP

Ask the people on the other side for their advice. Invite their criticism. Be willing to have them analyze your offer. This will only make you look humble and in need of help. Say something such as, “This is what I want. But, perhaps I don’t fully understand. Maybe there’s something about this deal that needs to be explained. Could you please enlighten me?” In their rush to criticize, advise, and analyze, they will trip over themselves revealing what it is they really want and how far they are willing to go to get it. All that it costs to learn about your opponents is a little humility.