Split the Difference.
If this is what you’re used to when negotiating, that’s fine. It’ll get the job done. But it’s as unsophisticated as doing 4 sets of 12 reps at the gym; you won’t win any muscle contests and you probably won’t get the best deal possib You need a Russian Spy, aka: a savvy real estate broker who poses as a friend of the listing agent but is secretly gathering the sellers motivation.
This is what I do best! Not only am I a certified negotiation specialist (take that Harvard!) but I have great relationships with other agents from other firms. I’ve spent years biting my tongue and kissing ass (I do that for referrals too) with agents just to create the perfect environment for when you want a deal. *Beware of the agent who doesn’t get along with the co-brokering agent! You need their cooperation to get the best deal.
First, understand that there are different approaches to getting the best deal when you are in an up or down market. If you think you’re being savvy by low balling in a soft market, you may just piss everyone off and lose the opportunity altogether. This is a highly emotional business. It’s not “just business,” this is someone’s home. That’s personal so, know your audience. Want to win in a bidding war? Bidding the highest price is the stupidest approach in most cases in my opinion. Who the hell wants to pay over ask anyway?! I’m not saying that there isn’t a time and place for that, but it’s not the end all be all approach. There is so much more than price to consider when negotiating. Oh, and if you think it matters what the current owner paid for the apartment when they bought it, save your detective energy for snooping on your spouse’s phone, because it doesn’t matter one bit.
Top Secrets from Your Personal Real Estate Spy
See, before I make a formal offer, I always call the listing agent on the phone first, just to feel them out. After a little friendly chit chat about our kids and how rough this business is—you know, dealing with YOU - our impossible clients, I’ll then slip in questions like: Why are the sellers moving? How quickly do they want to move / do they need more time before they close? Are they negotiable? Will they be offended by a low-ball offer? I elude to the fact that my buyer is considering an offer and then I throw out a low number and then, and this is vital, I shut up and listen. You’d be surprised how much people want to tell you if you just listen. Their reaction tells me everything. I’ll know if there’s more room to negotiate, if the offer needs to be higher, if we need to include certain terms or even if we’re competing with other offers.
I bet you’re thinking, “I can just go directly to the listing agent and ask all these questions myself.” Oh no, you dit’enn! Trust me, you need a buffer. There’s no way the listing agent is going to openly share all this with you; you’re the obvious enemy / the buyer trying to get a deal. You need your Russian spy who speaks broker.
The critical point is to do this before an actual offer is made. I can always fall back on “I tried, but my buyer is insistent of offering $X OR I’ve convinced my buyer to come in strong and offer $Y.” If you as the buyer go indirect, you don’t have anything to fall back on. You don’t have a buffer.
Did I mention that working with a buyers broker is totally free? Why wouldn’t you work with me?
Twice just last year, my buyers were involved in a bidding war and they won it! But, not because they bid the highest price. I won their dream apartment by giving sexual favors to the listing agent. Shame on you for believing that! I won them the offer because I presented better terms and a more financially solid purchase structure. The co-broker was so impressed with my buttoned-up presentation that she encouraged her seller to go with the shoo-in offer whose broker knew how to get the deal done quickly, painlessly and with virtually no risk of a board rejection. Owners want to make sure you are going to pass the board approval process, so this component is equally as important as price. (reference my piece on Financially Qualifying Buyers for debt to income ratio & post-closing liquid asset requirements.)
I’ll leave you with one anecdotal story of a mommy-friend of mine who I met recently. Our kids go to school together on the Upper East Side and she tells me that she has been looking for a larger apartment for over a year and just can’t seem to find the right fit. That seemed odd to me because buying is the easy part; I can always find the right fit within 6 months. So I asked her what happened?
Apparently, she did find the right apartment. But her broker lost her the bid because he advised her to low-ball on a well priced $3M apartment. She lost her dream apartment over $50,000 when she was willing to pay full ask! This broker should be shot. I mean fired. Fired, then shot. Are you and idiot? This is your job If he would have gone through my Russian Spy Training Program, my dear mommy-friend would be moving into her new 4 bedroom apartment on the Upper East Side as we speak.
Guess who has a new client wink.