Negotiations
Recent negotiations took place regarding a house purchase and sale. The negotiators were myself, my agent, the house sellers and their agent. Each of the stakeholders in this particular situation had certain, biases, beliefs, concerns, goals and objectives. I had been looking for an investment property that I could fix up, reside in, and then sell in 3-5 years for a tidy profit. After a number of weeks of searching for just the right property, I finally found what I was looking for; a nice three-bedroom, two-bath property sitting on approximately a 1/2 acre with a double-car garage located on the outskirts of town. The residence was 20-years old and needed some work to bring it up to standard. The asking price for the entire property was $499,000.00.
The first thing that I wished to affirm was the comparable pricing in my specific marketplace. I asked my agent to run a Comparable Market Analysis (CMA) as suggested by the Home Buyers Information website (Home, 2011). What I discovered was that comparable sales in my market were priced approximately 15-25% less than what the owner was asking. I knew that preparation was the key to any successful negotiation, and therefore I knew that I had to determine what made the owners believe that their home was worth so much more than other recently sold residences in that area. Having access to a CMA also provided evidence that hiring an agent of my own was another preparatory move that had been beneficial.
Initially, I wondered if hiring a buyer's agent would be worthwhile. After all, I would be throwing one more bias into the negotiations; that bias would of course be that the agent (no matter how much they protest otherwise, they are all motivated by gaining commissions)...
The CMA however may have ended up saving me some substantial dollars, ergo, it was likely a good idea.
My agent also provided me with a list of the amenities that came with the house, things such as the two fireplaces, the gazebo off the deck, the double thick windows that cut down on energy use, the new heating/cooling system and a new roof. Those items would all factor into the price of the house. I decided that an anchor offer of $405,000 would be a good starting point. My offer was based on the considerations of the new heating and cooling system as well as the new roof coupled with the thought that comparable houses sold in the $375,000 to $410,000 range. The owners of the house were motivated to sell having already purchased and moved into another residence out of state, which also played into my considerations.
My main worry was still why the owner's believed that the house was worth so much more than other houses in the area. According to Dottie Reuning one of the things a buyer should not present to the seller (or to anyone for that matter) is the fact that there is substantial buyer interest in the property (Reuning, 2011). Keeping Reuning's advice in mind, I did not wish to project my enthusiasm for the property in an evidentiary manner, so I decided to do some detective work on my own. I discovered two interesting items about the property; 1) that it had been in the owner's family for at least two generations, 2) that when the owner's inherited the property the estate had valued it at just over $500,000.
These two items provided me with…
