Never Say Yes to the First Proposal Article by: Roger Dawson
Saying â€œYesâ€ to the first proposal from the sellers will automatically trigger two thoughts in the sellerâ€™s mind: 1. I could have done better. 2. Something must be wrong.
I once bought 100 acres of land in the state of Washington. The sellers were asking $185,000 for the land and I felt that if I could get them down to $150,000 it would be a terrific buy. (I donâ€™t recommend bare land as an investment. Itâ€™s more of a speculation than it is an investment.) I asked the real estate agent to present an offer at $115,050. By picking that price, I was using these two negotiating principles:
1. Specific numbers have more credibility than rounded numbers.
2. Bracketing your objective assumes that you will end up midway between the two opening negotiating positions.
I knew that I was making a very low offer and thought Iâ€™d be lucky if the sellers responded at all, but to my amazement, they accepted the offer. What was my reaction? Something must be wrong! I suddenly wanted to take a very close look at the preliminary title report when it came in. My second thought on that land in Washington was, â€œI could have done better.â€
Those two thoughts will go through anybodyâ€™s mind whenever you say â€œYesâ€ to the first offer.
Imagine if your son came to you and asked to borrow your car tonight and you said, â€œSure. Take it. Have a wonderful time!â€ Wouldnâ€™t he automatically think, â€œI could have done better? I probably could have gotten $10 for the movie out of this too!â€ And, wouldnâ€™t he automatically think, â€œWhatâ€™s going on here? How come they want me out of the house?â€
What does this teach you? You should always go through the process of negotiating because you want the other side to feel that they won. Never say â€œYesâ€ to the first proposal.
Note: Always make your offer to buy real estate subject to your approval of the preliminary title report. Thatâ€™s important because anybody who previously owned the property could have put a restriction on its use. I was once looking at a property that would have made an excellent shopping center development. When I checked the title, I found that a former owner had put a restriction on it that there could never be any liquor sold on the property. That nixed the deal because a liquor store not only builds traffic, but it is also a big money maker when leased on a percentage basis.
Source: Adapted from Roger Dawson and Mike Summey‘s audio program The Weekend Millionaireâ€™s Real Estate Investing Program. Learn more about Roger Dawson and his bestselling audio program The Secrets of Power Negotiating.