I would like to share the 3 important steps when dealing with Negotiations and these rules can pretty much apply to any field:
1) Determine the value
I firmly believe that this is the most important step. When you are trying to purchase something of value, the seller will always put the price first and try to return the highest Dollar amount possible. As a Buyer, your job is to determine the true value of the purchase. Let’s take the example of a Condo for sale. You found for one for sale for $18,000 and you did a great job negotiating the price down all the way to $14,000. Your are ecstatic about the purchase and you think you got a great deal. Not so fast, what if the condo is only worth $13,000. If you had done your research, you could have found one for $13,000 and negotiated the price down to $11,500. The same theory applies to spotting great deals. What if you found a desperate seller who wants to sell it in the market place at 9500 Dollars and it generates a bidding war. In that case, you will be happy to increase your offer to $11,000 and you will still walk away with a great deal.
2) Never accept the first offer.
Let’s take another example. I want to sell my sail boat for 7500 Dollars. I get an offer from a Buyer for 6000 Dollars. As a desperate seller, I go ahead and take it. The Buyer will automatically start having second thoughts “What if I had offered only 5000 Dollars, I think I could have got it at that price”. Unless the Buyer is offering asking price, you always comes back with a counter offer. Always be patient and take your time in negotiating. Find out why they want to sell and time is your best friend.
3) I have another Buyer interested.
This is the toughest one I think. You are trying to purchase an item and the seller is telling you that he has other parties interested. How can you verify this fact? How can you find out about the other offers? You can’t, you can simply rely on your gut instinct. The rule of thumb will tell you that if he has other parties interested, then he wouldn’t be negotiating with you in the first place. The best way to tackle this issue, is to go back to Step 1. Determine the value and make an acceptable offer. If you are Buying a home, you can easily determine the value by reviewing the recent sold comparables in the same neighborhood by doing the research in MLS.
Have fun with negotiations, don’t take it personally…:)