Tuesday, July 10, 2007

Down 'n' dirty negotiating might not get you any further

We received an offer on one of our listings on Sunday. The condominium was listed for $400,000 plus $35,000 for each of two parking places - a total of $470,000.

The offer came in from a couple that had not seen the unit for themselves, but their agent had pre-viewed for them a week earlier. The offer came in at $100,000 under list price. Mind you, we had just reduced the price aggressively and were right in line with other comparable unit prices in the building.

During negotiations, we did learn that the buyer was only interested in one of the parking spots, but this still left the offer some $65,000 off the asking price. We do have the ability to sell the leftover parking space to someone else in the building later.

After delivering counteroffers back and forth once, the buyer's agent slipped and said "Which unit is this for?" WHOA?

We immediately ask: "Are you bidding on multiple units at the same time?" and the answer from the broker was "Yes."

This extremely aggressive form of negotiating is not considered illegal here in Chicago; there is not much of a danger that a buyer will wind up owning two or more pieces of property. We usually write our first offer and deliver it, but negotiate verbally. Therefore it's possible that you could agree to price and terms on a property, but not follow up with a written version. We also have very generous attorney review clauses in our contracts, so a buyer's attorney could cancel a contract during the first few days of attorney review.

Though both of these tactics are completely legal, they will not garner any favor with a seller's agent that discovers that these underhanded tricks are being used on him. We now know that these buyers are pitting us against several other sellers in the same building, and hammering us against each other to beat out the lowest possible price. Then, after the bottom line is discovered for each, signing the contract with the most desired terms leaving everyone else holding nothing in return.

Our advice to our clients is to negotiate in earnest with someone negotiating in good faith with us, but in this case, since every negotiation we make will be used against us, our best defense against this strategy is not to reveal our lowest price.

Normally, it's considered to be acting in bad faith to be negotiating multiple offers at the same time without all parties in the negitiations being aware of the tactic. Buyers should beware that extreme negotiating tactics can backfire if the other party learns that they're being played against other competitors. In our case, since we know that our bargaining position will be used against us, we won't reveal anything close to our true lowest price.