How Much To Budge?

How Much To Budge

By Marty Latz

Clients count on agents’ advice and experience regarding the amount and timing of offers and counteroffers, when buying or selling a home. It’s common. In fact, an agents’ negotiation skill is often a core reason why they’re even hired. So what should you recommend?

First, while many homeowners crave closure and push to just get the deal done, this “cut to the chase” mentality has significant risks. In fact, bypassing the back-and-forth offer-concession process is almost always counterproductive.

Here’s an example from another common negotiation: division of property in a divorce.

John represented himself in negotiations with the attorney for his soon-to-be ex-wife. Based on an independent expert’s evaluation, John believed a truly fair property settlement would be for him to pay his wife $500K. However, he thought he could justify a $100K offer and his wife could somewhat justify a $1M offer. Of course, his wife’s attorney started at $1M.

John, who really wanted to get this done, decided to “cut to the chase.” So he countered with a “very reasonable $450K,” stating he “didn’t have much room to move.”

His wife’s attorney countered at a “very reasonable” $900K. John then offered $460K, at which point his wife’s attorney accused him of “negotiating in bad faith” by only moving $10K to his wife’s $100K move. The negotiations quickly broke down.

A year later, after expensive, protracted litigation, they settled for $540K.

How did John mess up – and how can you avoid John’s mistake?

No. 1 – Agency Creates an Advantage

Homeowners and buyers are often super-invested in the negotiation process. And they should be. After all, it’s often the biggest transaction in their lives.

However, their level of investment can come at a cost. The more your clients show the other side how much they care, the less likely the other side will believe they will walk away from the deal. If the other side knows your client won’t walk, they’ve got leverage.

This is a major reason agents usually keep clients one step removed from the actual negotiation. A skilled agent can gain clients’ trust, keep emotions at bay, and negotiate at arm’s length with the other side. That’s an advantage.

No. 2 – The Offer-Concession “Dance” Matters

John tried to rush by setting his opening move too close to his goal. His strategy failed and made the experience longer and more contentious. Crucially, the give-and-take offer-concession “dance,” albeit sometimes frustrating, makes an important psychological difference. Help your clients view it as a chess match, not a race. Each side needs to feel the other sacrificed something significant.

That feeling usually comes from how far they get the other side to move. Build that room to move into your strategy. Then do the dance. Only then will both sides accept the result as “fair.”

No. 3 – Meet in the Middle? Maybe …

Many negotiations start with two numbers, far apart. Concessions on both sides then often begin with (a) relatively big jumps, and (b) substantial time between jumps. Near the end, concessions often become quicker and smaller.

Moving to the middle is tempting. If I’ve listed an antique clock for $1,000 and you offer $600, we will likely gravitate toward $800, regardless of the clock’s true market value.

However, “the middle” in John’s divorce would have meant a $725K settlement, well above John’s perception of “fair.”

Rather than a go-to, quick solution, “meeting in the middle” should be a strategic choice based on the reasonableness of the two starting moves. Ask yourself – is it typical and usual for negotiations in that environment to gravitate to the middle? What’s the pattern in that negotiation environment?

If it’s the pattern to move to the middle, it may be “fair.” If not, don’t do it.

No. 4 – Use Independent Standards to Support Your Move

If your client offered $335K for a 2,000-square-foot house listed at $360K and wants to increase her offer by $10K, don’t just say “we offer $345K.”

Instead, say “We offer $345K because a comparable 2,000-squarefoot house one block down just sold for $345K.” Basing your moves on objective standards increases the likelihood it will be accepted.

Of course, that’s your goal.


Marty Latz is one of the world’s foremost negotiation experts. Over the past two decades, Latz has trained over 100,000 business professionals to become more effective and successful negotiators. For more information visit www.NegotiationInstitute.com.