I read an interesting opinion piece about compromise in this Sunday’s Times. Tip O’Neill’s son, Thomas, wrote about his father’s working relationship with Ronald Reagan; how the two men, who disagreed about practically everything, learned to work together for the good of the country. This successful collaborative effort was based on compromise. In addition to being a serious indictment of TODAY’s governmental process, the piece made me think about the real estate business. Buyers and sellers so often get in their own way, shooting themselves in the foot by their inability or unwillingness to reach for common ground. As agents, we see this at every step in the process.
1. Pricing All too often, a seller has a price already fixed in his or her head. This price may be based on other asking prices for similar properties (never a reliable gauge, since selling prices are often so different) or it simply may be based on what the seller would like to believe the property is worth. We often hear, “Oh, I was told I could get ten million for it.” Brokers all tend to have the same internal response to that statement: by whom? A dinner guest? An inexperienced agent trolling for the listing? No suggested asking price is meaningful unless it is presented with comparables which justify it. As an opening salvo in the negotiating process, a distorted asking price is highly counterproductive. Even in this tight environment, many fine properties linger on the market month after month. It is always about price. Buyers will rarely return to a property once they have decided against it. There is interesting psychology at work here: when buyers see a property which could be right but is priced wrong, they often convince themselves of its deficiencies so as not to feel disappointed. Then, when the price comes down to the appropriate level, it is too late. They have already talked themselves out of it.
2. The opening offer Here we see the buyer equivalent of the excessive asking price: the aggressively low offer. Sellers (and their agents, who should know better) can be offended and put off by a really low offer. Frequently they refuse to counter. This offer can also prejudice the seller against the buyer in further negotiations. Very low offers are worse than a waste of time. They create a setback to the negotiating process, reducing the likelihood of a positive outcome.
3. The line in the sand Agents experience this snafu with deal after deal. The negotiation proceeds, either smoothly or otherwise, to a point at which the parties are less than 1% apart. And neither side will budge. Each tends to become self-righteous about how they have given up more than the other side. Sellers feel that they have dropped too far from their asking price, while buyers fear they have offered more than the market indicates the property is worth. And there the deal sits. Each participant has drawn a line in the sand; neither is willing to cross over.
In each of these situations, the participants hang on aggressively to the fantasy of being right. Other forces are at fault: the buyer, the seller, the broker, the environment. This is only human. We all do it. But only in letting go of our need to feel right can we once again see the goal – a fair transaction for all. We must compromise to arrive at the best outcome. The details drop away once we attain the desired conclusion. Did I pay a half percent too much? Did I sell for a half percent too little? Six months later, no one remembers. But in the moment, we tend to compromise our own ability to get what we want as ego, or a sense of the rightness of our position, blind us to the need for give and take. When we hang on too hard to our own positions, everyone loses.