It sometimes hurts to negotiate

“It never hurts to negotiate.”

A woman just said that to me about an antique dining chair, which needed new cane or other seating material, I was advertising for $10. And I think most people believe it. It goes on the list of “stupid things people have repeated so long and so often that they assume them to be true.”

To me, negotiation is for when the seller is not offering fair value. Suppose someone’s trying to sell some hummels (fine, long as they are sold to anyone but us; good god, but those things are useless). They are worth maybe $170. Someone lists them for $199. Fair enough: offer $150, end up paying $170-175, perfectly reasonable. Another example: car dealers are never offering fair value, because car dealers simply do not do that, ever. But when the seller is offering more than fair value, it can be counterproductive.

I knew that $20 would have been plenty fair for an antique chair frame that would be worth rather more with a little effort. I listed it for $10. Our conversation went:

“Will you take $5?”

“No. When I’m offering something that cheap, and someone tries to give me half of that cheap, I’d sooner throw it away than go along.” My face was smiling, but my brain was irritated.

She backpedaled a bit. “It’s okay, I have no problem paying $10. You know, it never hurts to negotiate.”

Still smiling: “Actually, sometimes it does.” She paid me, took the chair and left. It wasn’t about the $5 difference; it was about how ridiculous it is to dicker with someone at that level.

Most people don’t agree with me about that, which is yet another reason to have confidence in my viewpoint. Plus, it has worked for me many times in life.

Let’s take a couple more examples. I recently bought some collectibles from a fellow. His advertised price was more than fair; in fact, it was an excellent bargain. I could have negotiated, but it would have been stupid. I’d have conveyed to him that he always had to build in some bargaining room when dealing with me, and if we did future business, I’d have paid for it eventually. Or, since what he was asking was a great price, I could just pay it.

We went on to do more business, and for me, the second deal was the big test. If he tried to deliver less value for the price on the second go, then I’d have known it was time to negotiate–if the value was no longer fair. As it was, he was so delighted, the values kept getting better and better, and he kept throwing in other stuff that I would definitely want but he hadn’t promised. I ended up with ridiculous bargains and all our transactions were most cordial. If I’d put him on notice that he had to fight for every dollar when already offering fair value, I would have gotten only what was promised, and I’d have had to pay a lot more.

Here’s another. My wife and I are about to close on a home in Aloverton (unincorporated Washington County between Beaverton and Aloha, Oregon). The sellers wanted $282K. It so happened that my wife got to meet the sellers when she was looking at the home, and they hit it off very well. Our agent advised us that the value was excellent and likely to draw several offers within the day. She suggested a full price offer, more if we really wanted it.

Well, it was about at the ceiling of what we could afford and finance, but I gambled a bit on the seller’s class and relationship to my wife. Had they wanted maximum dollar, they’d have listed it $10K higher, and probably gotten it. It was evident, relative to the market, that they just wanted it sold. So I told our agent: “Let’s offer them a little over full price, just so that if they get more than one of those, we at least are in the club.” She agreed, and we offered $282,500.

The sellers countered with an acceptance subject to a few small conditions (all easy to accept), and conveyed to us that they would like to accept our offer, citing the relationship with Deb and the good feeling that obtained, but could we please respond quickly so that if the answer were “no,” that they could accept one of the other offers. I asked our agent if she thought the other offers were above full price. She said that if she had to guess, one had probably been about $284K and one perhaps as high as $287K. Of course, we jumped on it.

Then came the home inspection phase, an area where we had already had to bust a home purchase deal due to a dishonest homebrew maintenance seller. This house came back with about $1300 in legit repairs, an abnormally small amount on a house selling for $282,500: less than 0.5% of the value. Considering that our home inspector is an absolute stickler who views his work as educating the client about even the fussiest little issues, if he couldn’t find even 1% of the value, it was obvious the place was in fantastic shape. Even so, by reflex, our agent began preparing an addendum to ask the sellers for $1300. She actually didn’t consult us before she started to prepare this, though that’s not bad behavior on her part; as all such agreements say in bold capital letters, “time is of the essence in this agreement.” She was simply being alacritous, if a bit habitual. Considering what a lazy horse’s ass the listing agent had been by comparison, I wasn’t going to grouse on her over an error in the direction of timeliness. We did, however, need to have a meeting of the minds.

Our agent called me to let me know she had prepared the addendum for our signatures. “L,” I said, “we need to get on the same page. See it from the sellers’ viewpoint. We think it very likely they went out of their way to sell the house to us for anywhere from $2-5K less than someone else might have paid them, all for the sake of wanting us to have it. In their mind, in effect, they have already given us a $4-5K discount. They have been splendid throughout this whole deal, although I have no idea what would move them to use such an atrocious listing agent; maybe they are too unwilling to believe the worst of anyone. So here they are, having already given up $4-5K in their minds, and now–now that they are in contract, have declined the other offers, and would have to start all over again if they reject the addendum–the recipients of that value want another $1300? This will signal to them that we think it never hurts to negotiate. Well, it can.”

“I never thought of that,” she said.

I wasn’t done. (I was not angry, just making my points; it was a cordial-toned conversation.) “What’s worse, it has no teeth. Suppose we ask for that, and they say ‘forget it.’ Would we then bust the deal for $1300 in fairly straightforward repairs?”

“I can’t see you doing that.”

“You’re right. We wouldn’t, which means that we’d just be twisting their arms for a small gain. So if we do as you are suggesting, we will change the entire character of the transaction, and worse yet, we will be doing so at the point where we have less to lose than they do. It would be a tremendous inconvenience for them if the sale failed now, so they’d be almost forced to take it–but they’d be on notice that they’d misjudged our business style and approach to life. Or, given their conduct so far, they might simply refuse, preferring to endure the inconvenience rather than have their arms twisted over a trivial matter. I think we should believe our home inspector, waive the contingency without dickering, and move this whole thing forward.”

“Wow. This is very rare, but I see your point. If you’d like to waive it, that makes sense.”

We waived it. The sellers responded by offering us any furniture in the house. Any or all. While we didn’t expect any such thing, it confirmed that we’d read our people rightly.

On top of that, they’d previously offered us a desk and the bookshelves, made by the husband’s own hand before he became more frail. We had to come up with something, though, lest we seem to spurn their generosity, so we accepted the barstools. Not high value in resale, probably spendy to buy ourselves, and least likely to match wherever they were living.

We also learned, along the way, that the listing agent was not keeping his clients apprised of matters that would directly concern them such as the progress of our financing and appraisal process. If I were them, I’d have been nervous as hell about the possibility that either might blow up. So we took steps, quietly, to make sure the sellers knew immediately when each step had finished, including the point at which all was approved and we were all clear to close.

I find it a bit tragic that I, buying this house sight unseen, will never get to meet the sellers. They seem like the sort of people I’d want as neighbors.

And it would very much have hurt to negotiate.

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