UNDERSTANDING THE NEGOTIATION PROCESS

Negotiating the selling price of a property is a tricky process and emotions often run high.  Vendors sometimes think that moving from their original asking price means they are “losing money”, while purchasers are afraid of “going too high” in the heat of the moment. It’s a wonder properties ever get sold, when the price a purchaser is prepared to pay is often so much less than a vendor is prepared to sell it for!

Whether you are buying or selling, it helps to remember that market value for any property can never be scientifically established or arbitrarily insisted on. A property’s price depends on purchaser demand at the time of selling; when there is little buyer interest in a property, the price tends to be lower. If there are lots of buyers competing for a property, the price tends to be higher. Neither the vendor’s “I won’t take any less than…” or the purchaser’s “This is my final offer” actuallly determine the price. The price only becomes a reality when two parties agree to it and exchange contracts at law. In the course of negotiation, the vendor’s desire to get the highest price is offset against the purchaser’s desire not to pay too much. Neither wants to miss out –  vendor on  sales,  purchasers on  properties they have set their heart on. The point or price that is neither too little nor too much depending on where you are standing is arrived at by small (usually!) adjustments until the two parties evolve to a position they find mutually satisfactory.

Many vendors and purchasers think they can deliver a price ultimatum. If this is done before the market value is arrived at, it will usually bring negotiations to an end. The New Shorter Oxford Dictionary (1993) says: “It is not a negotiation when one party says “this is what I want.” It is easy to forget that market forces dictate prices and vendors who say: “We need $x to buy what we want” and purchasers who say: “This is my one and only offer, take it or leave it” need to ask themselves whether they have based their figures on analysis of past selling prices for similar houses, and not on their own wishful thinking. Whether you’re a purchaser or a vendor, leaving a window open for negotiation usually means you won’t get the door closed on the sale.

Where the balance of power lies in negotiations depends on the market. In a sellers’ market, vendors can and do make ultimatums and hold out for dream prices, while in a buyers’ market it is the buyers who have the upper hand in any negotiations.

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