A quick word first
Thanks for visiting The Jazz of Negotiation! When you have a chance, check out the Welcome announcement to get a feel for this publication’s purpose, its broad scope, and the variety of content it provides.
Hope you sign up and give it a try. Thanks!
Dividing the pie1
Every time we sit down to negotiate, we implicitly decide what we owe other parties (if anything) in regard to fairness, honesty, or the use of pressure tactics. The toughest questions often aren’t about right or wrong, however. Rather, they force us to reconcile competing rights and obligations.
Here’s a case that gets to the heart of what fairness can mean in negotiation and whether it matters. At the end of this article there’s a short poll where you can enter, anonymously if you like, what you’d do in this situation. In Thursday’s article I’ll report on the results and analyze different ways of thinking about the issue.
Imagine that you’ve saved some money and are at a stage in life where you want to buy a vacation home. You’re not looking for anything fancy, just a cabin in the woods, far from the city, where you can get away and relax. The real estate market in your area is strong, but you’re hopeful that you can find something reasonably priced. After thinking carefully about your baseline, you’re prepared to pay around $275,000, though exactly how much you’ll spend will depend on the particular place and how it compares with others.
On recent weekends, you did some prospecting, meeting with real estate agents and looking at properties. Those outings were enjoyable at first, but now you’re discouraged. Everything that you’ve liked costs at least $300,000, sometimes more. Even if you negotiate effectively, a decent place may be beyond your budget. You may have to put your plan on hold.
But on your latest excursion, you spot a hand-painted sign: For Sale by Owner—Inquire Within. You slow down and turn into a gravel driveway. There it is: a well-maintained cabin nestled among tall pines. Off to one side is a glistening pond.
The elderly owner shows you around the place an invitation to sit down for tea. You listen politely to the story of how the family built the cabin more than fifty years ago. You also talk about local history and the changeable weather, but there’s been no mention of price. All the while you’re thinking this place is clearly best you’ve seen, but you doubt you can afford it.
The owner finally broaches the topic and says, “It’s always awkward to talk about money. I hope you won’t be offended if I’m asking too much.” It turns out that they’re moving back to the city to be closer to grandchildren. The cost of living is higher there, so they’ll need to get every penny that that can be garnered from this sale. That’s why they’re not using a broker.
You brace yourself for a number that’s way out of your price range. So you’re shocked when they ask only $210,000. From looking at other properties, you know this is far below market value. How would you respond?
Your options
I’ll sharpen the question. Whatever you decide, there’s no downside. You can draft a simple offer to purchase that gives you complete protection if there are any problems with legal title to the property or its physical condition. Likewise, you can write a small, fully refundable check to secure the deal. Now, taking all that into account, how would you respond to the owner’s $210,000 asking price?
A. Quickly accept the asking price ($210,000).
B. Counteroffer with a somewhat lower figure, knowing that you can always agree to the $210,000 if necessary.
C. Inform the owner that you want to buy the cabin, but you believe they undervalued it.
Okay, take a moment to think about the pros and cons of each of these options. You might do something different but pick whichever one that comes closest to what you‘d choose.
Submitting your response
Here’s a one-minute survey where you can enter your choice, anonymously if you like. I’m eager to see your response and am looking forward to discussing the issues in Thursday’s follow-up article!
Housekeeping
Just by signing up for Jazz of Negotiation, you’ll get free access to a full article, plus a shorter post, delivered by email 50 weeks a year. Paid subscribers get additional content: Q and A threads, videos, and from time to time short exercises, with more to come.
Please share the piece with people in your network who want to expand their knowledge of negotiation. Thanks! Mike
Photo credit and thanks to Becky Fantham and Unsplash