Hi Mike, I can't help but notice that you provided a number of variables and perspectives in your piece above, but you didn't tell us what decision you would make in this hypothetical situation. While I'm confident there's no "right" answer, I'm interested in how you would respond and why.
Hi Dave, Thanks for your question. For me, it's situational. When I buy a car from a dealership, I bargain hard. Even if I'm well prepared, they know more about the market and their needs than I do. Years later when I sell the vehicle, I'd ask a lot less from a kid in the neighborhood, that I would from a stranger. As I think about it, the same applies in even transactions like the cabin one. Getting to know someone even briefly over tea could make me more generous than if the person were disagreeable. A strict economist might say that's irrational, but not the way I see it.
Thanks Mike, I assume that means you would take option C then, is that correct?
In regards to your question regarding the gender of the seller, I had a thought. Do you think there is a correlation between empathy in approach and gender assignment? If we try to put ourselves in the shoes of the seller, do we then also see ourselves in the seller?
Hi Mike. I loved this week's post. I actually read it at the dinner table and we had a great discussion about it. My family was also divided in terms of how we would respond. I answered C. My reason why is two-fold: 1) you taught me well in your Negotiating Complex Deals and Disputes class (and not to brag, but you did give me a I). 2) I've been through quite a few real estate negotiations in my life now (far more than the 0 when I was your student). Here's my thinking: What is my BATNA? I don't really have one. I've looked everywhere and can't afford anything else. I really need to make this deal work or I will not get any vacation cabin at all. This is my one chance to fulfill my dream, at least in the near term. So my goal is to make them take down the for sale sign ASAP and disregard anyone else who would come knocking on their door. What can I do to make sure I guarantee a deal is done here and still stay under my $275k budget. Simple. Make the owner feel like they are getting an awesome deal and want to close NOW. I have $65k to play with where we will both be thrilled and get exactly what we want. It is the definition of a win win. The one other build is that residential real estate deals are highly emotional. Having been in this house for so long, they are likely to have a high attachment to the house. I would be very clear about how much I love the house too, how I'll take care of it for them, etc. Then I'll put my money where my mouth is to show them I really mean it. So my response would be "I absolutely love this house. You've done a beautiful job with it and I can feel the love here. I will care for this house for you as my own and love it the way you have. But to me that means it is worth more than you are asking. I'd like to offer you $240k and get you agree to sell to me now. Take down the for sale sign and we'll get this deal done ASAP." In my mind, there's no way I lose the house with this plan. With options A and B, it could fall through as soon as someone knocks on the door with a bigger offer. And I don't want to get into a bidding war where the price goes up to a FMV that I can't afford.
Hey Jeni! Wonderful to hear from you. And it's obvious that you earned your "1" in my course. (For others, that's the highest grade a student can get.) What fun it may have been to debate this at the dinner table. For dessert tonight you might talk about nonmonetary ways in which you could make this a more valuable deal for the owner. (For example, perhaps offering the woman a chance to return a couple of weeks each summer when you're not using the property.) By all means, keep in touch! Mike
I forgot to add: after we finished talking about this situation, my kids (ages 15 and almost 12) said "Give us another one!" They love talking about negotiation situations. So you will have eager readers when you format future posts like this. We also watched True Grit last night, per your recommendation, and discussed her negotiation strategies. I think I have a couple of future HBSers on my hands.
Always more for me to learn from you. :) We will absolutely be talking about this again at dinner tonight. They have anxiously been awaiting the "answer." Like Dave below, I would also like to hear what you would do.
Hi Michael, thanks for the interesting task. I selected the option " inform the owner that the price is lower than market " and added in comments it would be good to know why this price was on the table. There is an option that the owner needs money immediately, on the other hand, it could be that a lot of renovation work to be done and it was not visible. Also it is possible that the money, in reality, does not play a huge role but the owner ( I assumed the owner is male) would like to sell to a "right"person. And finally, there could exist neighbours which are difficult to live with... so the option list can be long. Also I agree with Dave's comment below - what would be your response?
Hi Stan, I've talked overly generous sellers up in price a number of times, once fairly recently for a fair amount of money. This was someone I've known for a long time. I wanted to reciprocate their kindness. Part of the fun of it is figuring out how to do it in such a way that they wouldn't feel foolish about asking too little. I was doing it for them, of course, but also for myself. Best, Mike
Hi Mike, I can't help but notice that you provided a number of variables and perspectives in your piece above, but you didn't tell us what decision you would make in this hypothetical situation. While I'm confident there's no "right" answer, I'm interested in how you would respond and why.
Hi Dave, Thanks for your question. For me, it's situational. When I buy a car from a dealership, I bargain hard. Even if I'm well prepared, they know more about the market and their needs than I do. Years later when I sell the vehicle, I'd ask a lot less from a kid in the neighborhood, that I would from a stranger. As I think about it, the same applies in even transactions like the cabin one. Getting to know someone even briefly over tea could make me more generous than if the person were disagreeable. A strict economist might say that's irrational, but not the way I see it.
Thanks Mike, I assume that means you would take option C then, is that correct?
In regards to your question regarding the gender of the seller, I had a thought. Do you think there is a correlation between empathy in approach and gender assignment? If we try to put ourselves in the shoes of the seller, do we then also see ourselves in the seller?
Hi Mike. I loved this week's post. I actually read it at the dinner table and we had a great discussion about it. My family was also divided in terms of how we would respond. I answered C. My reason why is two-fold: 1) you taught me well in your Negotiating Complex Deals and Disputes class (and not to brag, but you did give me a I). 2) I've been through quite a few real estate negotiations in my life now (far more than the 0 when I was your student). Here's my thinking: What is my BATNA? I don't really have one. I've looked everywhere and can't afford anything else. I really need to make this deal work or I will not get any vacation cabin at all. This is my one chance to fulfill my dream, at least in the near term. So my goal is to make them take down the for sale sign ASAP and disregard anyone else who would come knocking on their door. What can I do to make sure I guarantee a deal is done here and still stay under my $275k budget. Simple. Make the owner feel like they are getting an awesome deal and want to close NOW. I have $65k to play with where we will both be thrilled and get exactly what we want. It is the definition of a win win. The one other build is that residential real estate deals are highly emotional. Having been in this house for so long, they are likely to have a high attachment to the house. I would be very clear about how much I love the house too, how I'll take care of it for them, etc. Then I'll put my money where my mouth is to show them I really mean it. So my response would be "I absolutely love this house. You've done a beautiful job with it and I can feel the love here. I will care for this house for you as my own and love it the way you have. But to me that means it is worth more than you are asking. I'd like to offer you $240k and get you agree to sell to me now. Take down the for sale sign and we'll get this deal done ASAP." In my mind, there's no way I lose the house with this plan. With options A and B, it could fall through as soon as someone knocks on the door with a bigger offer. And I don't want to get into a bidding war where the price goes up to a FMV that I can't afford.
Hey Jeni! Wonderful to hear from you. And it's obvious that you earned your "1" in my course. (For others, that's the highest grade a student can get.) What fun it may have been to debate this at the dinner table. For dessert tonight you might talk about nonmonetary ways in which you could make this a more valuable deal for the owner. (For example, perhaps offering the woman a chance to return a couple of weeks each summer when you're not using the property.) By all means, keep in touch! Mike
I forgot to add: after we finished talking about this situation, my kids (ages 15 and almost 12) said "Give us another one!" They love talking about negotiation situations. So you will have eager readers when you format future posts like this. We also watched True Grit last night, per your recommendation, and discussed her negotiation strategies. I think I have a couple of future HBSers on my hands.
Always more for me to learn from you. :) We will absolutely be talking about this again at dinner tonight. They have anxiously been awaiting the "answer." Like Dave below, I would also like to hear what you would do.
Hi Michael, thanks for the interesting task. I selected the option " inform the owner that the price is lower than market " and added in comments it would be good to know why this price was on the table. There is an option that the owner needs money immediately, on the other hand, it could be that a lot of renovation work to be done and it was not visible. Also it is possible that the money, in reality, does not play a huge role but the owner ( I assumed the owner is male) would like to sell to a "right"person. And finally, there could exist neighbours which are difficult to live with... so the option list can be long. Also I agree with Dave's comment below - what would be your response?
Hi Stan, I've talked overly generous sellers up in price a number of times, once fairly recently for a fair amount of money. This was someone I've known for a long time. I wanted to reciprocate their kindness. Part of the fun of it is figuring out how to do it in such a way that they wouldn't feel foolish about asking too little. I was doing it for them, of course, but also for myself. Best, Mike
Funny-- I assumed the owner was a woman.