Last-Minute Blowups
DOLLARS AND CENTS DEALS AREN'T JUST ABOUT MONEY
A quick word first
Great to be back after a short hiatus! Very busy work time for me, but lovely family visits, too. Both were very gratifying. I hope you’ve had similar good luck, too!
How to snatch defeat from the jaws of victory
Even when parties are close on price, negotiations can be highly charged. And if they’re not careful, they can blow up a deal that would be beneficial to both sides.
The sale of a $3 million Greenwich Village property almost fell apart because of a dispute over a used washing machine that the sellers had removed from the premises two days before the closing. According to Stephen Raphael, the lawyer representing the sellers, it wasn’t worth fighting over, “but the buyers had already felt pressured to up their offer and to concede many things, and this was the last straw.”
At the closing, the sellers still refused to replace the machine. One of the buyers ripped up the seven-figure check for the balance due, put a match to the scraps, and stomped out of the room. The sellers finally relented and agreed to reduce the price by $300. The brokers found the angry buyer at a nearby bar, nursing a drink. They coaxed him back, and the deal was done.
In another sale, a buyer tested the sellers’ patience by haggling over one item after another. Finally, it was too much. The sellers stormed out in the middle of the closing, returned to their home one last time, and removed every lightbulb from all the fixtures. Wolf Jakubowski, who represented both parties, says, “It wasn’t the amount of money that was the issue. It was the principle.”
Real estate closings can even get violent. Fern Hammond, a New York broker, tells the story of an angry woman who flung the set of house keys at a man’s face as hard as she could. “All of a sudden there was blood all over the place,” Hammond says. “Everyone was pushing the papers out of the way.” And the target of the woman’s anger was her own husband! She was furious with him because he had agreed to sell their place for less than she thought it was worth.
When tempers erupt at the end of negotiation, it’s often because pressure has been building up along the way. Buying or selling a home is the biggest financial transaction that many people ever undertake. It’s usually emotional as well. For sellers, parting with a home is often freighted with memories. For many buyers, the transaction is laden with hopes and worries.
These deals, moreover, are usually conducted at arm’s length, through brokers and lawyers. Offers volley back and forth as the parties haggle price, with each side trying to read the intentions of the other. Preliminary agreement may be reached, but then, while the paperwork is being done, there’s a dormant period when people have time to brood over their decision. Small wonder, then, that these anxieties tumble out when the parties meet—sometimes for the first time—to close the deal.
Negotiating through intermediaries complicates the process. Brokers and lawyers may contribute expertise, perspective, and credibility, but they complicate communication. It may be unclear who speaks for whom, or who has ultimate authority to approve a deal. When relationships are strained, a tag-team approach may be needed. The first cohort of negotiators may settle some issues but get stuck on others. A new set of negotiators, unburdened by whatever interpersonal issues arose between their predecessors, may be able to wrap things up.
Of course, this can be a bargaining gambit as well. It’s a classic move in auto showrooms. You think you’ve reached a deal, but then there’s a bait and switch. You shake hands with the salesman, but then he goes off to confer with his manger. When he finally returns, he wears a hangdog look. “I’m sorry,” he’ll say, “but my boss says it’s gotta be another thousand dollars.” He’ll quickly add that’s really only $29 in monthly car payments—and in return, he’ll toss in the deluxe floor mats for free.
Shame on those who resort to such tired old ploys. Shame on us, too, if we’re not prepared for them. Ideally, we should confirm at the outset that we’re negotiating with the right person: someone who can make a binding commitment. When that’s not possible, we should hold something back in reserve that we can throw in to close the deal.
Housekeeping
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Be well, Mike