A quick word first1
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Snatching defeat from the jaws of victory
It’s said that you if don’t ask, you don’t get. But asking can be risky, as a colleague of mine learned the hard way. Let’s call him Arvind Gupta.
Arvind was close friends with an older couple who lived in a beachfront mansion with sweeping ocean views. Somehow, for twenty years, they had never been billed for property taxes.
When a notice from the city arrived, it was for a staggering amount. The couple had already been thinking about downsizing and the bill pushed them to make that decision. They were childless, so they approached Arvind, whom they loved, and offered to sell him the property for $2.5 million.
Arvind realized that this was a bargain price, but it was beyond his means. So he approached another friend whom he calls “Wealthy Bill,” a nickname that is also a shorthand measure of the latter’s fortune. Bill recognized the investment opportunity and was glad to be a silent partner in the purchase. But Bill said they should counter with an offer of $2.25 million. If the sellers insisted on full price, he noted, they could always pay it if necessary. Arvind was hesitant, however. The asking price was already well below market.
“Nonsense,” said Bill. “There’s always room to bargain.” Arvind reluctantly made the counteroffer, since it was mostly Bill’s money that was at stake.
You probably know where this story is going. Arvind’s friends expressed their hurt and anger when he tried to haggle: “We treated you like a son, and this is how you thank us?” The owners withdrew their offer, found a real estate broker, and, less than a year later, sold their property for $11 million.
Yikes!
Somehow Arvind is philosophical about it. He’s not rich, but he’s professionally successful and comfortable financially. He is also Exhibit A for the principle that the only way to know just how close to the edge of the cliff you can go safely is to take one more step beyond that.
Compare Arvind’s blunder with Liz and Tony Weiler’s story (also pseudonyms). For twenty years, they rented a summer cottage in Salt Harbor, a charming coastal community in Massachusetts. From the back porch they could watch their kids playing on the private beach below. The elderly owner who lived next door encouraged them to plant raspberry and blueberry bushes. In return, Liz made fruit pies for her.
From time to time, they inquired discreetly whether she might be willing to sell the property, but the owner herself had three grown children, one of whom had expressed interest in the house. The Weilers knew that they’d be able to return to the cottage every summer so long as their neighbor was still alive, but they despaired of what would happen when she died. And she was now ninety-four.
Then one August morning, the owner’s eldest son appeared at their door. Without coming in, he announced that he had talked to his mother and his siblings. The family was ready to sell. “Three hundred and thirty thousand dollars,” he said. “Take it or leave it. Let us know before Labor Day.” Then he left.
The Weilers were in a swirl. At long last, the cottage could be theirs. But what about the price? Given the market, $330,000 wasn’t outlandish, and they could afford it, but it was no bargain, either. Then again, there was nothing else in that range that they could love nearly as much. Nevertheless, Liz bristled at the take-it-or-leave it remark. Why not make a counteroffer?
They asked my advice. I sketched a decision tree and told them to weigh the consequences of their two options.
“If you accept, you’re the new owners of a home you love. If you counter-offer, you’re putting your future in their hands. Three things could happen. Maybe they’ll come down a bit on price. Maybe they’ll insist on $330,000. Or maybe they’ll pull their offer and sell it to someone else.”
Liz and Tony realized it had taken the family years to agree to sell, and that their consensus might be fragile. If the Weilers countered, any one of the siblings might regard that as an excuse to retract the offer.
Nothing ventured, they thought, nothing gained. But they also recognized a corollary: nothing ventured, nothing lost. They swallowed hard and paid full price. That was a while ago. Still from time to time they still catch themselves wondering if they could gotten the cottage cheaper. They’ll never know.
20-20 Hindsight
I can imagine other ways the Weilers’ story might have gone. Given their enchantment with the cottage, on hearing the offer they might have blurted, “Sold!” If that had happened, the owner’s son might have thought the family had underpriced the place and should raise the price. (To avoid that problem, the safest response might have been “Thanks for letting us know, and for letting us have a little time to see if we can work something out.”)
I wasn’t involved in Arvind’s case, but it occurs to me now that maybe he could have salvaged after the condo owners berated him for haggling.
Specifically, what if he had enlisted “Wealthy Bill,” to intervene and apologize to them for pushing Arvind to counteroffer. Maybe he could have improved the offer a bit, as well. That’s 20-20 hindsight, of course. Maybe it’s a good reminder that just because we think a deal has cratered, there may be a way to save it.
The bigger lesson here is about whether to continue to negotiate when you’ve been given an acceptable offer.
Holding on to a bird in the hand requires a sensitive touch. Firm enough to prevent it from flying away but not so tight as to squeeze the life out of it. Context matters. How much risk you’re willing to run depends on your temperament, as well as your resources and alternatives. The time to stop negotiating is when the risk of pressing further outweighs possible gains.
Housekeeping
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Photo by Leio McLaren on Unsplash