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No harm asking?
Lots of things are negotiable. As people say, “You don’t get, if you don’t ask.” But asking can be risky, as Arvind Gupta learned to his regret.
Arvind was close friends with an older couple who lived in a swank beachfront mansion with sweeping views of the ocean. Somehow, for twenty years, they had never been billed for property taxes, nor had they ever paid them. When a notice from the city arrived, it was for a staggering amount.
The couple had already been thinking about downsizing and the tax 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 way beyond his means. So, he approached another friend whom he calls “Wealthy Bill,” a nickname that reflects 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, though. 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.
Whoops!
Arvind is philosophical about the experience. 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 a cliff you can safely go is taking one more step beyond that.
The road not taken
Compare Arvind’s blunder with Liz and Tony Weiler’s story. For twenty years, they rented a summer cottage in Salt Harbor, a charming community on the New England coast. From their back porch, they could watch their children playing on the private beach below. They befriended the elderly owner who lived next door. She encouraged them to plant raspberry and blueberry bushes. In return, Liz made fruit pies for their landlady.
From time to time, they inquired discreetly whether she’d 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 could 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 no other place else in that range that they could love nearly as much.
Still, Liz bristled at the take-it-or-leave it remark. Why not make a counteroffer?
Whenever somebody makes you a proposal, either at the outset or deep into a negotiation, you must reckon the plusses and minuses of bargaining further. In the Weilers’ case, the upside of countering could be saving some money. Knocking 10 percent or more off the price could be a long shot, but even saving half that amount might seem worthwhile.
What about the downside, though?
The current owners might lower their demand a bit or insist that the price is the price. But it had taken the family years to agree to sell. Their consensus could be fragile. If the Weilers countered, any one of the siblings might regard that as an excuse to retract the offer.
Sitting on the porch of their rented cottage, the Weilers weighed the pros and cons of negotiating. Nothing ventured, they thought, nothing gained. But they also imagined a corollary that Wealthy Bill had ignored: Nothing ventured, nothing lost. The agreed to the sellers’ demand. To this day, they wonder whether they over-paid.
Weighing the upside and downside
We rarely know how much room there is for agreement (or if there’s any room at all). Still we can sketch the paths that negotiation may take, depending on choices we—and the other party—make.
“Wealthy Bill” had thought about the possibility that the mansion owners might either lower their price or hold firm, but gave too little attention to the chance they might rescind it.
I’ve had experiences myself where I’ve gotten a good deal but wondered if I could have done better. In the end, I’d much rather deal with that sort of doubt than kick myself for blowing up what would have been a great deal. The time to stop negotiating is when the risk of pressing further outweighs possible gains.
Housekeeping
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