Imagine for a moment that you own a sailboat, and you’re desperate to sell it. It was fun when you first got it, but now you hardly ever use it, and the maintenance and slip fees are eating you alive. It’s early Sunday morning, and you’ve given up a chance to play golf with your friends because you need to be down at the marina cleaning your boat. You’re scrubbing away and cursing your stupidity for ever having bought the boat. Just as you’re thinking, “I’m going to give this turkey away to the next person who comes along,” you look up and see an expensively dressed man with a young girl on his arm coming down the dock. He’s wearing Gucci loafers, white slacks, and a blue Burberry’s blazer topped off with a silk cravat. His young girlfriend is wearing high heels, a silk sheath dress, big sunglasses, and huge diamond earrings.
They stop at your boat, and the man says, “That’s a fine looking boat. By any chance is it for sale?”
His girl friend snuggles up to him and says, “Oh, let’s buy it, poopsy. We’ll have so much fun.”
You feel your heart start to burst with joy and your mind is singing, “Thank you, Lord! Thank you, Lord!”
Expressing that sentiment is not going to get you the best price for your boat, is it? How are you going to get the best price? By playing Reluctant Seller. You keep on scrubbing and say, “You’re welcome to come aboard, although I hadn’t thought of selling the boat.” You give them a tour of the boat and at every step of the way you tell them how much you love the boat and how much fun you have sailing her. Finally you tell them, “I can see how perfect this boat would be for you and how much fun you’d have with it, but I really don’t think I could ever bear to part with it. However, just to be fair to you, what is the very best price you would give me?”
Power Negotiators know that this Reluctant Seller technique squeezes the negotiating range before the negotiating even starts. If you’ve done a good job of building the other person’s desire to own the boat, he will have formed a negotiating range in his mind. He may be thinking, “I’d be willing to go to $30,000, $25,000 would be a fair deal and $20,000 would be a bargain.” So, his negotiating range is from $20,000 to $30,000. Just by playing Reluctant Seller, you will have moved him up through that range. If you had appeared eager to sell, he may have offered you only $20,000. By playing Reluctant Seller you may move him to the mid-point, or even the high point of his negotiating range, before the negotiations even start.
One of my Power Negotiators is an extremely rich and powerful investor, a man who owns real estate all over town. He probably owns real estate worth $50 million, owes $35 million in loans, and therefore has a net worth of about $15 million. Very successful-what you could justifiably call a heavy hitter. He likes wheeling and dealing.
Like many investors, his strategy is simple: Buy a property at the right price and on the right terms, hold onto it and let it appreciate, then sell at a higher price. Many smaller investors bring him purchase offers for one of his holdings, eager to acquire one of his better-known properties. That’s when this well-seasoned investor knows how to use the Reluctant Buyer Gambit.
He reads the offer quietly, and when he’s finished he slides it thoughtfully back across the table, scratches above one ear, saying something like, “I don’t know. Of all my properties, I have very special feelings for this one. I was thinking of keeping it and giving it to my daughter for her college graduation present and I really don’t think that I would part with it for anything less than the full asking price. You understand; this particular property is worth a great deal to me. But look, it was good of you to bring in an offer for me and in all fairness, so that you won’t have wasted your time, what is the very best price that you feel you could give me?” Many times, I saw him make thousands of dollars in just a few seconds using the Reluctant Seller philosophy.
Power Negotiators always try to edge up the other side’s negotiating range before the real negotiating ever begins.
I remember an oceanfront condominium that I bought as an investment. The owner was asking $59,000 for it. It was a hot real estate market at the time and I wasn’t sure how eager the owner was to sell or if they had any other offers on it. So, I wrote up three offers, one at $49,000, another at $54,000 and a third at $59,000. I made an appointment to meet with the seller, who had moved out of the condominium in Long Beach and was now living in Pasadena. After talking to her for a while, I determined that she hadn’t had any other offers and that she was eager to sell. So I reached into my briefcase, where I had the three offers carefully filed and pulled out the lowest of them. She accepted it, and when I sold the condominium a few years later, it fetched $129,000. (Be aware that you can do this only with a “For Sale by Owner.” If a real estate agent has listed the property, that agent is working for the seller and is obligated to tell the seller if he’s aware that the other side would pay more. Another reason why you should always list property with an agent when you’re selling.)
So, Power Negotiators always play Reluctant Seller when they’re selling. Even before the negotiation starts, it squeezes the other side’s negotiating range.
Remember that when people do this kind of thing to you, that it’s just a game that they are playing on you. Power Negotiators don’t get upset about it. They just learn to play the negotiating game better than the other side.
Key points to remember:
Always play Reluctant Seller.
Playing this Gambit is a great way to squeeze the other side’s negotiating range before the negotiation even starts.
The other person will typically give away half his or her negotiating range just because you use this.