Buying or selling Sequim real estate or Port Angeles real estate? How you negotiate can mean $10,000 more or less in your pocket when the dust settles. Imagine two card players. One has spent a lifetime learning how to play cards, has become an expert on mathematics and statistical calculations, on human behavior and psychology, and has studied and practiced for decades. The other is a school teacher, a good and honest person, who has taught 3rd grade for 22 years, but has never played cards, and has had no interest in the technical skills required to be a good card player.

Both enter a national card playing tournament. Who would you bet on? Who would win the majority of card games? So why would anyone with virtually no experience negotiating the purchase or sale of expensive houses, gamble when they buy or sell their own house? One might argue, “Well, I’ve sold two houses in my life.” Buying or selling one or two houses does not a lifetime of experience make.

Don’t lose money negotiating your hard earned investment. If I seem passionate about this subject, it is because I am. I’ve seen people lose a lot of money simply because they assumed they could do what it has taken others a lifetime to learn. Assuming is gambling.

Read more about negotiating the best price at Sequim Real Estate - Negotiating for $1,000’s.

Courtesy Sequim & Port Angeles Real Estate, LLC

Some Sequim real estate and Port Angeles real estate owners are looking at serious financial trouble on the horizon. Many property owners refinanced not once but several times in the past five years as the mortgage industry reduced rates and standards. Lower rates created the motivation to not only lower the monthly payment on a long term mortgage, but to keep pulling out cash.

While all that sounds like a free lunch, we all know there’s no such thing as a free lunch. Refinancing to lower the monthly payment is great, provided the term of the amortization is not increased, and provided money is not taken out that could go toward reducing the mortgage balance.

Alas, some local businessmen and homeowners are now concerned about their debt service, and this really hits home if the current state of the economy has reduced income. It has for some businesses. In any slowdown, cash is king.

This will present a rare opportunity for real estate investors with cash, and it will also give home buyers with cash or good credit a rare opportunity to buy homes from those who are in trouble. This spring will see new buyers coming from California, Arizona, and the Seattle area shopping for good deals. One aspect of buying and selling will become more important than any other: negotiating experience in this kind of market. The difference could be $10,000 to $50,000. That’s not pocket change.

Whether you are buying or selling a home in Sequim or Port Angeles, you want the best price you can get. Of course, price is one of many negotiable terms, and you want a clean transaction that closes as soon as possible. Buying or selling a home is not like going to a garage sale where you might get that used paperback for 50 cents or 75 cents, but either price is acceptable. A typical 3 bedroom, 2 bath home can easily be priced at $325,000 or $600,000, depending on the location and the market, and the price you ultimately negotiate involves big stakes, perhaps the biggest you have ever played.

Knowing how to negotiate the price and each term of a transaction could mean 10 to 50 thousand dollars to you. This is no time for a garage sale mentality. The last thing you want to do if you are representing yourself as a buyer or seller is to go up against someone on the other side who has 20 or 30 years of experience negotiating. You will lose, although your opponent will make you think you won. By the way, if you have a real estate agent representing you, don’t assume your agent is a master negotiator. Most are not. It takes years of experience to acquire the skills.

One of my favorite movies is the classic, “The Princess Bride.” Early in the movie the two stars face each other in a thrilling sword fight. They are both extremely good, and leap and dance with grace and skill that is delightful to watch. At one point in the battle, one of the swordsman asked his opponent why he is smiling, and the response is, “Because I know something you don’t.” “What is that?” The answer from the left handed swordsman is, “I am not left handed. I am right handed,” at which point he quickly tosses his sword into his right hand, and the battle continues.

A master negotiator will smile while he negotiates, but he will not reveal he is a master negotiator. In fact, he may have practiced a bit of a stutter or slow talking, and he will appear so average. He learned not to seem too smooth. He also knows something you don’t. He knows how human nature negotiates. He knows the patterns. He’s seen the pattern hundreds of times, and your behavior is quite predictable, although you don’t even know that he knows how you will respond and counter.

You may say, “No one knows how I will negotiate. Even I don’t know yet.” Oh, but he does know. He is often able to predict with an accuracy of 70% to 90% how negotiations will proceed and what the final outcome will be. But of course, he will not reveal any of this to you . . . ever.

Here is a simple example, which actually occurs regularly, but there are many nuances that an expert negotiator learns. The nuances are a function of the parties’ motivation, experience, and financial status.

A home is listed for sale at $425,000. The actual FMV (fair market value) is only $405,000, but the seller thinks that he has to start high to negotiate down. Almost all sellers make that mistake. A lot of real estate agents do, too. The buyer happens to have an expert negotiator in his corner, and knows the FMV is in the range of $395,000 to $410,000. The buyer is not going to pay more than FMV, and would prefer a little lower price since the market has stalled and prices may drop a little in the months ahead.

The buyer’s negotiator writes the offer at $380,000. The buyer is willing to pay more, but his negotiator knows the seller will typically meet them halfway in a counteroffer, $400,000. While the seller is having all kinds of discussions at his end about how this is his lowest price, yadda yadda, the buyer’s negotiator doesn’t care, because he knows something the seller doesn’t know. He knows the seller typically will come down again.

Buyer’s counter now meets the seller halfway again at $390,000, and seller (after agonizing) counters at $395,000. Buyer’s negotiator had already prepared his client for this eventuality, so this has all played out just as planned for the buyer. Unfortunately, the seller thinks this is all new ground, and that he has everything under control. That’s precisely what the buyer’s negotiator wants the seller to think.

Are we done? No. The buyer’s negotiator had a discussion with his client in the very beginning about the carpet in the living room. The buyer would like new carpet. Continuing to implement their original plan, the buyer now counters one last time, accepting the price of $395,000, provided the seller gives the buyer a $2,500 credit for carpet in the living room. The seller now exhausted emotionally by this whole process, and having already gone through the negative experience of having his house on the market for 216 days with no offers, is not going to kill the transaction over $2,500.

The buyer wins, and the buyer wins precisely as his negotiator had coached him. To this day the seller still does not know how this was orchestrated, or even that it was. The seller found the whole experience very stressful, and of course it would be, because one of the greatest sources of stress is uncertainty. The buyer had a very pleasant experience throughout, because he knew what to expect and what he was willing to do, and he knew the outcome he wanted. He got that outcome, and so the buyer lived happily ever after.

Do you have a master negotiator in your corner? I hope so.