By Jeff Bell.
When we are looking to sell an asset, we want to make the best possible return.
Don’t we?
But we may have already missed the opportunity.
Because we often want something more than we can afford, we will find a way to pay high—and no doubt regret it immediately after. Buyer’s remorse?
Because many of us feel we have failed if we don’t get what we want. We will plough on and make the purchase, instead of knowing when and how to walk away. Much less play the risky game of appearing to walk away.
If we pay too much, we will be constantly under pressure to hold our ground. The chances are that on most occasions, we will fall flat on our face.
Our first, probably our best and often
our last opportunity to make money is going in.
To buy successfully, it may take a lot of preparation to position ourselves. It will certainly take a lot of impulse control at the crucial time—the point of commitment. From there, there will be no turning back.
Keeping all of that in mind, let’s consider the rules of negotiation when we are on the buyer’s side:
- State your purpose. Why is this purchase so important to you? Talk it over with whoever else is involved on your side—what are the benefits, what are the risks; quantify the net gain to be had. Recognise the emotional aspects of the purchase.
- Set your purchase criteria. Write down your required features of the target purchase, then separate them into the “mandatory” and the “optional”. Without each of the mandatory features, there will be no purchase. For the optional you will be weighting importance against performance.
- Research each seller’s position. Find out how long the target has been on the market and what changes there have been in the price; who is the seller; what is their history and reputation; what pressures are on them; why hasn’t the target sold yet?
- Set your own highest price. Compared to alternatives decide where this price sits; decide what you are able and prepared to pay. Revisit your purpose—is this still a good purchase if you are forced to pay your highest price? If not, withdraw.
- Arrange your financial position. Will this be financed out of savings or through debt? If the former, will it be less than half? If the latter, calculate the actual life-of-loan cost—is this still a good idea? Either way, a quick cash transfer is powerful.
- Set your own starting price. Determine your most optimistic outcome, based on your research and your funds. Your offer can be even lower if the market and/or the seller’s circumstances warrant; or just as a tactic—but too low may scare off the seller.
- Don’t negotiate. Having done all this homework, you are in a strong position. Rather than approach the seller tentatively, perhaps standing in line with other prospective purchasers, make your offer—once only. Be clear that you will not countenance the counter. [Use this with caution.]
- Proceed calmly (to beyond the point of commitment). Most sellers will be expecting an attack but may be pleasantly surprised, even disarmed, by a calm and friendly approach. Aggression, disdain or even contempt may be used under special circumstances—sparingly; and prepare for consequences.
- Walk away. For this, you will need the desperation, the urgency of the seller. You will also need to keep on walking if they don’t cave; otherwise you will look like an idiot. You may say “You may not want to hear this, but…”
- Make your offer. If you are still in, lead with your appreciation of the asset. State your own starting price. Use as much silence as you can bear—let the seller rush. If the counter comes, reply with half of that. Repeat as necessary.
Assuming that you settle on a price within your range, you have bought successfully. Secure the purchase, making sure that there are no conditions of sale that will disadvantage you.
Research, calm manner, rigorous process.
Then, when you are looking to sell the asset, you will be strongly positioned to make that best possible return.