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Time Investment: a Real Estate Negotiation Technique

By - 2008 - 2013

You have probably heard the expression, "time is of the essence." It even says as much on most business and real estate contracts. The steps in the process of buying and selling a house or other property have to take place in a timely way -- by the specific deadlines laid out in the contract. These deadlines may or may not be advantageous to you depending on the circumstances.

But before the contract is finalized and the deal is closed there is a period when you are negotiating various matters, and here time can definitely be used to your advantage, if you know how to use it. Whoever controls or understands the elements of time involved has the better position. There is a lot to this subject of time and negotiation, and we're going to cover one aspect here...

Time Investment

When I was a real estate agent, one of my less-pleasant experiences involved selling a home to a lawyer. The seller, my client, was a real decent guy, and I wanted to do my best, but I was new to real estate, and this buyer/attorney knew all the angles. Without getting into the various dirty tricks he used (there were several), I'll just say that the buyer had everyone involved angry, frustrated and worn down.

As a final blow, he arbitrarily decided that he wanted the price lowered by another $5,000, long after the purchase agreement had been signed by both parties. The seller was almost ready to throw away the whole deal, but he had been trying to sell the home for two years at this point, and we had been working with this buyer for months. None of the agents or brokers involved wanted to see all their effort go for nothing.

There were three agents under two brokers involved in the sale. We all agreed that suing the buyer wasn't worth the trouble, so instead, we gave in. The seller had enough of the buyer's tricks, and refused to compromise further (and who could blame him), so each of the three agents and two brokers agreed to forfeit a $1,000 of the commission -- $5,000 in total -- just to make the deal close. This is sometimes referred to as a "commissionectomy."

This is an extreme example of using what is called "time investment" to one's advantage. After investing so much time, none of us wanted to lose everything. The lawyer knew that, and used the fact against us. In this case, there really was nothing in the contract that allowed him to renegotiate the price, making it unethical in my mind. Still, it was effective.

In other cases, it is just good negotiating to get the other party involved for a while and then push for concessions. Consider the simpler example of buying a car; if you want to get the best price, do you think you'll get it after spending two minutes with a salesman? No, you let him invest two hours or more (possibly spread out over two or three visits) showing you cars, and by that time he'll be begging his manager to let the car go for your low offer.

This is just as true in real estate. If you are dealing directly with a seller, hold off mentioning an offering price until you have spent some time with him. Get a seller to the point where he knows you and thinks the property is sold, and he will not want to throw away that time investment. That means you can push a little harder to get what you want.

You can also remind the seller about time, to let him remember the time he has already invested. To do this politely, say something like "Look, neither of us wants to lose the time we've spent on this and start all over, so why don't I..." Then offer some small concession.

Notice how he is subtly warned that he could lose his whole time investment with nothing to show for it. The words "start all over" may even scare him. You set the scene, and then you offer a way out. This is non-offensive if done right. You say "Neither of us..." to let him or her know that you're both in the same situation, and it's not just you making a threat. Once a person has spent or "invested" time, he is more likely to accept a lower offer or terms that he might have refused earlier in the negotiation.

Note: There is a chapter on real estate negotiation tips in our free book on selling a home. Of course they are oriented toward selling more than buying, but you might find something useful there.


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