The Intelligent Negotiator (29 page)

Even if you decide to hire a car-buying service to obtain prices for you, don’t hesitate to use the prices they give you to bargain with other dealers. Stop by other dealers in your area and ask them if they can beat the price you have already been guaranteed. This approach may allow you to save another couple of hundred dollars. Is it worth your going to another five or six dealers for
such a saving? You may feel it is if this allows you to cover the cost of the buying service you employed.

Should you automatically do business with the dealer that has given you the lowest price for the car you want to buy? Not necessarily. Consider other relevant factors such as their reputation for providing good service, their proximity to your home in case you have to have warranty work performed there, and whether they provide a loaner vehicle if you have to leave the car overnight for repairs. You may find it well worth a couple of hundred extra dollars to do business with a dealer you trust in a location that is convenient.

Buying Used Cars

If you are seeking a used vehicle, rather than a new one, you can still obtain relevant price information through books available in bookstores and in public libraries. Internet sites can also be helpful (such as
www.edmunds.com
and
www.autotrader.com
). You can also review used car advertisements in local newspapers to get a good idea of vehicle prices. Should you purchase your vehicle from a used car dealer or an individual seller? This is a difficult question to answer. Dealers are more likely to have late model vehicles that are in good operating condition, and they usually set prices in the mid- to upper-
retail
range. They frequently include vehicle warranties. You can estimate dealer “cost” from the
wholesale
value for the cars you are considering since dealers have generally obtained their cars as trade-ins on new vehicles and they tend to use wholesale values when determining trade-in allowances (If pressed by new car buyers, dealers may have given them trade-in
credit in the low
retail
range.) They are often willing to accept $300 to $500 above their base “cost.”

Individual sellers usually hope to obtain prices in the low -to mid-retail range. Their price expectations are lower than used car dealers because their non-settlement alternative is the amount they could get on a trade-in toward new vehicles. Since dealers normally give new car buyers no more than the wholesale value of used vehicles (or occasionally the low retail value for late model cars), the private sellers consider the low-to mid-retail price range a good deal. Private sellers don’t include personal warranties. On the other hand, if individual sellers are willing to provide you with the service records pertaining to their vehicles, you can decide whether they are in the shape you desire. In some instances, you can have the remaining portion of the original car warranties transferred to you.

How can you be sure you are not purchasing a vehicle that has a questionable background? Go to
www.carfax.com
and obtain a “lemon check.” You enter the Vehicle Identification Number (VIN), and carfax.com provides you with the vehicle’s history. Has it been in a major accident? Does the present odometer reading represent the vehicle’s actual mileage? You should also ask to have your own mechanic inspect the vehicle before you purchase it. If the existing warranty will continue for a reasonable period of time, this should provide you with additional protection.

B
UYING
H
OUSES

The first thing to decide when contemplating the purchase of a new house is the geographical area or areas in which you would consider living. Realtors like to say that
three critical factors affect the value of houses: “location, location, and location.” What areas are convenient in terms of your family members’ schedules and commutes? While a neighborhood close to your place of employment may be more expensive than a community ten or fifteen miles away, the monetary cost of your commute and the frustration and time lost because of traffic may outweigh the higher house prices in the more convenient location. How good are the schools in each area? Ask every parent you know—colleagues at work, fellow congregants, and others who live in the area about the different school systems. Residing in a good public school district will cost more, but if you have children and care about the quality of education they will receive, you will end up spending that money for expensive private schools if you select a home in a weak district.

What type of house do you want—colonial, contemporary, split-level, other? How many bedrooms and bathrooms would you like to have? How big a yard? Would you be willing to live on a busy street or would you prefer a quieter setting? Would you like to find a neighborhood with a number of families who have young children or prefer an area with few youngsters? Is the proximity to grocery stores and other shopping centers important? What about closeness to religious and cultural institutions, and recreational facilities? To avoid false starts, answer these fundamental questions for yourself at the beginning.

Learn How to Determine Price

The next step is to gather information on house prices. In many areas, you can access large realty firms through the Internet, or go to
www.housevalues.com
and list.realestate.yahoo.com
and gather information concerning both recent sales and current listings. Public property records, accessible through Lexis/Nexis or through government deed records should provide price information pertaining to all houses in the neighborhoods you are contemplating, with the most recent sales transactions being the most relevant. Even if you are still living a distance away from the location to which you are moving, you can subscribe to the local newspaper and begin to review the real estate advertisements. You can also contact major real estate brokers and have them send you information about available houses. Before you ever begin your actual search for a new house, garner enough information so you know the value of different houses in the neighborhoods you like.

Knowledge is especially critical with respect to home buying for two reasons: First, this is a large expense. Intelligent Negotiating will save you and your family several thousand dollars. Second, you may enter a seller’s market in which houses are moving quickly. If you don’t appreciate the value of a particular house, it may be sold before you even begin the serious discussions.

Contact Seller and Buyer Real Estate Agents

If you simply contact real estate firms, you will normally deal with seller agents who have a number of listings they hope to show you. While most real estate agents try to be fair to both buyers and sellers, these individuals are going to be paid a share of the sale price by their clients, and they feel a greater loyalty to those individuals. To
avoid this possible conflict, many home buyers now retain their own
buyer agents.
(To obtain information on buyer agents nationwide, you can go into
www.finderhome.com
.) These are individuals who work primarily or exclusively for purchasers. They have to satisfy their buying clients, or they don’t get paid. They thus have a real incentive to locate houses in your price range that satisfy your stated needs. If they are able to locate a house you like and you decide to buy it, they act as your bargaining agent vis-a-vis the selling agents. They are usually remunerated from a share of the sales commission. They can help you find good financing and assist you through the closing. Through Internet sites such as
www.lendingtree.com
, you can get several lending institutions to compete against one another to obtain your business.

It is important to remember that buyer and seller agents only get paid when they are able to procure house deals. As a result, even seller agents are not completely loyal to their own clients. I have encountered a number of real estate agents who were willing to indicate the degree to which particular sellers were anxious to relocate. Or they have noted that the sellers had already purchased another home and had a bridge loan that was due within the next sixty days. Several have told me that their clients would be willing to reduce their asking price by significant amounts, and a couple have even indicated that the sellers were being transferred by business firms that would subsidize the sale of their homes to allow them to lower the price and sell quickly. I doubt the sellers were aware of the degree of candor evidenced in these disclosures. I have also seen buyer agents suggest to sellers that their clients would be willing to pay more than they were presently offering.

House Negotiating: First Round

If you are planning to visit a new area for a few days to try to purchase a house, ask several realtors to send you listing information through the mail, e-mail transmission, or by fax. This allows you to become familiar with the general market before you arrive. Once you arrive, try to visit as many different properties as you can during the first day or two. This allows you to appreciate the houses that are available and the prices being sought. Ask the realtors a lot of questions. Have housing prices been increasing or decreasing over the past twelve months? How long does the average house remain on the market before sale? What are the current mortgage rates available in this area?

Once you have narrowed your search to certain houses, continue asking questions. Ask realtors how close to asking prices most recent sales have been? In some areas of the country, selling prices are very close to asking prices, while in other areas they may be 5, 10, or even 15 percent below asking prices. When you decide to make an offer on the house, privately ask the selling agent what he or she thinks would entice the seller. More often than you think, agents will suggest a figure below the asking price that they think would be accepted. How much do you want this particular property? If you have found your dream house, and no other home like it is available, you may have to pay a premium. If, on the other hand, other similar properties are available and you are willing to look elsewhere, you can afford to gamble.

Don’t try to talk sellers into lower prices by denigrating their house. They have probably lived in that dwelling for a number of years and have become attached to it. If you start telling them what is wrong with their house, they are likely to react with hostility and may
even withdraw from the negotiation process. You are better off telling them how much you like their house. After all, if you thought it wasn’t nice, why would you be thinking of offering them thousands of dollars for it? Once you have indicated how much you want to purchase their house, you can politely mention the aspects that might warrant a decrease in the price they are asking. If the interior or exterior must be painted, how much would this cost? If the carpeting needs to be replaced or the floors have to be refinished, what would this cost? While you may try to use such information to generate price reductions, you must remember that the sellers probably considered these factors when setting their asking price. If you soften your discussions regarding these issues, the sellers are more likely to listen objectively and reevaluate the need to reduce the price they are seeking.

Some sellers try to whipsaw buyers against one another. As soon as they get an offer from one person, they have their agent contact the other parties who have recently expressed an interest in the house. They hope to generate a bidding war that will increase the price. To avoid this possibility, make an offer with a severely limited duration, say, good for a maximum of twenty-four or forty-eight hours. I have seen prospective buyers make offers that were good only until the evening of the date they were made. This forces sellers to decide how much they are willing to gamble. If they are anxious—particularly if their house has been on the market for several months—they are likely to move quickly. Most people are hesitant to reject a
sure gain
when they may end up with no sale.

In most instances, your initial offer generates a counteroffer from the seller. They may be asking $250,000 and you offer $230,000. They then counter with a request for $240,000, and you respond with a new offer of $235,000.
Before you know it, you have agreed to a sale in the area of $237,500. Since parties tend to move toward the center from their opening positions, you should carefully consider what your opening offer should be. You want to start as far away from the asking price as you can—while still generating real interest in the sellers. If your offer is insultingly low, you will offend the sellers and diminish the likelihood of a counteroffer. On the other hand, if you begin with too generous an offer, it may be readily accepted and you would experience “buyer’s remorse.” You would be displeased with the price and try to get out of the deal or obtain a price reduction as the closing date approaches.

When you sit down with your family and your buying agent to plan your opening offer, look at the asking price and the price you would like to pay. Try to select an offer that places your goal near the middle. Imagine where the seller would be likely to counter, and plan your next offer to keep your target number in the middle. If the seller makes a counter that is less generous than you anticipated, you can moderate your new offer. If, however, the seller comes down further than you expected, you may still wish to make only a slight increase in your counter to see how anxious the seller may be.

While you are making offers and counteroffers, the parties are usually discussing various items that may be included in the sale of the house, such as the drapes, certain furnishings, and various appliances. Would you be willing to forego these items for a lower price? In most cases, unless you already have these items, you are smart to increase your offer if the seller is willing to include them. The extra cost to you will normally be substantially below what it would cost to purchase these items new. Since most sellers have no interest in taking these house
specific items with them to their new location, they are willing to give you a good deal.