The Intelligent Negotiator (30 page)

House Negotiating: Second Round

Once the parties achieve mutually acceptable terms, they sign a formal purchase contract. Do not make the mistake of assuming the deal is final at this point. You still have to agree upon a closing date, and you may have a time frame that differs substantially from that of your counterpart. As the buyer, you will want to have the house inspected to be certain everything is in working order, particularly if the house is more than a few years old. The realtor can help you find a reputable firm to hire for a professional inspection. You should normally not ask the selling agent, because he or she would have an interest in recommending someone who is unlikely to find too many problems. Ask a buying agent or a disinterested selling agent to suggest the names of several inspection services.

House inspectors almost always discover some problem areas. These have to be addressed before closing. Some buyers use house inspectors as the basis for the
Nibble Technique
discussed in
chapter 6
. They demand significant price reductions based on the problems that have been discovered. Some deliberately select inspection firms that have a reputation for finding difficulties. Even if everything is currently working, they point out the obvious fact that the roof is now fifteen years old, the kitchen appliances are ten years old, and the heating and cooling system may have to be replaced within the next four to five years. These facts should have been apparent when they initially examined the house, and these considerations
were presumably reflected in the purchase price. Sellers confronted by such claims should usually refuse to make price reductions.

If the inspector you hire finds some unexpected difficulties, sit down with the real estate agent and the seller and try to work out a fair arrangement. The seller may reduce the price accordingly or agree to fix up the problems before—or even after—the closing date. The seller may agree to place a specified amount of the purchase price in an escrow account to allow you to take care of the necessary repairs. Sellers who think that buyers are being greedy can agree to have the work done by their own people. This allows them to get the estimates and select the people to do the work. It also forces the buyers to indicate whether they really want the work done. I have seen buyers demand price reductions to permit them to have “critical” repairs done—only to have the buyers leave those items untouched for several years after they move in. They were merely using these items as a tool to obtain price reductions and didn’t really care whether those problems were fixed.

If buyers and/or sellers expect difficulty as the closing date approaches, they should allow their real estate agents to bring the deal to a successful conclusion. Buyers or sellers who fear last-minute problems at the closing can send their agents to the meeting with the necessary sales papers and their power of attorney, and not show up at the actual meeting. They can make themselves unavailable and force their counterparts to decide how much they are willing to hold up the final deals.

When potential difficulties arise in real estate transactions, it is important to remember that
both sides
want the deal to be consummated. The sellers are relocating and want to be rid of their house, and the buyers need a
new home into which to move. If both parties can remain civil and deal with problems in an intelligent manner, they will almost always agree upon mutually acceptable solutions.

S
UMMARY
P
OINTS

• Doing your homework before you enter discussions on a car or house purchase will make the experience a more pleasant and more profitable one.
  

• When buying a new car, first decide which makes or models would suit your needs. Then determine the actual dealer cost of those vehicles, and use that as your base negotiating price.
  

• Be prepared to negotiate the dealer profit, and the cost of options, as well as the transportation costs, dealer prep, and processing fees as the “sales manager” uses the “Nibble” Technique to obtain further price concessions from you. Only after you do that should you address the value of your trade-in (if applicable).
  

• When buying a house, contact seller and buyer real estate agents to obtain information about the cost of available houses in the areas in which you would like to live.
  

• Plan your house-buying negotiation strategy carefully, and be prepared for post-agreement bargaining.
  

C
HAPTER
11
S
ITUATION
3: N
EGOTIATING WITH
R
EPAIR
S
HOPS

T
oo often we consumers find ourselves at a disadvantage when we have to negotiate with car dealers over vehicle repairs or with repair shops over appliance breakdowns. We are usually not experts with respect to the machinery in question, and at times our lack of sophistication allows unscrupulous mechanics to take advantage of us. Since we are unlikely to develop the knowledge required to preclude unnecessary repair work, we should be able to use our negotiation skills to minimize the possibility of such events.

F
IND A
R
EPUTABLE
R
EPAIR
S
HOP

If you are not facing an emergency situation, you should first ask friends to recommend trustworthy vehicle or
appliance service shops. If you live near a metropolitan area, you may be able to look in a local consumer magazine for ratings of repair establishments. A call to the local Better Business Bureau can let you know whether it has received significant complaints about the firms you are thinking of using.

D
ESCRIBE
Y
OUR
P
ROBLEM AS
S
PECIFICALLY AS
P
OSSIBLE

When you take your vehicle or appliance to the shop, try to appear as knowledgeable as possible. You can start by specifically describing the problem you wish to have addressed. If you merely indicate to the mechanic, for example, that your car is not working properly or the refrigerator is making a strange noise, he or she may assume that you don’t understand how your machine is supposed to work. On the other hand, if you can explain the precise nature of the malfunction (for example, “The transmission is slipping when shifting from second into third gear” or “The freezer compartment has not been maintaining a sufficiently low temperature”), you accomplish two objectives: First, you make it easier for the repairperson to diagnose the underlying problem. Second, the more this person thinks you know about the repair to be performed, the less likely he or she is to take advantage of you.

A
GREE ON THE
E
XACT
W
ORK TO
B
E
D
ONE AND THE
S
PECIFIC
P
RICE FOR
T
HAT
W
ORK

Once the repairperson has examined the vehicle or the appliance and developed an understanding of the problem,
be sure to ask for a detailed explanation. What is the precise problem, and what should be done to correct it? Never be ashamed to admit your inability to understand the repairperson’s technical language. Ask them to explain using terms that a layperson can understand. If you still have difficulty comprehending the exact problem, ask for an even simpler explanation. Good mechanics are usually able to describe the problem and its solution in terms any of us can understand.

After you have nailed down the problem to be corrected, ask for a precise estimate of the cost. Have the repairperson detail the work to be performed—the parts to be replaced and the labor involved. You want an estimate that will apprise you of the exact cost involved. If they only provide general estimates, the work may end up costing far more than you anticipated. Once they give you a specific estimate, the shop is bound to that figure unless you subsequently authorize more work based upon the discovery of unexpected problems.

If you find the estimate high, don’t hesitate to ask about other options that may be available to you. Could the part in question be repaired instead of replaced? If you have to have a replacement part, could the shop obtain a used part from a junk dealer or a rebuilt part from a reputable firm? These options can save you a great deal of money and depending on the part, may last just as long as a new part.

Don’t hesitate to ask repairpeople: “Is that the best price you can give me?” They may be willing to substitute less expensive parts or offer you a lower labor cost to get your business. This is especially likely if business has been slow lately. Such a polite inquiry could save you 25 percent or more. If you would like to have this shop do the repair work but have received a better estimate from somewhere else, don’t hesitate to mention the lower bid. This shop may be willing to match that price.

If the estimate you have obtained is still excessive, telephone or visit other repair shops. If possible, take the car or appliance with you to give shop personnel the opportunity to examine it. They may give you a different diagnosis that saves you money. If your car is not running or the appliance is too large to take to the shop, some repair people are willing to visit your house to examine it. If they are hesitant to come in person, you can describe exactly what the first shop said is wrong and what must be done to correct the problem and ask for a second opinion. Another shop may have less expensive parts available or charge less for labor. This effort may save you $50 to $100 on an appliance and possibly hundreds of dollars on a vehicle.

Repair or Replace?

If repairs are going to be expensive, would you be better off purchasing another vehicle or appliance? Don’t give up on your old car or refrigerator too quickly. A $500 or $750 repair to your car transmission or $150 repair to your refrigerator compressor may enable you to drive the car or use the refrigerator for another four to five years. If the car or refrigerator is otherwise in good shape, the current repair expense may be a rational investment. On the other hand, if your car or appliance is old and you are likely to encounter future repair problems, you may find purchasing a new or used vehicle or a new refrigerator more cost effective.

Don’t make the mistake of continuing to throw good money after bad simply because of the amounts you have already paid for repairs to your present car or appliance. Such an
escalation of commitment
can entangle you in a losing venture. Assess whether the car or appliance has
become too expensive to maintain. Once it becomes too costly, look for a substitute no matter how much you have already put into this one. If you retain the car or appliance after the point of diminishing returns, you will not only waste good money, you also lessen the chance that you will ultimately purchase as good a replacement model. When you evaluate the amount you have spent on the old car or appliance, you often decrease the amount you are willing to pay toward a new car or appliance, resulting in the purchase of a lower quality replacement.

G
ET
I
T IN
W
RITING

Once you decide to have the repair work performed, obtain the following: First, ask for a written form indicating the exact work to be done containing a specific price quote. Second, ask the shop to specify the warranty period for the work being done. Many automobile and appliance shops now guarantee replacement parts for as long as you own the vehicle or appliance. Be sure to have them indicate whether the warranty covers parts
and
labor. If it only covers replacement parts, you will often discover that, should the new part fail, the labor cost to replace the part is nearly as expensive as the original repair.

Never give repair shops expansive authority to perform extra work they discover once they get into the current job. The authority you give them can be used (and often is) to substantially increase your final bill. Don’t hesitate to authorize minor work that doesn’t exceed a modest amount (such as $50), with the shop being obliged to call you and obtain specific approval for more extensive work.

B
EYOND
N
EGOTIATING:
D
ON’T BE
T
AKEN BY
U
NSCRUPULOUS
R
EPAIR
S
HOPS

If a vehicle or appliance part is being replaced, ask the shop to give you the old part once it has been removed. Many shops do this as a matter of course. Even if they do not, they should not hesitate to do so when requested. If you have any doubts about the shop’s reputation, secretly mark the old part in an area not easily seen by others. When they give you the part that was removed, you can look for your mark to be sure they have not given you an old part from another car or appliance. They may have simply repaired your existing part and charged you for a new one, as they did for a friend of mine who supposedly had to have an expensive alternator replaced in his car. He marked his alternator and left the car with the dealer. When he returned to the shop later that day, they gave him the “old alternator.” It was not the one that had been in his vehicle. He discovered that the shop had repaired his old alternator and charged him for a new one!