There’s a book called Getting to Yes that argues against taking an adversarial position when negotiating. Instead, it encourages both parties to engage in principled negotiation to reach wise and fair agreements that leave both parties feeling good about the outcome.
This all sounds great until you’re in the middle of a contentious divorce or business break-up, or until someone offends you by making a low-ball offer on your house.
The Break-up
Sometimes life’s circumstances change without any warning, and we must respond. When it comes to real estate, this can mean selling your house or business property when you didn’t expect to. Here are a few pointers to make the best of an unexpected situation.
First and foremost, remember that when runaway emotions control your actions, especially the emotions that call for vengeance, things rarely end well. You may have heard the expression, “Don’t cut off your nose to spite your face.” The real estate version of this is “Don’t refuse to pay the mortgage to punish your spouse.”
In a divorce, it’s important to stay current on all financial payments to protect both people’s credit. When romantic partners try to hurt each other by refusing to pay, both end up with negative hits on their credit, making it harder for each of them to buy or rent another place to live (which, presumably, they’ll need to do soon).
I’m divorced, so I understand the emotion that comes with such a big life change, but I’m telling you, it’s best for everyone—especially you—if you can put emotion aside and make rational decisions that benefit both parties. Consider all the options (refinancing, loan modification, short sale, etc.), decide who pays for what, and document everything (verbal agreements are worth the paper they’re written on).
I know it can be tempting to put off decisions: don’t. Hash out the details up front. You don’t want to move down the timeline with appraisals, inspections, and other contingencies, only to discover you cannot agree on who will pay for title insurance. This opens the door to last-minute excuses for negotiations, which can derail an escrow.
Playing Hardball (Especially after a Low-Ball Offer)
Regardless of whether there’s been a falling out, some people are of the mind that negotiations are a zero-sum game: meaning if the other side wins, I lose, and vise versa. Sometimes, you really can have a win-win, but you have to be willing to share what you want and what you need.
I’ve found that clear, open discussions can lead people to discover that both parties can benefit from a negotiated position. I’m often asked to define a fair rate for seller financing, but the answer always depends on the details of the transaction. If a buyer is paying $450,000 for a house with a fair market value of $500,000, the seller shouldn’t make concessions on the terms of the loan. On the other hand, if the property is worth $500,000 but buyer is willing to pay $550,000, then concessions are appropriate—a lower interest rate could benefit both parties.
Let’s say the seller has twin daughters going off to college in a few years and the buyer has just launched a business with a lot of start-up costs. The seller would be willing to offer a lower interest rate if the buyer would be amenable to a balloon payment in a few years. That works for the buyer because in a few years, the buyer’s business will have had a chance to earn a profit. The buyer could pay off the loan and/or refinance at that time. In the meantime, while her business was growing, she would have benefited from a low interest rate. And the seller gets cash just as he needs it to pay outrageous college tuition.
When you negotiate, make sure both parties are aware of what’s important to the other. That way, you’ll know if there’s an opportunity for both to get what they need and want.
If you have questions about property management or real estate, please contact me at [email protected] or call (707) 462-4000. If you have an idea for a future column, share it with me and if I use it, I’ll send you a $25 gift certificate to Schat’s Bakery.
Dick Selzer is a real estate broker who has been in the business for more than 45 years. The opinions expressed here are his and do not necessarily represent his affiliated organizations.
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