World Expert Negotiator’s Amazing Story Of Buying Her Home
How does a world expert negotiator buy a house? For a start, they ignore price.
Residz Team 4 min read
How does a world expert negotiator buy a house? For a start, they ignore price.
“I am never deterred by a list price for a house,” writes Dr Victoria Medvec in her just-released book Negotiate Without Fear.
The world-leading negotiation expert, with clients including Google, GE, McKinsey, Goldman Sachs and BlackRock, tells a story of buying a house well outside her price range in the Chicago area. Her story could be useful for Australian house buyers wanting to improve their negotiating skills in the property market boom.
She learned the sellers were retiring
The home bordered Lake Michigan and was significantly outside Dr Medvec’s price range. Dr Medvec did research on the sellers. She discovered they had built the home and were retiring to the city. Dr Medvec crafted her offer to focus on making the sellers’ move as simple as possible. She also highlighted that they were a young family who would take excellent care of the beautiful home.
She crafted three offers
Instead of slamming down a price, Dr Medvec writes that she crafted three options for the sellers. She stresses the importance of putting forward multiple offers at once, and names this model a Multiple Equivalent Simultaneous Offer (MESO). All three options had positives for buyer and seller. Here’s what she offered:
- Option A - The family would purchase the house and all of the furniture to simplify the sellers’ move. This had the highest price.
- Option B - The sellers could keep special pieces of furniture and Dr Medvec’s family would take care of everything else they wanted to leave. This had the second highest price.
- Option C - The sellers take all of the furniture. This had the lowest price.
Research has demonstrated that people who deliver multiple offers secure better outcomes for themselves, than people who make a single offer (Leonardelli, Gu, McRuer, Medvec, & Galinsky, 2009).
She made all offers lower than the asking price
Dr Medvec says her offers started at about 40% off the asking price. As you can imagine, this made her realtor (buyer’s agent in this instance) very uncomfortable.
“They felt our offers were so low we would lose credibility, and not get a response at all.
“Although I acknowledged the offers were ambitious, I believed we would get a response, because the multiple offers (MESO) frame a story focused on the seller’s needs,” she recounts in Negotiate Without Fear.
She focused on storytelling issues not price
Framing a story is key to success in negotiation. Try to discover ‘storytelling issues’ - things that are important to the other side, but easy for you to give. In this case, Dr Medvec was framing a story of easing the burden of having to move or get rid of bigger pieces of furniture, and used this effectively in her negotiations.
She pushed on despite objections
Dr Medvec was given pushback by her agent who said they would damage their reputation if they delivered such ridiculously low offers. Dr Medvec said she’d be willing to meet with the sellers directly to provide the three options so their reputations wouldn’t be affected. In the end, she met with the sellers’ agent and delivered all three offers. Remember, all three offers focused on making the move as painless as possible for the sellers.
She receives a counteroffer
Dr Medvec said she was delighted when the sellers came back with a counteroffer that also contained three options. All three of the counteroffers were significantly lower than the original list price, she writes.
She had anchored the price
Contrary to popular belief (ie. Who speaks first loses), research shows you should always make the first offer to anchor the price, Dr Medvec says. She recounts in Negotiate Without Fear an experiment that showed how powerful the anchoring effect can be. People were asked to pull a ball out of an urn full of balls. Each ball had a different number on it. If they pulled out a ball with the number 50,000 on it, and were later asked “How many McDonald’s restaurants are there?”, their number would be much closer to 50,000 than someone who pulled out a ball marked 5000. The anchoring effect worked, despite there being no link between a random ball and a question on McDonald’s restaurants.
She bought the house
Dr Medvec said the dramatic price adjustment from the sellers shocked her agent. They’d expected no more than a 10% reduction in list price by the end of the negotiation. Instead, a significant concession by the sellers was part of the counteroffer. The multiple offers (MESO) had made the first offer from the buyers appear flexible and cooperative.
“We were able to purchase the house at a price substantially lower than other offers the sellers had rejected in the past, and well below the asking price,” she writes.
Summary
Dr Victoria Medvec says there are five ‘F’s” you want to do to become a fearless negotiator:
- Go First: You want to make the first offer, despite what you may have heard before.
- Focus on them: Craft a rationale that focuses on the other side and their needs.
- Frame your offer correctly: What pushes their buttons?
- Be flexible: Leave yourself room to concede and leverage multiple equivalent simultaneous offers (MESOs)
- No feeble offers. Don’t be vague and say “Can you do better?” Be clear and direct with your offer.