[The following is the fourth part in a series about my adventures to buying a vacation/retirement home. It may make more sense to read it after Buying a Vacation/Retirement Home and Buying a Vacation/Retirement Home (Part 2) and Buying a Vacation/Retirement Home (Part 3). There’s also a prequel at Time to Buy that Vacation/Retirement Place?.]
I feel like this journey is getting a little long, especially for those you who aren’t in a house-buying state of mind. With that in mind, I’m going to condense the story quite a bit. When we last left, there we had 6 places that we liked. In dollar per square foot terms, two represented very poor values, but my wife liked them. By the same measure, two other properties were great values, but one is a slightly questionable part of town, and the other was a slightly creepy, unfinished mansion.
We limit ourselves to the final two
The two leftover properties in the middle of the value, hit exactly what we were looking for. They were both recently renovated. One was average size, with a small year, but near the beach. The other my wife described as the Barbie Dream home, bigger and better, with more land… but it was further from the beach and really stretched our budget to the limit… maybe even going a little beyond it.
Time to feel out the sellers
We decided it was time to start placing bids. Our agent did a good job of calling up the seller’s agent and fishing out what would be an appropriate starting point. He did this by crafting a story and saying, “My clients don’t want to embarrass themselves with a poor bid, but how about something in [this range].” The value for this range seemed to be around 18% off the asking price to about 10% off the asking price. For example, if the place was 300K he’d say, “They were thinking of something around the mid 200s, how do you think your client would feel about that?” The typical response was that a mid-200 would likely be rejected, but that a high-200 bid would be taken into consideration.
There was a lot more information given up by the sellers such as the couple’s desire to move more quickly or wait until the summer market. It was hard to trust whether the seller was really looking to wait, but a sign that they want to move quickly definitely adds to our negotiating leverage.
Time to make the bids
With the information from our “feeling out”, we learned that the while the people at the Barbie Dream House seem to be in a hurry to move, they’ve already rejected some offers around the 8% off their asking price. We would need them to come to at least 12% off to begin to entertain it and 15% off to really consider moving forward. This didn’t seem likely.
The other house (the one near the beach) implied that a bid at 20% off the asking price would be asking for too much, and that around 15% wouldn’t be a bad start. We decided to float a formal Purchase and Sale agreement at 16% off their asking price. They countered by reducing their asking price by 2.3%. We decided to offer a number at 13% off the original asking price – a sizable sign of goodwill on our side. They countered by offering a price that was 4.7% off the original asking price – not much of a move from before. Despite their poor counter, we decided to try another sign of goodwill… we suggested we split the difference at 8.8% of the original asking price. That was painful, because we had given up significant negotiating ground already. They countered by suggesting 5.9% off the original asking price – their lowest concession yet.
If we were to accept that, we’d have come up in price twice as much from the reasonable starting point (that their agent suggested) than they would have come down. I think the goal of a negotiating is that each person should have a good feeling about the result. I was certainly uneasy about even offering to split the difference after already giving up the biggest concession. Anything less than agreeing was “walk away” time for us.
That’s just want we did. We didn’t even respond to the final counter. Their negotiating tactics have left us quite bitter. At this point, I wouldn’t take it if they came back accepted our offer to split the difference. They would have to work their way back to giving us 10% off of the original asking price. I’m penalizing them for being greedy.
In the meantime, we are turning our attention back to the Barbie Dream House. With a couple of weeks passing by and their original desire to be in a hurry to make a sale, perhaps we can swing a deal.