How to Negotiate the Best Deals in the Worst Situations

Date: 07/27/2007

Five siblings are involved in the negotiations for a piece of property I'm interested in buying right now…despite the fact

that the father is still alive and holds title to the land. Five siblings each with his own agendas and ideas. Not exactly what you want on the other side of the negotiation table. Give me a single owner any day…one who can make his own decisions.

I agreed to the counter-offer presented by the lead brother; still, my agent reports, we don't have a deal. Seems now that two of the siblings want to hold out for more money. I've agreed to the slightly higher price but added some stipulations as to how it would be paid. Negotiations continue.

On my most recent scouting mission, the real estate agent pointed out ranches for sale as we drive through the countryside. How much is that one, I'd ask? $3 million. Who are the owners? Three siblings. And that one? $2 million. Just a brother and a sister. It doesn't matter that the first property is half the size of the second property. Three sellers…$3 million. Two sellers…$2 million. I see a pattern. Everyone wants to walk away with a million dollars.

All gringo buyers are millionaires, right? The local sellers want to be millionaires, too.

Setting a price and negotiating a sale are entirely different processes outside the States. Educating your seller can be a big part of the buying process. It's all about expectations.

In Panama, about a year ago, a gringo buyer called a meeting of the local farmers to see who was interested in selling. He made the blanket statement to the group that he was willing to pay $5 a square meter for oceanfront land. At that time, oceanfront land in this part of the country was worth nothing near $5 a square meter…but this gringo set the market (thanks a lot, buddy). He set the sellers' expectations. Today, more than 12 months later, land in the area still isn't worth $5 a square meter, but try explaining that to the farmers. They are all sticking to that price. The gringo never did buy anything, and he made it much tougher for the rest of us to get a square deal.

Sometimes, the seller doesn't actually want to sell. In Dubrovnik, I made an offer on an apartment at full list price. Initially, I asked the owner to carry back half of the sales price for three years. They didn't understand the "carry-back" concept. They thought they would get the 50% down payment then continue to live in the apartment for three years, at which time I would pay them the rest of the sales price…and they would move out. Rather than trying to educate them on my first offer, I countered with 100% cash at closing. Still…they didn't accept. It turned out they didn't really want to move. Their daughter was pushing them to sell the apartment, expecting that she'd walk away with some of the purchase price and be able to buy her own place.

In Bucharest, at the start of the real estate frenzy that continues today in that city, I was frustrated by buyers who were taking their properties off the market…only to relist them a month or two later…for more money. They'd look around and see their neighbors selling for ever-higher prices…and, current offers or contract negotiations notwithstanding, they'd decide they weren't selling. At least not yet…not at any price. They'd walk away from the table no matter what you offered…believing that, in two months time, they'd be able to sell for much more. And they were in no hurry.

How do you navigate these kinds of "negotiations"?

If you're buying for investment, stick to your numbers. Don't allow the buyer's erratic or mysterious behavior get to you. The asking price is just that. If you come up against a stubborn seller who's not interested in considering anything but sticker price…and you can't justify that number…move on.

Another opportunity will come along.

I'm at counter offer number five with my five-sibling seller group, and both the price and the terms are still up in the air. But I'm sticking to the numbers. I know what I can afford to pay given my exit strategy. If I don't work out a deal on this one, I'll find something else.

Your scout, sticking to the numbers,

Lief Simon
For International Living