How to Negotiate a Purchase Price
Around my neck of the woods, my friends and family call me “the negotiator.” It’s seldom that I pay full price for anything but at the same time, I have everything that I want. What I tell people is, “how do you know if you don’t ask.” Most people take for granted that the price tag is what they have to pay but most big purchases, multiple purchases, and sometimes mom and dad type businesses are more than happy to give you a break but only if you ask for it. Of course, there are several places out there that have the same no haggle policy but if you wait, the sales will come and if you any knowledge of the internet, you can find coupons to further your discount.
I took my girlfriend around to some of the furniture stores that I knew would be more than happy to have her business and would offer her a price that she would be willing to pay. Sure, I could have done the work for her but the first order of business was for her to be independent so that she wouldn’t monopolize all of my time whenever she needed great deals. Another thing she needed to learn was to be confident. Third thing she needed to learn was to do homework and research what others are selling and for how much. Why go through all this hassle? Simple. All furniture stores are competitive and all strive to provide the best price. Also, homework is done so that you get the feel of what a reasonable offer would be. Once you have done this, you need to put on your poker face and step up to the plate.
She found a 3 piece sofa set very similar to what she had picked out originally. It was priced at $1900.00. I asked her what she was willing to pay for it. She said, “about $1750.00.” Then I asked if she saw any other items that might interest her in that shop. Remember, when making a big purchase, you can further lower the price tag by purchasing multiple items. She really liked the matching 3 piece coffee table set priced at $300.00. “Lovely” I said, “now go up there and TELL the salesman to give you that sofa set for $1550.00.” Her eyes almost bounced out of her head. Once I explained my reasoning, it was crystal clear to her. First of all, the price tag of $1900.00 includes the actual price that the buyer paid, plus delivery, plus their cut, the salesman’s commission, plus their overhead. Other factor’s to keep in mind is that if the item is discontinued or scratch and dent, they might be willing to lower the price even further (even take a loss) just to clear way for something that they are sure to make $$ on.
The best and most successful negotiator keeps one thing in the back of his mind when he is negotiating�the only way this transaction is going to be successful is if it is a win-win situation. What that means that there is something in it for both the buyer and seller. If both parties walk away happy, they will be most likely to do business again. Just as sellers are always looking for repeat customers, buyers are always looking for good deals.
I told her, “Sure it would be awesome if you could just walked up to the salesman and tell him what you were willing to pay and he agreed immediatelyâÂ?¦ but that would be giving it away or perhaps taking a loss and that is just not going to happen in the real world.” Although that number may sound slightly ridiculous at first, it tells the salesman that you want that item and that you will purchase it only if you get their best price. This is how you negotiateâÂ?¦and remember that poker face. Once this first step is accomplished, the salesman will most likely walk away, crunch some numbers and present that figure. If your salesman hasn’t gone through his manager, chances are there is room for more negotiations. If you hang in there eventually his superior will send the salesman back with a figure that includes a minimum cut for the company and minimum cut for salesman. I am sure they would have been happy to make more money from you but they are just as happy to make a sale and keep you happy so that you are a returning customer.
After some back and forth the salesman finally came back with a figure of $1700.00. Keep that poker face because she still wants that matching coffee table set. I sent her back again with a figure of $1900.00 which includes the entire living room set. The invoice was totaled at $1995.00 including sales tax. She walked away with the entire living room set for the same cost of the 3 piece sofa set. Both parties were happy and chances are that they will be doing business again in the future.
Okay, so how did we manage to do this in less than 5 minutes? Well first of all, she didn’t bring her kids who would distract her while she was negotiating. She didn’t bring a family member or friend that stood buy her telling her that it was already a good price right in front of the salesman. She didn’t show any signs of desperation and she didn’t walk in without doing her homework. She was cool, calm and collected. She spotted what she wanted, told the salesman that the other stores sold similar items at a price she was willing to pay. She told him that she preferred what this particular store was selling but if the price wasn’t right, she was willing to make the purchase elsewhere. The bottom line to the salesman was that the buyer really wanted to purchase from him if the price was right. If that salesman came close to the number in her head then he could collect his commission today and hope to do business again in the future.
I always get asked, “how does it work if I am buying a house or a car.” It works the same way. The key is confidence and doing your homework. For instance, let do a car example. Start with the homework. You already have an idea of what car you want and the price range. Let’s say you want to purchase a SUV. Every dealership sells SUV’s but if you had to go to each and every dealership and research every single SUV and categorize options, it would take forever. So narrow it downâÂ?¦American made. Well, now your choices are Ford, Lincoln, Mercury, GM, Chevy, and Chrysler. Now price compare those SUV’s with the options you are looking for and show your poker face to the salesman to find out what their lowest price would be. Take that information to the dealership that is selling the car you want to purchase and now show them your poker face and that you did your homework. Chances are that if you work your magic, you could negotiate either getting the sticker price lowered or extras thrown in at no cost.
If you are buying a house or any type of real estate property, chances are that location is important. Investigate the area in which you want to move. What are other houses going for in that area, is it growing, is this an investment property or is it for yourself, what is the school district and resell value. All these factors are big players if you decide to sell and if you are buying for yourself. Realtor’s are great sources of information but never assume that they are in it to help you find the right home. Remember, it is the mighty commission dollar that keeps their homes warm at night. Do the homework yourself, not only will your learn more about the community you are planning on living in but chances are you will get even a better deal because you will know what you are talking about. AND, Never, Never, Never, let a realtor tell you what they think you should offer on a house. You should already know what you are willing to pay. The internet has a wealth of information and this is where you should start.
There are additional factors to keep in mind when negotiating the price tag of a house. Location is key but other factors to keep in mind that will assist you in negotiating the right price is the time of year when you are purchasing, how long has it been on the market and if it is bank owned. If the house is already empty then chances are that the owner has already moved out and is paying 2 mortgages and might be willing to lower his price further just to get a second mortgage off his plate. Most houses go up for sale during the spring and summer months so that school doesn’t get interrupted for those who have children. The only problem buying during these months is that you may face multiple offers or inability to get your offer accepted significantly lower than what you had expected. The big plus in buying during this time of year is that you will have a better selection.
If the house is a bank-owned foreclosure then you can work your magic and do really well. At this point you may be able to negotiate not only the price tag of the home but splitting the closing cost, inspection and other particulars. The final thing to keep in mind is that if the house has been on the market for a long time, you might be able to get a better deal. Your realtor can give you an idea of the timeframe just but looking at the MLS number.
If you are really savvy, there are ways to find out what the previous owner paid for their home and make your offer based on that number. Call this your competitive edge. Not only will it give you an idea of how that area is growing but if the owner is paying 2 mortgages, he might be willing to take a minimal loss at your advantage.
Negotiating is an art to me. It requires practice but once you have mastered it, I promise that you will save and feel pretty good about any purchase that you make. Not only does it build confidence, self esteem and character, it shows everyone who is in control over your wallet and that is the safest investment that you will ever purchase!
