Bargaining Tips – Information is King

Here are some bargaining tips that I used when buying land in California. These tips will work well for you, even if your purchase isn’t a 50 acre estate on a mountain top.

One day I found an excellent piece of property that was beautifully situated on top of a mountain in northern California. The seller seemed motivated, but the $125,000 price tag was a bit more than I wanted to pay. Yes, I was engaged in frugal shopping for bare land.

My first move was to have the water tested for all kinds of contaminants, more than what was normally tested for. I wanted to be certain that I went into this negotiation with my eyes wide open. Since water is key to a home site, having a thorough testing regimen seemed reasonable and prudent.

Among your list of bargaining tips, make certain "eyes wide open" is near the top. In order to do this, you must actively seek information that is relevant to the purchase.

It was a good thing I had a thorough water test performed, because without it I wouldn't have been aware of the presence of boron. The level of boron was high enough to be of concern if it were consumed on a regular basis for many years, but not very much higher than recommended maximum permissible levels.

Knowing this, I investigated ways to remove boron from water. It was possible to reduce it to acceptable levels, but it couldn’t be removed altogether. It was a bit costly ($5,000) for a device to reduce the boron, and it wasted a fair amount of water in the process. It was also possible to drill another well to find water that didn’t have boron. This would be even more costly.

Your list of bargaining tips should also include "follow the information trail" to extract relevant information about the purchase. The cost of removing boron and drilling a new well was part of that "information trail".

There was another issue concerning telephone and power line access to the property. To reduce the ridiculously high cost of these utilities ($20,000 and $25,000 respectively), a cooperative agreement would have to be reached with the neighbors.

I spoke with the power company and learned that a route for power wasn’t formally approved, and not all the neighbors had bought into the idea. Of course, without telephone or electric power, the value of the land was diminished in my eyes.

I used all this information to my benefit. I crafted a rather complex proposal that offered a significantly lower price for the land, about $75,000 ($125,000 minus $5,000, minus $20,000, minus $25,000), due to the many presumed yet unknown costs associated with addressing the water, telephone and electricity issues.

The proposal basically stated that if all the eventual costs to address the issues were as they seemed at the time of sale, then the lower purchase price would be compensation enough to the buyer. The lower price was indeed attractive to me.

The attractive part of the proposal for the seller was that with the resolution of these issues, costs would become known and the seller would be compensated for presumed costs that didn’t materialize. The proposal also included compensating fees to the real estate agent so it was attractive to her as well.

Here is another point to add to your list of bargaining tips: make the offer a win for all parties involved. Here, you can see that my proposal considered my interests, the seller’s interests, and the real estate agent’s interests.

I knew that the proposal was too complex for the average person, and the gestation period for resolving the issues would be rather long. This would encourage the seller to make a counter offer, and he did.

The seller simply wanted to get the property off his hands, so he made a counter offer of $100,000, and I accepted. I loved the land, and I didn’t want it to get away. I knew that the issues could be resolved relatively easily and cheaply, but I didn’t want that belief to surface during my negotiations.

Having information was a key to saving money on this land purchase. This is one of the most important bargaining tips for you to remember.

I believed that the electricity would come eventually once all the neighbors had an interest in getting it to their building pads. The water wasn’t that big an issue since the concentration of boron was only a few parts per million over what was the recommended maximum. Also, the telephone would easily come along with the power poles for electricity.

So, with additional information in hand, it was easier to think of ways to make the sale happen at a price that I wanted. All I had to do was show the seller all the obstacles to the sale. This gave him incentive to make an attractive counter offer to offset the perceived problems with the sale.

Knowing a bit about the real estate business was also helpful. I discussed with the real estate agent that since the issues and problems were identified, they had to be disclosed to any future potential purchaser.

She agreed that was the case. So you can imagine that her conversations with the seller included the advice that he had better make an attractive offer to the potential buyer at hand, rather than risk not getting another buyer because of all the difficulties that had come to light.

Lastly, the agent was motivated to sell this property to me because without a sale, there was no commission. She represented both the buyer and the seller, but like all agents, the sale gets the commission, so pushing my offer through with enthusiasm was in her best interest.

Having information is key to successful negotiations. You can’t haggle with a seller and be a smart shopper without information that might be vital to your interests.

For more bargaining tips, refer to how to negotiate a better deal, bargaining tips for big ticket items, and bargaining for cheap solar energy products.

Done with Bargaining Tips, take me back to Frugal Shopping