A few months back I had lunch with my old high-school friend Todd, who had just moved to a new city. As we sat down to our salad and steak sandwich, he shared that he had just made an offer on a home. I asked him about his house-hunting, and was impressed that he had avoided Expensive Sentences in his quest.
That’s a good thing, too, because for most of us our home is our greatest personal investment. Here are a few lessons we can learn from watching Todd.
He Developed Options
“Don’t fall in love with one, fall in love with three.”
This classic quote is the absolute best negotiating advice for buying a house. (Or buying a TV, or a software system, or a consulting engagement, etc.) Todd found several houses that would be good for his family, and moved forward with each of them as legitimate possibilities.
This instantly put him far ahead of most home buyers who find “the house” and then attempt to buy it without a strong backup plan. No options = no negotiating power. Options = power.
He Defined what was Important to Him
One of the houses had a high-end outdoor kitchen and patio for entertaining. Another house was more than twice the square footage of Todd’s old house. These two features were promoted with gusto by the realtor. But they weren’t important to Todd and his family, so they were not willing to pay more for them. Just because the current market prizes cork floors or great rooms or linoleum doesn’t make those things valuable to you: the benefit must be PERSONAL.
He Analyzed Costs Multiple Ways
Everyone can find a few comparable home prices, but Todd looked at pricing three different ways: comparable home sales, price-per-bedroom, and price-per-square foot.
Cost analysis can be tedious, but it always yields useful information. Taking different angles on the prices in different neighborhoods gave him insight into which houses were asking a fair value and which were over-priced.
He Negotiated with Reason, Not Emotion
Todd made an offer on the house, and the seller countered with a very minor concession (this happened while we were sitting at the table). At this point most people would get entangled in the emotion of negotiating, and start worrying about respect and “winning” more than about getting the best value. Todd kept his usual cool and stayed focused on making the decision that his wife and kids would be happiest about years down the road. Smart man.
These steps are crucial when you’re making a huge investment like a home purchase, but they can help us in nearly every purchase we make…with our money or with our time.
- Develop your options
- Know what is important to you
- Analyze the total cost
- Make the decision with logic & fact
Fine work, Todd. You’re an example to us all.