A Property is Only Sold When the Buyer and the Seller Disagree on its Value!

Whether you are buying a property or selling a property, if you understand how to capitalize on the "value disagreement" principle then you will be able to increase your profit dramatically.

When you read about, or hear people talking about, negotiation they usually talk about the parties reaching an agreement. They only reach that agreement because of an underlying disagreement on value.

If you are selling me your house then to reach the point where we have a sale you have to believe that the amount of money that I am offering has more value (to you) than the house does.

From my perspective as the buyer I have to believe that the house that you are offering me has more value (to me) than that particular amount of money that I am offering you.

If one of the parties thinks that the amount of money is exactly equal to the value of the house then there is a good chance that they won't go ahead with the deal because they will have an underlying feeling that they could do better.

This may sound like a trivial distinction but it is not. Knowing this simple fact about value will guide you to one of the most crucial factors of good negotiating; part of your job as a negotiator is to help the other person feel like they got the better end of the deal.

In order to do this well you need to have a good idea as to what value the other party is placing on the deal. You can best do this if you know why they are negotiating.

If a person is selling his house so that he can buy a more expensive home then he will more than likely over value the house he is selling because his underlying desire is probably to reduce the shortfall between the sale of this house and the purchase of the other.

On the other hand if this person has plenty of money and his wife is pressuring him to get the more expensive home then that brings a time pressure into play that might drop the value of the house in exchange for the peace of mind of being able to move quickly.

If the person is in financial trouble and needs to sell the house then knowing the degree of financial trouble can help you guess at the value they are placing on the sale. Similarly if the person is moving city to take up a new job then knowing their deadline can be very useful to you.

In the case of the buyer their reasons for buying can greatly influence the value that they place on the house.

If the buyer is an experienced investor then they will place a commercial value based on the profit that they can make. If you push beyond that then they will simply walk away and look for another house because they have no emotional tie to this one.

By way of contrast, if the buyer plans to live in this house and thinks it is in the ideal location and is just the type of home they are looking for then their value may be considerably higher than the value that the investor had in mind.

Of course you have to go through the same exercise with yourself and decide, before the negotiation, what the value is to you. When I am buying an investment property I have a system that I use to value the property from my perspective. I write that value on a piece of paper and put it in my pocket before I go to the negotiation. I will never go even a single dollar beyond that value.

If the other person's perceived value is not what I want it to be then I always negotiate with the intention of them changing their mind and re-evaluating the worth of the deal. In that way I can still win but they will walk away happy that they did really well. Negotiating in this manner will win you a lot more deals and the deals will stay in place because the other person genuinely believes that they won.