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Comment by petercooper | Hacker News Reader

Buyer: I think I could come up to maybe $7500 but that’s about it. .. then later: Buyer: Ok at $10,500 we have a deal.

I've sold a few projects in my time, but this conversation makes me think I should really look at having an agent represent me in future. The whole "I can only offer $7500" but then that turned into a $10500 sale just goes over my head - the communications skills needed are next level, and I've read Getting to Yes and such books :-) Maybe having someone less emotionally attached to a project could work in negotiations to increase the price to far more than cover their fee?

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In reality it's much easier. I've sold couple of my projects before via different mediums (one is through microacquire - the one OP mentioned, and one was through a connect), and the best way i found to go about it is to be ready to walk away from the deal.

I know this is negotiations 101, but it's tough to put it in practice most of the time if one person wants a little bit more to see the transaction through. Surprisingly, communications skill doesn't play that big of a role, unless you really want to "sell it" most of the conversations goes the same way OP mentioned.

Another great way is to make sure there are multiple prospect buyers and have them bid against each other.

On the flip side, an agent is motivated to close the deal not necessarily get the highest price. If the agent gets 10% cut, they get $750 or $1050. Is $300 worth potentially souring the deal?

That means you need a better incentive structure for the agent. Like 30% above a certain bar, for example.

That's a common complaint about seller's agents in real estate.

Unsure what the solution is. A seller can, of course, say that they refuse to sell for under $X, though that could potentially still be leaving money on the table if the buyer might have been willing to offer $X+Y.

A reserve price just sets a target for the agent and they negotiate to that target. I'm sure there are some commission based structures out there that address this inbalance.

I think one better way to handle commissions for home sales is to have no commission for the first $x of the price. X being a price that it would be very easy to sell at, a price low enough that the property would just immediately sell without much effort because it is too low. Then apply a much larger commission percentage to the amount it sells for above that "easy sale" price. That way, the seller and the agent actually have more closely aligned incentives and thus motivation for the agent to try and get that last $5k, or whatever.

Have you negotiated this?

Or have you ever seen an agent offer this?

To explain the issue in detail for others that don’t understand the dynamics:

A flat percentage is the standard where I live. Selling agents are only incentivised to get as many sales through as quickly as possible, and the agent will deceive and cheat to achieve that goal. Selling 20 homes at 5% discount is almost double the earnings (commissions) for the agent than selling 10 homes.

Agents make wayyyy more by selling more houses quickly than they ever could by spending more time selling each home to get a few percent more.

Yet the person selling the home really really cares about that few percent because their home is often highly leveraged: if they have paid 20% of principal and get 1% more from the sale, that is actually 5% extra return (which can easily be equivalent to avoiding many extra years of work before a home is paid off).

> which can easily be equivalent to avoiding many extra years of work before a home is paid off

Yes it is an exaggeration at 1%, but not such an exaggeration when you consider that 3% is a realistic amount extra that a real estate agent can get if motivated. https://financialpost.com/real-estate/the-realtor-client-dil... - “a real-estate agent keeps her own home on the market an average of ten days longer and sells it for an extra 3-plus per cent, or $10,000 on a $300,000 house.”

When I wrote it I was specifically thinking of low paid friends who missed out on about 5% when selling their home due to poor advice from the agent during a hot market (my friends also failed to think straight because they don’t work in negotiation jobs, and they struggle with emotions involved with the amount involved). The reduction in principal will translate to requiring a total of ~10% extra over the lifetime of the new mortgage (extra interest = ~5%). I imagined how that would translate to extra years of work for them when they should be retiring. I also thought that the story of my friends happens to many, because many people are not used to negotiating sales for $x00,000 and have little financial experience to understand the impacts of their decisions.

No, I have not ran this by an agent, but I likely will in the future.

I especially think that buying agents have the most messed up commission structure out there.

Not only is their real incentive just to make as many deals as possible, just like a seller's agent, but they actually get a bump in commission the more you overpay for the property.

Never Split the Difference is another good book to read.

This negotiation as written was just moving down by the same amount offered by the buyer, is that what the book would recommend as a technique? It gave a gain of $750 over splitting the difference from the start.

The book does not recommend it as a technique for starting a negotiation but does include a chapter on the final barter/haggle over price and how best to handle it

> This negotiation as written was just moving down by the same amount offered by the buyer

Huh, didn't even notice. Thanks for pointing that out!

If you continued to play it out with computers you’d run into Zeno’s paradox. At some point the buyer stopped going to lower increase amount,s but it could happen in which case I guess you’d end up in the middle and quibbling over pennies.

I haven't read the book, but, in general, it's not a good move to split the difference from the start, because there is usually at least one more round of back-and-forth. So once you've split the difference, you're already going to end up closer to the other person's initial bid.

e.g. "I want 10,000" -> "I'll offer 5000" -> "Let's spilt the difference and say 7500" -> "How about 6000?" -> ... now you're already between 6000 and 7500.

Great book, would recommend. Not surr how often it has been useful for me still it is a very pleasant read. The main idea is to not give in so easily and to find mutual wins, e.g. he gives the example that he could help the other party get an article in a magazine - barely related to the deal, cost nothing for him, but was worth a lot to the other party.

> "I want 10,000" -> "I'll offer 5000" -> "Let's spilt the difference and say 7500" -> "How about 6000?" ->

"Okay, spliting the difference on that works out to 8000. Sounds good."

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