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Haggling down home and car prices like a pro

The art of haggling Fishing has been defined as a jerk on one end of a line waiting for a jerk on the other end.

Selling big-ticket items such as houses, cars, appliances and jewelry is a lot like fishing. Salespeople, including savvy homesellers, hook you and reel you in by using a variety of negotiation strategies. They use those time-tested tactics on you whether you want them to or not.

Since you can't avoid the salesperson's negotiating ploys, your only defense is to recognize what he's doing. You then have the chance to use some of those tactics yourself -- becoming the fisherman instead of the fish.

It's called haggling. How well you do it could be the key factor in determining the price you agree to pay for your new home or car.

When consumers make major purchases, the most common mistake they make is to assume that negotiating is not an option, says Steven Cohen, who dispenses advice online and in seminars as founder of The Negotiation Skills Company.

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It's there, if you can find it
In fact, he says, there is room for negotiation in virtually every purchase.

Roger Volkema, a management professor at American University, touts the Golden Rule of Negotiation: "People will not negotiate with you unless they believe you can help them or hurt them."

You can help the seller by buying, and hurt the seller by going to a competitor or by wasting his time. So unless you're buying something unique, like the Hope Diamond, there is almost always room for negotiation.

The second most common mistake: lack of preparation. "That can be disastrous," Cohen says. "If you negotiate without preparing properly you can actually make your position worse."

A seller aware that you are guessing or bluffing will be unlikely to give an inch.

Haggling isn't unseemly, seat-of-the-pants horse-trading. It's more a freewheeling form of negotiation.

Ready for action
You prepare in three key steps, by:

  • Determining exactly what you want
  • Researching to find out what constitutes a fair price for what you want to buy
  • Figuring out what's most important to you and to the seller

Don't assume that the seller shares your priorities. Yours might be price, but the seller's top desire might be a quick sale. Or it might be something that you would never expect.

"People need to think in broader terms and think of negotiation as discovery," says Volkema, author of The Negotiation Toolkit: How to Get Exactly What You Want in Any Business or Personal Situation.

But what if you discover that you and the seller share the same priority: You both want to get the best price possible? Then it's time for "power negotiating," says Roger Dawson, author of Secrets of Power Negotiating.

You are a power negotiator, he says, if you get the deal that you want and the other person believes that he or she has won the negotiation.

Haggle or be haggled
Dawson lists tactics that sellers -- and smart buyers -- use when haggling for big-ticket items:

  • Invoke higher authority -- In this tactic, the buyer and seller arrive at a tentative agreement, then one party has to get someone to OK the deal. Anyone who has haggled with a car salesperson is familiar with this tactic: You arrive at a price, then the salesperson has to get the sales manager's approval.

Buyers use this tactic, too. The wife can say she loves the house, but apologetically explains to the real estate agent that her husband won't budge unless the price is reduced. Later, they agree to buy the house if an inspector (a higher authority) finds no serious defects and a bank (a higher authority) will lend the money.

If the "higher authority" tactic is used on you, return to your original position. For example: A refrigerator is listed at $1,300. You offer $1,100. The salesman says he can sell it for $1,200 if the sales manager approves. When the sales manager says to you, "I understand that you're offering $1,200," your response should be, "No, your salesman offered $1,200. I'm offering $1,100."

  • Never say yes to the first proposal -- The seller will wonder if he set the price too low and whether he is about to "lose" the negotiation. "You want to ask for more because you want to allow the other person to get a win," Dawson says.
  • Make sure to flinch -- The most common tactical mistake that consumers make is to remain calm in the face of a proposal, Dawson says. It's better to flinch -- to appear shocked and surprised by an "outrageous" offer, even if it's not really unreasonable. You might think a stoic demeanor looks professional, but in the haggling business it will cost you.
  • Squeeze your opponent -- Dawson calls "the vise" one of the most effective tactics: "You say, 'I'm sorry, but you'll have to do better than that.' Then you shut up." Chances are that you'll get a more reasonable offer. Too many people, says Dawson, just can't stay quiet, they blink and fill in the silence with words that drain all the power out of their rejection.
  • Never offer to split the difference in price -- Always wait for the other side to split the difference; it gives your opponent a feeling of winning and, if you split the difference again, it'll be in your favor.
  • Save a small concession that you're willing to give up at the end so the other side can feel the satisfaction of winning something.

You might not feel comfortable using these tactics but, the experts say, they'll be used on you.

When you plan to buy something expensive, you might want to consider practicing on salespeople beforehand. Simply being alert as you go from car lot to car lot, or house to house, can educate you in a hurry. In addition to brushing up on your skills, you'll get a good idea of what's a fair price.

What you'll need to know
to haggle successfully

"I think it's a good idea, when you're making major purchases, to go to several places, shop around not only to make comparisons but to get some confidence," says American University management professor Roger Volkema.

"In the real-estate business," he says, "they say the three most important elements of selling a house are location, location, location. The key to negotiation is information, information, information."

The most important thing you need to know is what constitutes a fair price for what you want to buy. For things such as appliances and jewelry, you can get a good idea by visiting several stores.

For houses, find out prices paid recently for comparable houses in similar neighborhoods.

  • Ask a real estate agent for a list of "comparables," or visit your county tax office and look at sales records.

For automobiles, find how much the dealer paid for the vehicle, then negotiate a price that includes a fair profit.

  • Edmunds.com is a fine place to find out the invoice price of a car as well as how much the manufacturer has provided the dealer in holdback. Don't know what holdback is and why it's important? The site tells you.
  • Intellichoice is another option for automobile pricing information.

 

-- Updated: June 24, 2004

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