At some point during the first consultation I have with every new buyer he utters the sentence, “Well, and I don’t mean to be a difficult client, but I’m going to want to get a good deal,” and glances at his spouse for support. She nods earnestly in an almost apologetic, but firm manner.
“Yes, a good deal,” I always repeat, and take it down in my client notes as though I’m hearing it for the first time, mostly because it would be offensive if I rolled my eyes and said, “Wait, you want a good deal? This is shocking. No one ever wants a good deal! Mavis, hold the press!! This guy wants a good deal!!”
But I also don’t say that because I get it. I was in that place once. I bought a house before I was a Realtor. The only thing I knew going into it was what the list price was and that I didn’t want to just give them what they wanted. This wasn’t because I couldn’t give them what they were asking, or because the mortgage payment for what they were asking was too high for us to afford, it just seemed pretty obvious that in any negotiation someone has to be the winner and someone has to be the loser, and paying what they were asking for the house would clearly make me the loser. I don’t like to lose. I didn’t know what the house was worth, but goddamn it, I wanted a good price.
I’ve written at length before about how to write an offer, and that’s not where I’m going here. Today I want to talk about this idea of a Good Deal. Let’s start with an analogy about wine (because there are two things in this world I know and love, a good analogy and wine).
You want to buy an important bottle of wine. It’s a 1992 Pinot Noir from an Oregon vineyard. You want this wine for a special night with your wife celebrating 20 years of not ending up in a murder/suicide situation (AKA: wedded bliss). Now the question is: How do you prefer to acquire the specifically special bottle? Here are your options:
A – Total Wine has this bottle right now. It will cost you $375 (and you’ll probably buy lots of other things because how can you not? It’s like Toys R Us for adults with stressful jobs).
B – There’s a discount wine shop you’ve heard of in downtown Chandler. There was a gang shooting pretty near there in broad daylight last week, but you called and they have the bottle you’re looking for available for $350.
C – You can order the wine online direct from the vineyard for $300, but you will have to pay shipping and you need to order it 3 weeks ahead to get it on time for the anniversary.
D – You could have purchased a bottle of the wine when you visited the vineyard on your honeymoon 20 years ago and saved it in your wine fridge until now. Back then they even let you carry wine on the plane. It would have cost you $30.
E – You could buy a different bottle of wine today at Total Wine that’s not quite as pricey. Sure, it wouldn’t have nearly the emotional significance of this particular wine and will probably have that nasty metallic aftertaste your wife hates, so she’ll be disappointed and might even give you the cold shoulder tonight, if you know what I mean, but it will save you several hundred dollars. You can get totally make your wife cry and be rejected easily for about $25.
OK, so assuming we have a time machine and all of these options are actually possible, which would be the best deal? D is what you’d want to do, right? Sure, maybe you could haggle down the ghetto discount wine shop a few more dollars, or hey, if you order a case of the wine in question from the vineyard, you might even be able to get it for $200 a bottle. Even taking into account inflation, however, buying the wine when it was inexpensive on the market and hanging on to it while it aged and increased in value is the most economical option, by far. Still with me?
My point is not: You should probably figure out how to build a time machine, or just quit your whining. My point is it’s important to keep in mind the very best deals come with the most favorable market conditions. Let’s translate this to real estate. Which of these scenarios would you prefer to have purchased a house in:
A – A 4 bed/2 bath/3 car garage in Gilbert in 2005 for $10k over asking price at $350k.
B – The same 4/2/3 in Gilbert in 2007 for $20k under asking price at $280k.
C – The same Gilbert 4/2/3 in 2009 for $40k under asking and the seller is paying your closing costs at $250k.
D – Same Gilbert 4/2/3 last month (2012) for $10k over asking at $190k and you have the historically low (and almost unbelievable) interest rate of 3.75%.
E – A different Chandler 3/2/2 that has a back fence 20 feet tall because it backs to the 202 in 2005 for $20k under asking price at $250k.
See the big picture? Even though you have to pay $10k over list price, D is the best deal.
You can’t get too consumed with winning the battle of the negotiation with the seller. The war is with the market. Focus on buying at the right time and then do what you need to do to acquire the property. (Also? Now I really want wine. Although boxed would work. I don’t really need 20 year old Pinot Noir from Oregon.) (Also, also? I have at least 3 current clients who are going to read this and think I’m talking specifically about them. I’m not. I’m talking about everyone.)