When you believe an offer is both fair and reasonable but it does not meet the sellers asking price you should?
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By — on September 19th, 2022 / Dealmaking The first offer dilemma in negotiations – should you make the first offer? Few questions related to negotiation techniques have yielded more academic attention and debate among practitioners in negotiation
research. One of the most common negotiation techniques: Don’t ever make the first offer, or risk “showing your cards” and perhaps unknowingly giving away some of the bargaining zone. Others provided experimental and real-world examples of negotiation evidence that making a first-offer will allows you to “anchor” the negotiation favorably (anchoring in negotiation),
particularly if you have a good sense of the bargaining range (see also, zone of possible agreement or ZOPA) and (even better) your counterpart does not. In a series of negotiation technique research studies, researchers Ashleigh Shelby Rosette of Duke University, Shirli Kopelman
of the University of Michigan, and JeAnna Abbott of the University of Houston provide evidence that might reconcile these competing perspectives. For their research, they asked MBA students to negotiate a single-issue price deal and recorded who made the first offer, the amount of the offer, and the deal outcome. Making First Offers, the Anchoring Effect in Negotiations, and Negotiation Success The subjects then were asked questions about their emotional state, such
as whether they felt anxious during negotiation scenarios and whether or not they were satisfied with the outcome. The negotiators who made the first offer felt more anxiety than those who did not – and, as a result, were less satisfied with their outcomes. Yet, backing up prior bargaining studies, those who made first offers did better in economic terms than those who did not. The implication? Advantages of Using Anchoring in Negotiation If you value only the economic outcome of your deal, make the first offer in order to anchor the negotiation in your favor. But if you value satisfaction with the negotiation process more than the outcome itself, you may want to avoid the stress and anxiety of making the first offer. The authors also recommended finding a “personal antidote that would prevent feelings of anxiety from emerging altogether.” For example, “some negotiators may find it helpful to role-play making the first offer and repeat this behavior in a safe simulation setting until they feel comfortable enacting it in a real-world negotiation.” What are your opinions on making the first offer? Let us know your negotiation techniques in the comments. Originally published in 2012. Related Posts
Several scenarios may warrant a counter offer, and the countering process looks a little different for home buyers and sellers. SellerA seller can counter a buyer’s initial offer to change the purchase price or increase the earnest money deposit. For example, let’s say you’re the seller and you list your home for $220,000. However, a buyer offers you $200,000 instead. Maybe you're still interested in signing a contract with that buyer for your home. If so, you make a counter offer of $210,000. At this point, the buyer may agree to that price, or the buyer may counter in response to your counter offer. To make your offer stronger, you may want to provide comps, or comparable homes in the area, to show why that price is reasonable. Sellers can also make counter offers for other reasons, such as changing the closing date or contingency periods. Sellers will typically communicate the terms of the counter offer through their listing agent or real estate agent, and may also put an expiration date on the counter offer to speed along the home sale process. BuyerA buyer can also counter a seller’s counter offer, as we’ve mentioned in the previous example. There are no limits to the number of counters you can submit as a buyer. Home buyers first create an offer that may be below the asking price when they want to negotiate the house price presented by the home seller. The home seller may counter with a higher price than the buyer’s original offer, but lower than the original asking price. If the buyer thinks the price is still high, they could counter it. Let’s take a look at our previous example, only this time, you’re the buyer. A seller lists a home for $220,000, and you, the buyer, offer $200,000. If the seller comes back with a $210,000 counter offer, you could accept the deal or counter $205,000. In another scenario, you might counter because a home inspection reveals issues with a property, such as a cracked foundation. You can ask the seller to take the price down to $200,000 if you find out that fixing the foundation issues will cost $20,000. Buyers resend the counter offer terms to the home seller through their agent. When you believe an offer is both fair and reasonable but it does not meet the sellers asking price?When you believe an offer is both fair and reasonable but it does not meet the sellers' asking price, you should: Make no recommendations and let the sellers decide on their own.
Who typically present an offer to the sellers?If you decide to make an offer and are not working with an agent, you will be responsible for presenting the offer to the seller's agent. If both parties are working without agents, then you will need to be the one to hand off the offer directly to the seller.
What is the impact of making a counteroffer?A counteroffer functions as both a rejection of an offer to enter into a contract, as well as a new offer that materially changes the terms of the original offer. Because a counteroffer serves as a rejection, it completely voids the original offer. Thus, the original offer can no longer be accepted.
When a counteroffer is made what happens to the original offer quizlet?What happens to an original offer if a counteroffer is made? The person making the original offer is no longer bound by it. Which function of the deposit receipt is described by a buyer and a seller agreeing to mediation by a neutral mediator? Seller Fred listed a vacant lot with a broker at $115,400.
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