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Anchors in Negotiations

The notion of an anchor in real estate negotiations refers to the asking price of a home or the first offer. The idea is simple, that the negotiation is then tied to – anchored at – that fixed starting point. Like a ship at anchor, the negotiations will often drift around the anchor point as details are presented back and forth, much like the tides and winds of the ocean.

However, whether you represent a buyer or a seller, that anchor point does not have to be accepted as is. There are many reasons to reset the anchor point, such as the commodity value, relative scarcity, or uniqueness of the property. Since initial anchors are often set based on emotion, a fact-based approach to the negotiation can prove successful.

Research is key to removing an artificially set anchor point. If the price seems too high or the offer seems too low, first ask about the other party’s basis for that price and listen to their reasoning. Be prepared with your own research of comparable properties to support your negotiation point.

Facts are the single greatest argument to avoid “splitting the difference,” a common negotiation counter. There is simply no reason to split the difference in a price or offer that was artificially set to begin with. Using your research, make reasonable offers that are supported by facts.

The old adage of, “buy low/sell high,” does not hold up well in today’s real estate markets. Starting high to coax a higher counter offer only works if you have a buyer already at the table. Setting lower anchors can encourage more interest and more buyers to participate, leading to a higher final price as bidders work against each other.

Negotiation anchors can and should be moved if the facts support your position. Successful negotiations are the result of reasonable, fact-based offers.