Commercial Negotiation Case Study

                 Commercial Negotiation

I am a civil engineer and I am working in my family company which is a construction - development company. Five years ago (2012), we owned an apartment in Voula and we decided to sell it. The first thing that we did, was, to upload it on our website, on popular listing sites and to assign it to local brokers. Due to our working history on Real Estate market, it was easy for us to approach the most suitable brokers that could promote the apartment with the most efficient way for us and for them also.

After 3 months on the market, there were a lot of phone calls and viewings but nothing serious. One of our brokers then, brought a client who was a doctor at the two blocks away public hospital and was interested of buying a house in the area. He came with his wife and she was excited about the house. It is a fact that when one woman likes the house, then the couple will buy this house. This woman really had just loved the apartment. The house consists of 3 bedrooms, one living room, one kitchen, one bathroom and one WC (total area: 170 sqm). The apartment is located on the 5th floor of a five-storey residential building with an exclusive use of the above floor where a swimming pool is also. The beach is 2 minutes away while the centre of Voula 5 minutes. It is a perfect house at a perfect location so in some way we thought that we were in the position of power.

The asking price of the house was €950,000 but a more realistic amount was at €800,000. It was a very difficult period in our life because Greece was in the middle of the economic crisis and Real Estate market had been destroyed. We were facing financing difficulties and we really needed money so our red line configured at €700,000. During the viewing, we talked with the doctor and of course he told me that the asking price was very high and he couldn’t reach it. I told him then that the apartment is perfect, it has all the comforts that someone needs but I also told him that I knew that the price is too high and that we can reach an agreement somewhere else. That was a terrible mistake from me because I showed weakness and after this meeting I knew that he would come back with a very low offer, according of course to the asking price.

        One week later, the broker phoned me and asked to have a meeting again with the potential buyers and I accepted. I was sure that they will make an offer this time. I started the conversation by trying to present all the advantages the apartment has (i.e. location, floor, view, materials used etc.) in order not to get a huge discount on the asking price. I told them that is a fantastic opportunity for them, since I want to sell the apartment being the last one unsold in the building, the shared maintenance expenses are low and It has 2 parking spaces dedicated solely to them. Again, the woman seemed to be excited but the financial problems that we were facing didn’t let me to take the advantage of the negotiations. During the conversation with them, they didn’t tell me anything about an amount that they offer and we “waste” time speaking about details of the house. They didn’t give me any information about their thoughts. I thought that it was the time to tell them about the background of our company. Telling them that we are a construction private equity company with many buildings (residential and commercial) in our portfolio, I targeted them to think that we are big and wealthy and we weren’t willing to make discounts. I forgot that I told them in the first meeting that the price is too high. That was my second mistake.

        The couple, given the circumstances on the Real Estate market, took the advantage that I gave them and I believe they understood that probably with this huge real estate properties unsold we might be facing financial issues. The offer amount they gave me was €500,000 in cash. I was really socked. It was too low according to the advantages of the apartment. But they had realized my weakness. After my first sock, I tried to negotiate on this although we were far away.

I knew that it was a distributive negotiation and my interest (decent price) was in contrary with their (big discount). On the other hand, we had one shared interest: to reach an agreement. I want to sell the apartment and they want to finally stop looking for one.  My response on their offer, was an amount at €800,000. It was a huge discount, approximately 17%, but I still believed it was a decent price for the house. Unfortunately, it was too late, they had realized much more than I wanted to know and they told me their final offer is €600,000 in cash with an upfront payment of €150,000. They had reached my red line and they told in other words “take it or leave it”. I told them that I should think about the offer and discuss it with the other members of our company to decide either approving it or reject it.