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Drawing The Line: Buyers And Sellers Try To Meet – Is The Broker In The Way?

[Hey, I know I am a little late, but I just got back from my vacation. Contrary to the speculation given in Curbed (see reader comment number 2) [1]] and my hiatus from Three Cents Worth [2] weekly post till after Labor Day, it was a West Coast/Midwest thing avec ice tea.]

In Vivian Toy’s excellent article Lets Make A Deal [3] on the state of real estate negotiation in this weekend’s New York Times, the graphic was unbelievably good [4]. Its exactly how I think the negotiability of property should be portrayed. The idea that negotiability will keep expanding until list prices fall in line with market prices is a key point.

However, one of the aspects of the process that keeps coming up in market condition articles like this is the generic anti-broker position that seems to come from academia.

Max H. Bazerman, a Harvard Business School professor and an author of “Negotiating Rationally” (Free Press, 1992), warned against using brokers as advisers at all. “The broker’s most important goal is to close the deal, and that’s not necessarily your goal as a buyer or seller because you care more about the quality of the deal,” he said.

In other words, bypass the broker to make the deal. Professor Bazerman seems to either be stereotyping all brokers as bad negotiators or failing to see the advantage of having a middleman (person) in the process. It would appear from this comment that he sees the process as similar to the car salesman who gets up from their chair to fight for you with their manager to get you a good deal. I am not saying this doesn’t happen, however, but I think its the exception, not the rule.

I would guess that most people are not trained negotiators, especially with something they are emotionally attached to. My feeling is that for the average person, they will end up with an inferior deal if they negotiated directly rather than through an intermediary. That insulation is key to providing room to move in a transaction. Otherwise people get personal when they are frustrated and that essentially ends the deal. In other words: Checkmate.

I am not sure why this position seems to come from academia though. I have yet to see this proved empirically in a reasonable way.

UPDATE: Here’s NYT Real Estate Editor Bill Goss briefly discussing the article [5] (after summarizing the Bensonhurst market).