With home sales heating up in some U.S. regions in 2013, homebuyers faced competition they haven’t seen since before the real-estate bubble burst, and it showed up in the form of packed open houses, multiple bids above the asking price, and all-cash offers.
In New York City, low condominium inventory and low mortgage rates drove prices up 12%. Real-estate agents capitalized on the frenzy with tactics like one-day-only showings and tight deadlines for bidders to submit their best-and-final offers.
In such an environment, negotiation might seem futile. Yet there are ways to separate yourself from the pack, while also ensuring that you make smart financial decisions.
To begin with, focus on your BATNA, or best alternative to a negotiated agreement. You will also want to have a strong sense of your own interests and your limits in a home sale. How long do you plan to stay in a home? How important is the location to you? What can you truly afford?
The best way to improve your BATNA in such situations, according to Harvard Business School professor Max H. Bazerman, is to fall in love with two (or more) homes rather than just one.
If you can manage to find multiple homes that are equally appealing to you, you should be able to lessen your odds of bidding more than the current home is worth—and more than you can afford. The knowledge that other desirables homes exist should naturally make you more cautious and rational.