This technique is a sure win for both parties and sometimes, not at all.
Real estate gurus would tell you that one effective way of negotiating in a property transaction is by splitting the difference. This is fairly simple concept that is a battle of patience for both parties. It can also be a mind game for some.
For example, if a seller originally offers his home for $400,000 but the buyer who’s very interested haggles for $350,000, the seller in most cases, would lower down his selling price to $390,000 for instance. Then the buyer would match it with $360,000. But the seller would not relent to lowering it further. Finally, the buyer would suggest that they split the difference or meet halfway. That is, they can settle for $375,000. If both parties get settled with this price, then a deal is set.
Sounds easy, right?
Contrary to popular belief, splitting the difference is not that easy at all.
First, it doesn’t always follow that one party will agree to split the difference. In most cases, sellers will insist that you take the price or not. However, if they are very motivated to sell, buyers can take advantage of their situation.
Second, there’s a wait-and-see rule that experts are advising. Let the other party offer to split the difference first so that when you agree to their suggested price, they’d stop changing the cost. In other words, the one who was offered to split the price has more negotiating power. Now, if both parties know this tactic, chances are they’ll never make a deal for they’ll keep on waiting who’s going to offer it first.
Third and most often committed, if a seller has hiked his selling price in anticipation of splitting the difference, it can work against the buyer who’d have to settle for a higher halfway value.
Fourth, if the buyer takes advantage of the seller’s desperation to sell the property, he may start the offer with a very, very low value in order to keep the seller to lower his selling price too.
Nevertheless, if this technique is done correctly, it can help transactions be made faster and fairer.