One of the most costly strategies during a negotiation is what is known as the “nibble.”
Everyone knows that “nibbling” on a regular basis can result in a significant weight gain. What most agents don’t realize is that many buyers and sellers engage in the “nibble” as a negotiation strategy that can be extremely costly to the other party’s bottom line.
The negotiation nibble
This is one of the most costly nibbles to agents. It’s especially difficult when the nibbler hits you at the end of a transaction, just before you’re ready to close. Here’s how it works.
The nibbler doesn’t make outlandish requests initially. One type of nibble begins with a simple request that will escalate into a major cost.
Assume that you have one of your listings under contract. The inspector’s report shows that there is lime build up in the showerhead. All that is really required is to have the showerhead cleaned. The nibbler asks for a new showerhead. It seems like a simple request, so the seller agrees.
The challenge arises when the showerhead doesn’t match the exact color of the other fixtures in the bathroom. The nibbler, of course, couldn’t possibly tolerate that and requests that the seller replace all of the fixtures in the bathroom or the nibbler will cancel the transaction.
A different type of nibbler constantly makes requests for small concessions well after the deal is negotiated.
For example, your buyers are under contract with a couple going through a divorce. The wife is devastated and will be moving into a small apartment once the transaction closes.
She doesn’t mean to be difficult. But little Johnny’s birthday is the week after the transaction is supposed to close — couldn’t the buyers give her an extra ten days so Johnny can have his last birthday at home?
The buyers understand the situation, so they agree to extend the closing date. The day before the transaction is supposed to close, nothing is packed. The seller hurt her back and her doctor told her she had to go home and go to bed. She can’t lift anything more than five pounds and couldn’t possibly do any packing.
The challenge for the buyers is, do they throw the woman out of the house when she is supposedly ill? Is it easier to extend the closing date one more time? How much will they have to spend if they have to hire an attorney to remove her from the property? How much will a hotel cost and how about the cost of the storing their belongings?
As they contemplate all of this, the nibbler lands her final attack:
“The movers can get me out tomorrow on a rush basis, but it’s going to cost an extra $750.”
While these two examples are somewhat extreme, they illustrate the psychology of how the nibbler chips away at getting concessions throughout the transaction.
The strategy for dealing with a constant nibbler is to threaten to cancel the transaction. In most cases, they want the property — they’re just doing everything they can to get the best possible outcome for themselves.
The commission nibble
Expert nibblers love waiting until the last moment to spring their nibble on unsuspecting agents.
A classic version of this nibble is that buyer does the walk-through and notices a crack that was in back of a picture. The crack is superficial, but the buyers don’t want to have to deal with it.
In the meantime, prices have been increasing and the sellers really would like to sell for more, so they refuse to budge. To keep the deal together, you throw in part of your commission to have the crack repaired and the area repainted.
Another version of the commission nibble takes place when the buyers and sellers are $5,000 apart and no one will budge. They look at the big commission the agents are getting and lean on you to chip in part of your commission to bridge the final gap.
When this happens during a negotiation, it can be a harbinger of more concessions to come. You must carefully weigh whether or not it’s worth giving in at this point in the negotiation. Remember, nibblers keep nibbling until you put a definite stop to it.
One of the ways that you can cut the cost of the commission nibble is to split the cost one-third each to the sellers, the buyers, and the agents. Many agents will agree to a commission reduction with a split of 50 percent to the brokers, 25 percent to the buyer, and 25 percent to the seller. Most nibblers will be happy with the 33 percent concession.
When you spot someone who is nibbling, be prepared to cut off the behavior sooner rather than later. Otherwise, they will continue to nibble through your client’s money and your commission until you say, “No more!”