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Part Three: Common Biases and Errors Tha... > Where You End Up Depends on Where Yo...

Chapter Fifteen. Where You End Up Depends on Where You Start: The Anchoring Effect

The more you ask for, the more you get.

Anonymous

Brian and Rhonda had been looking for a home for several months. Then they came across the perfect place. The seller was asking $295,000 for it. Brian, always the smart negotiator, began doing his homework. He got a report listing all recent home sales in the area. He found ones that were similar to the one he wanted. He compared them on lot size, number of rooms, square footage, quality of construction, age, condition, and similar factors. After this careful analysis, Brian concluded that the fair market value for this house was $255,000. Now came the challenge. If Brian allowed the seller to focus on the $295,000 asking price, Brian was on the defensive. He would have to explain why he was offering $40,000 less. However, if Brian could get the seller to focus on Brian’s $255,000 offer—that is, to get the seller to justify why the house isn’t correctly priced at $255,000 when compared with other recent sales—he’d have a much better chance of buying the house for something close to $255,000. In essence, Brian was attempting to switch the point of negotiation from the asking price to his offer price.


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