Recently a client called to discuss an offer he’d had for his apartment. He thought the property was worth more, and asked for my opinion about negotiating the price. During our conversation I remembered some fascinating research conducted by a friend, a professor of economics.
When discussing prices, we unconsciously perceive things relatively. So, if you’re negotiating for a house valued at say, $350,000, ten thousand either way doesn’t seem much. Some of us would even stretch to $15,000, or more. In contrast, if you’re about to buy a car that costs $15,000, an extra $1,000 appears a very significant amount.
That’s because we subconsciously relate to prices relatively. But there’s a heavy cost to thinking this way. Instead, we should be perceiving things in absolute terms.
The extra $10,000 paid for your house would take some time to earn. $10K is $10K, no matter what portion of $350,000 it is. By thinking in absolute terms, money has its own intrinsic value – and your negotiating position will be much stronger.