How relationships can trump dollars

A friend recently forwarded me a great story that complements some examples in my recent book, The Art of Negotiation. It’s about how Jesse Lyn Stoner bought the house of her dreams even though she wasn’t the high bidder. If you have time, I encourage you to read her full post before you go on to the summary and analysis below.

Here, in a nutshell, is how things played out. 

Act 1. Jesse moved to San Francisco where the real estate market is red hot. Nice properties get snapped up fast, often at prices well above the asking price. Bidding wars erupt between would-be buyers. She was well aware of this when she finally found a place she loved. 

Act 2. Jesse carefully crafted a three-pronged strategy. First, she made an all-in-bid, holding nothing back in reserve, hoping to blow out potential competition. Second, the offer was all cash, so the seller wouldn’t worry about financing problems. And finally, Jesse wrote a personal letter expressing how much she loved the house and how it would be the last home she would ever own.

But it didn't work! At the last minute, somebody else jumped in with what her agent called an “out-of-the-ballpark” offer, far beyond Jesse’s means. 

Act 3. Jesse chose not to increase her original offer. But she also didn’t give up. Instead she thought of other items she could add to the package. Being able to close the next day, for example; and telling the family that they could come back for visits and stay at the house. She also had four 1-ounce gold coins that she’d been saving for something special. 

Plus there was one more thing. By sheer coincidence, Jesse knew the fire chief in the town these particular sellers were moving to. In fact, she had donated several copies of her book to the firefighters . Jesse could introduce the sellers to lots of people. She spelled all of this out in a follow-up letter. 

This second letter sealed the deal. The owners wrote back that in spite of the higher bid, they would sell to Jesse at her price—along with the other terms. (They only took two of the coins, though: one for each of their children.) 

From a negotiation perspective, Jesse did three things right: 

• She understood that market conditions required a blow-out bid. There was nothing to be gained by hedging. Sometimes it takes a bold offer to let a seller know you’re serious. It can also deter competition. (Jesse succeeded on the first count, but ultimately couldn’t beat others with deeper pockets.)
• As much as she wanted the house, she didn’t her emotions bust her budget. If she upped her price, where would she have stopped?
• Equally important, she didn’t give up. Instead she dug deeper creatively. The new items she came up with had some value in their own right, but as Jesse notes, they transformed what normally would be a dollars and cents transaction into something relational. 

I’m intrigued by the timeline of Jesse’s story, the way it unfolds in stages. She knew that she had no control over the real estate market. And it was ultimately a matter of luck that she happened to be dealing with a family that was receptive to a personal appeal. But Jesse did carefully manage those things that were within her power: crafting her initial offer; her decision to press on after it was rejected; and her creativity in closing the deal. 

It’s just a guess on my part, but if she had included in her first offer all the terms the parties ultimately agreed to, the sellers probably wouldn’t have appreciated nearly as much. From start to finish, Jesse conducted the process in such a way that the sellers got to know and like her. 

I have no connection with Jesse Stoner other than having recently read her post. But it seems clear that this experience was about transformation, not a simple exchange. A bargaining outlook regards being nice or doing a favor as a way of getting something tangible in return. Instead, Jesse never saw her friendship with the fire department as a means to some other end. It had ample meaning in its own right.

She notes, "I have found I am a happier person when I give more than I take and when I can make a difference in another person’s life. And sometimes, just sometimes, what you put out does come back to you from unexpected sources."

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Professor Michael Wheeler teaches at the Harvard Business School. His Negotiation360 self-assessment/best-practices iOS app launched this year.

Photo: Michael Wheeler