by Dave Barry
Conclusion
As we have seen, real estate is an exciting field, offering many opportunities for a financial novice such as yourself to screw up. In this chapter, I have done my best to cover as much ground as possible without imparting a single shred of useful information. Now it’s up to you to get out there and apply these techniques. Because as the late football coach Vince “Vince” Lombardi so often said: “If you don’t get up off the bench and get into the game, you can never suffer a career-ending knee injury.” Those words are still very true today, and although Coach Lombardi has passed away, I have no doubt whatsoever that somehow, somewhere, his mortgage lives on.
16
HOW TO NEGOTIATE A “WIN-WIN” OUTCOME
You Must Crush Your Opponent Like an Insect
LET’S SAY TWO MEN—call them Bob and John* 34—both want to buy a new car. They go to the same dealership on the same day and order the same model of car, with exactly the same options. Yet John pays $3,500 less for the car than Bob does. Why?
Simple. Throughout the entire course of his discussions with the car salesman, John was holding an eighteen-inch machete. This basic tactic—which rarely occurs to most car buyers—gave John a big edge in his negotiations, an edge that he was able to take to the bank.* 35
Yes, knowing how to negotiate is a very useful skill—and not just in financial transactions. Although you may not realize it, you’re negotiating constantly, from when you wake up in the morning and negotiate with your spouse for access to the bathroom; to when you negotiate with your kids to get them to stop playing their video game, “Death Killer of Fatal Murdering II: The Slaying” for ten freaking minutes; to when you negotiate with your boss to give you a raise and a promotion, or at least a better chair; to when you go to bed at night and negotiate with your spouse over whether you’re going to have any kind of intimate carnal relations at all during the current fiscal year.
So if you want to get ahead in life and the bathroom, you need to know the rules of effective negotiating. The most important one is: Never pay list price. I mean never. For anything, including intimate carnal relations with your spouse.* 36 List price is for suckers. If somebody tries to charge you list price, you need to make it clear to this person that you are a savvy individual who knows how the game is played, and you need to stick to your guns:
You: How much is it?
Person: $1.50.
You: That’s too much.
Person: What?
You: It’s too much. I’ll give you 75 cents.
Person: This is a toll booth. The toll is $1.50.
You: Eighty cents. But that’s the best I can do.
Person: But everybody pays $1.50.
You: That’s your retail price. You didn’t pay that much. Listen, I understand you need to make a profit. But let’s work together here. Let’s find a middle ground we can both be happy with.
Police officer: What seems to be the problem here?
Person: He doesn’t want to pay the toll.
Police officer: You have to pay the toll.
You: I realize that, Officer, and I am perfectly willing to pay a reasonable price. We’re negotiating that right now.
Police officer: OK, I’m going to give you a ticket for obstructing traffic. You just got yourself a $250 fine.
You: I’ll give you $125. Take it or leave it.
Police officer: Is that a machete?
See how easy it is? By sticking to your guns and insisting on a better price, you have negotiated yourself into a position where, instead of settling for the same deal that “everybody” gets, you will receive special treatment.
Most of us experience our first serious financial negotiations when we attempt to buy a car. A lot of people hate buying cars, because they feel that car dealerships use unethical sales tactics. This is not true! Car dealerships operate under an extremely strict code of ethics. Here it is:
Car Dealership Code of Ethics
• ETHIC 1. The salesperson shall never, under any circumstances, reveal the True Price of the car to the customer until after the customer has agreed to purchase the car. Until that point, the True Price shall be shrouded in deep mystery. Even though the dealership is in the business of selling cars, and has been selling cars for years, and sells cars every single day, including the exact car that the customer is looking at; and even though the dealership knows to the exact penny how much the car costs, and how much profit the dealership needs to make, the salesperson will insist that he has NO IDEA what the True Price is. The only way he can find out the True Price is to ask the Manager, and he cannot ask the Manager until after the customer has agreed to purchase the car.
• ETHIC 2. Once the customer has agreed to purchase the car, the customer and the salesperson shall work out an Offer. The salesperson shall then inform the customer that it is the lowest Offer that he, the salesperson, has ever dared to take to the Manager, and that he could very well be in physical danger. But, darn it, the salesperson really likes the customer, so he is going to give it a shot.
• ETHIC 3. The salesperson will then leave the customer alone sitting on a hard plastic chair in the little sales cubicle for a period of time that is not less than the gestation period of a yak. During this time the customer shall have nothing to do except stare at the framed photographs of the salesperson’s children, who shall look cute but waif-like and hungry.
• ETHIC 4. If the salesperson has no children of his own, he may use photographs of waifs cut out of National Geographic.
• ETHIC 5. When the salesperson returns, he shall look weary but triumphant. He shall inform the customer that the Manager was very, very angry about getting such a low Offer and at one point struck the salesperson with a telephone directory. But the salesperson fought for the customer like a tiger and was able to get the Manager to agree to a price that, while somewhat higher than the Offer, is still so low that the dealership is actually losing money on the deal, PLUS the deal includes floor mats, which, according to the salesperson, are worth, like, $17,000, making this deal so amazing that the dealership will probably go out of business at any moment because of its insane generosity, so the customer had better sign the deal right now.
• ETHIC 6. If the customer balks, steps 2 through 5 shall be repeated as often as necessary, until the customer has been in the sales cubicle so long that his butt has become chemically bonded to the plastic chair and the salesperson is returning from the Manager’s office with blood on his shirt from fighting so hard against the Manager and getting a price so low that he, the salesperson, will not make any commission at all, and his children will have nothing to eat except boiled gravel, but that is all right, because the salesperson has formed a deep personal bond with the customer and cares only about getting him this excellent deal. Finally the customer, realizing that he is in danger of spending his golden years in this cubicle, will break down and agree to the deal. The customer now believes that his ordeal is finally over, and that he at last knows the True Price.
• ETHIC 7. The customer is an idiot.
• ETHIC 8. At this point the salesperson shall broach the issue of “undercoating.” The salesperson shall explain that, although the manufacturer did a thorough job of finishing the upper part of the car—the frame, body, interior, engine, transmission, etc.—for some mysterious, totally inexplicable reason, the manufacturer failed to protect the underside of the car, which, the way the salesperson describes it, is made of low-grade shirt cardboard, so that, if left uncoated, it could dissolve at any moment and dump the customer and his loved ones onto the interstate at speeds in excess of 70 miles per hour, and, as a fellow parent with waifs of his own, the salesperson simply cannot sit idly by and allow that to happen to a customer he cares so deeply about.
• ETHIC 9. Once the customer has agreed to purchase the undercoating—and the customer will agree to purchase the undercoating—the salesperson shall broach various other essential dealer-installed features that the manufacturer, incredibly, f
orgot to include with the car, including: an alarm system that will annoy the hell out of everybody within a two-mile radius but never actually summon help; an Extended Total Customer Security Protection Plan offering numerous benefits that the customer will never actually benefit from; embossed-leather owner’s manual; driver’s-side ashtray light; lug nut defroster; moth deflector; rear-seat catheters, etc. In time the customer, weak from lack of food and realizing that the best years of his life are slipping away, will agree to purchase all of these things.
• ETHIC 10. But the customer shall still not know the True Price, not until it is finally time for the Ritual Signing of the Papers. This is when the customer discovers that, in addition to the price of the car and all the extras and the taxes and the license and registration fees, he has to pay for “dealer prep.” Dealer prep means cleaning the shmutz off the car, removing the stickers, adding fluids, etc., so that the car can actually be driven. In other words, the dealership, after charging the customer many thousands of dollars for the car and the various extras, is now going to charge the customer several hundred MORE dollars for getting the car into usable condition. This is not unlike a restaurant that lists steak on the menu for $23, and then, when a diner orders the steak, the restaurant charges $5 more for “thawing and cooking.” But the customer, like millions of car buyers before him, will pay the “dealer prep,” because by this point, after hours of intense cubicle pressure, the customer has the functional intelligence of a Rice Krispie.
As we see, when you enter a car dealership, you are going to be exposed to a very tough ethics code. Few people can stand up against it. I, for one, cannot. I’m the world’s worst car buyer. I come from a long line of Presbyterians, who get their name from the Greek words pre, meaning “people,” and sbyterian, meaning “who always pay retail.”
In ancient times Presbyterians were nomadic goat traders. They would arrive at a market with, say, fifty goats, and then, after several hours of bargaining, they would leave with twenty-three goats. Everybody loved to do business with the Presbyterians. The reason they became nomadic in the first place was that they traded their entire village for a pound of lentils.
So when I’m in a car dealership, I am basically prey. My idea of an opening tactical salvo is to look at the car’s sticker price and say to the salesperson, “This looks like a good deal! Are you sure you’re making enough profit on this?” I buy all the dealer add-ons. I buy Extended Total Customer Security Protection Plans for other customers.
If you’re like me, you should never go into a car dealership, or even walk past a car dealership, alone. You should always take along a designated negotiator. I recommend my friend Gene Weingarten. He actually likes to bargain with car salespersons. It’s a blood sport for him. He can sit in the cubicle for days and not change his position by a dime. He would rather undergo a vasectomy with a WeedEater than purchase undercoating.
Consider the Louisiana Purchase. In 1803, President Thomas Jefferson negotiated a deal with France under which the United States agreed to pay $15 million, in return for which France gave the U.S. full title to 800,000 square miles, or nearly 525 million acres, which works out to 3 cents per acre. Thus, in one stroke, Jefferson doubled the size of the fledgling nation and gave it control over a vast territory, strategically vital and rich in natural resources, stretching all the way from the Mississippi River to the Rocky Mountains:
The Louisiana Purchase As Thomas Jefferson Negotiated It
Photography Credits
Gene would have gotten a much better deal. He would have started by demanding that France knock at least $2 million off the asking price because the package included North Dakota. Gene’s position would have been that he was doing the French a favor, taking North Dakota off their hands. He would have also demanded that France knock off another $3 million because the Great Plains were basically covered with bison dung.
In addition to demanding a lower price, Gene would have insisted that France sweeten the deal by throwing in various extras. Ultimately France would give in, just to get rid of Gene, and the Louisiana Purchase would have been more along these lines:* 37
The Louisiana Purchase If Gene Weingarten Had Negotiated It
Photography Credits
Which brings us to real estate. Negotiating to buy or sell a house is different from negotiating for a car, because—to name just one factor—most cars do not have bathrooms. Also, your negotiating opponent, instead of being a professional car salesperson armed with a powerful set of ethics capable of reducing
you to a whimpering blob of drooling stupidity, is a regular human just like you. But that is no excuse for decency. There is never room for decency in negotiations.
In negotiating for a house, the first thing you need to know is whether you are the buyer or the seller. To determine which one you are, look in your yard. Is there a FOR SALE sign? If so, you are probably the seller. If you don’t have a yard, you are probably the buyer.
Now pay close attention here, because we are coming to the meat of real estate negotiations: If you are the seller, you want to get the highest possible price, which you obtain by presenting the house as a highly desirable property; whereas if you are the buyer, you want to pay the lowest possible price, which you obtain by suggesting that the house is basically a big house-shaped wad of bison dung. Be sure that, in the heat of negotiations, you do not become confused:
YOU: I’m sorry, but this house is basically a big house-shaped wad of bison dung.
YOUR OPPONENT: Wait a minute. Aren’t you the seller?
YOU: Ohmigod, you’re right! I mean it’s a highly desirable property. Sorry!
YOUR OPPONENT: Don’t apologize! I do that all the time.
Because real estate negotiations are so confusing, you may want to use the services of a real estate broker. This is a highly trained professional who, in exchange for receiving a commission, relieves you of all the worry and headache of figuring out what you would do with the extra money if you weren’t paying a commission.
The best way to choose a real estate broker is by the quality of the broker’s photograph in the newspaper classified ads. I’m not sure when this happened, but at some point, real estate brokers, at least where I live in South Florida, started running serious glamour photos of themselves. The result is that, in many real estate classifieds, you can’t tell for sure what’s being advertised:
Photography Credits
But enough about real estate. This isn’t even supposed to be the real estate chapter. This is the chapter on negotiating, and it is time to sum up what you have learned:
1.
Negotiating is very important.
2.
Thomas Jefferson was an idiot.
3.
Never pass up an opportunity to trade goats with a Presbyterian.
4.
You should NOT pay for the undercoating. You should never pay for ANYTHING that you don’t really need.
5.
This book, for example, was a horrible investment.
17
INCOME TAXES: BUILDING BLOCKS OF OUR GREAT NATION AND LIFEBLOOD OF OUR SACRED DEMOCRATIC WAY OF LIFE
How to Avoid Paying Them
AS THE OLD SAYING GOES, “Nothing in life is certain except death and taxes. Also, O.J. was guilty.”
How true these words are. If our government is going to be able to provide for the common good, everybody has to contribute his or her fair share in the form of taxes. And when I say “everybody,” I mean, “not everybody.” Because the truth is that a lot of people don’t pay taxes. Poor people, for example. Also many rich people. Also a fair number of middle-income people.
In fact, when you get right down to it, there is a great big old wad of people who don’t pay taxes. Our goal, in this chapter, is to show you how to become a member of that wad, without winding up in federal prison giving mandatory backrubs to a cellmate known as “Ramrod.”
The trick is to understand the U.S. Tax Code. This is a collection
of laws passed by the United States Congress, a legislative body composed of people you hated in high school. Since Congress is responsible for the content of the tax laws, if you ever have a question about your taxes, all you have to do is ask your congressperson, and he or she will be happy to give you a simple, clear, and definite answer.
That was of course a joke. Congress has no idea what’s in the U.S. Tax Code. Members of Congress don’t read the laws they pass, because this would take valuable time away from their congressional duties, such as drinking coffee with people who will give them money so they can get reelected to Congress and continue to carry out their duties.
But let’s not be too harsh on Congress. The truth is that nobody understands the U.S. Tax Code. It’s far too difficult even for really smart people. Back in 1955, Albert Einstein, acting on a dare from some fellow geniuses at a genius party, attempted to read the Tax Code, and within minutes he keeled over dead. “His brain looked like tapioca,” the coroner said.
Actual Photographs Showing Effects of Reading Tax Code on Albert Einstein’s Brain
SOURCE: Dan Rather
Photography Credits
And that was fifty years ago, when the Tax Code was only a few million words. It’s much bigger now—so big that nobody dares to go near it. It’s kept in a locked, windowless vault in the basement of the Internal Revenue Service building. Every day at 3 p.m. a taxpayer is selected at random, audited, then thrown into this vault. There’s usually a scream, followed by silence, followed by a massive burp. The next day the Tax Code is bigger.