BUS356 Negotiation Strategies for Property Sale – Case Study, Singapore

Question 1

Note: This is a fictitious case.

Sale of a House: A Choice of Negotiating Strategies

Mr. Kar (herein known as “Kar”) and his wife are both Australians and have been staying in a freehold five-bedder semi-detached house in Dunearn Road, Singapore for the past ten years. Their house is in an upper-middle class area and near several prestigious schools. Nanyang Primary School is less than 1 km away and the Tan Kah Kee MRT station is only 350m away from their house. Their house is also located away from the main road and near a playground. The surrounding area is safe as it is well lit. Also, there are frequent police patrols around the area.

Kar rented the house ten years ago when he was posted by his Sydney-headquartered company to work in Singapore. He rented the house for a few years and when he became a Singapore Permanent Resident, he bought the house from his landlord at a good price. Although the house was well- aintained, he renovated the house for $200,000 a year ago. The Kars loved the surrounding area. Grocery shopping was convenient as NTUC FairPrice and Cold Storage was just ten minutes by foot. The couple ate out almost every weekend with their friends, often at various popular Chinese, Indian, Japanese and Italian restaurants just a short walk from their house.

Kar knew that his house was a rare find. Kar surfed the internet and found out that his house was the only landed property in the 4,000 square feet category on sale in the vicinity then. Most of the other units on sale were either larger in their land area (costing much more) or terrace houses (2,000 square feet or less).

However, Kar just got notice that he would be posted back to his headquarters office in Sydney to oversee an important programme there. He had to start work there in four months’ time (at the latest). The Kars had mixed feelings about their relocation to Sydney. On one hand, they loved staying in Singapore. On the other hand, the couple also looked forward to spending more time with their ageing parents in Sydney. They decided that they would sell their house
directly to a buyer and avoid paying the 1% to 2% Seller Agent’s fees to a property agent. Kar’s bank recently valued his house at $8.5M. He advertised his house as sitting on 4,300 square feet of land on the 99.co property website for $8.5M or $1,977 psf. Kar would be in charge and responsible for all matters pertaining to the sale of their house. This included all the house viewings and negotiations with potential buyers.

The Kars have been rearing three pedigreed Bull Terrier dogs (purchased in Singapore for $8,000 a few years back) for the past five years. The couple loved their dogs and wanted to send them back to their Sydney home. Unfortunately, the respective authority did not grant them permission to export their three dogs back to Sydney. The couple was not keen to send
their dogs to a local dog shelter to be put up for adoption. If nobody adopted their dogs after a year, they would likely be put down. The dog shelters do not have sufficient accommodation to house too many dogs.

The Kars were seriously considering selling their house at a special price to any buyer based only on one condition, namely that the buyer likes dogs and will adopt their three dogs for free. They may sell their house by up to $300,000 cheaper (than their advertised $8.5M price), provided the prospective house buyer could assure the couple of his or her sincerity and
commitment towards the care of their beloved dogs until their death.

A week after the advertisement was up, Kar had shown his house to eight potential buyers, of which three had made an offer close to his asking price of $8.5M. The three potential buyers liked Kar’s renovations which were completed a year ago. One of the five remaining potential buyers who have yet to make an offer was the Tan family.

The Kars have a good impression of the Tans. Their lead negotiator was Mr. Tan (herein known as “Tan”). Tan, his wife, their three daughters (1, 3 and 5 years old) and their helper made up the six members of their household and they needed a house above 3,000 square feet. It was their first visit to Kar’s house and the surrounding area. Tan told Kar that he and his wife intended to enroll their three daughters at the nearby Nanyang Primary School when they
reached the age of seven years old. It was a reputable school. The school is within 1 km from Kar’s house and the Tans would stand a high chance of their daughters being admitted there given the prevailing government’s school allocation policy for students at that time.

Tan told Kar at their first meeting that he would like to buy Kar’s house at a good price as his three daughters were young and his household expenses were high. Tan had not really done much research. Yet, he was willing to offer $8M to $8.2M to Kar for his house. He was just unsure if it was too early to make an offer. He felt that perhaps he could wait a bit longer, get more market information and get a better sense of Kar’s keenness to sell his house to him.

Interestingly, the Tans like dogs. They do not own any dogs, but they volunteer at a dog shelter on weekends. Kar saw Tan’s daughters playing happily with his dogs during the Tans’ first viewing. Kar thought to himself that the Tans looked like they could provide the most ideal environment for his dogs should they choose to adopt his dogs. But how could he broach this without being too presumptuous?

Meanwhile, as they talked more, Tan wondered if there was any chance that Kar might just lower his asking price for the house if he were to offer to adopt Kar’s dogs. Kar had told Tan that he could not relocate the dogs back to Sydney and he was worried that nobody would adopt his dogs in Singapore.

(a) Assume that Kar wants to close the sale of his house with Tan. Consider two (2) possible strategies from the Dual Concerns model, namely the Contending strategy and the Problem-solving strategy in managing conflict between Kar and Tan during the negotiation for the sale of Kar’s house to Tan.

For each of the two (2) strategies (Contending and Problem-solving), define each strategy in your own words, analyse with evidence from the given case, the nature of the negotiation, the relative negotiating power of both parties, the option(s) available for Kar and likely outcome(s) for Kar. You may state any reasonable assumptions.

Write the answer in no more than 600 words and state the word count at the end of the answer.

(40 marks)

(b) Assume that Kar was not in a hurry to sell his house and he wants to achieve the highest possible price and the best outcome for him and his wife. Tan and his family have made an appointment to view Kar’s house for the second time to make a final offer.

Appraise how Kar could apply the four (4) tactical tasks under the distributive bargaining approach to achieve his objective(s). For each tactical task, provide relevant assumption(s) and specific action(s) Kar could take (e.g. what he should say to Tan) and also a plausible scenario (e.g., responses and outcomes) from Kar’s and Tan’s perspectives.

Write the answer in no more than 900 words and state the word count at the end of the answer.

(60 marks)