Doing the Deal 73

the reference point for negotiation with the seller. The buyer will
want to offer less, but not by an order of magnitude. For example,
in this case the prospective buyer might offer $350,000, expecting
a counteroffer somewhere below the listing price—say, $385,000.
An anchor is useful for whoever sets it in that it creates a per-
ception of possible outcomes. If the anchor holds, the deal will be
negotiated somewhere near the anchor price. Thus, the party that
sets the anchor in an area favorable to her gains an important ad-
vantage.
Where should you place the anchor? If you are a seller, and if
you have some notion of the buyer’s reserve price (the maximum
the buyer will pay), try dropping your anchor just below that price.
Then be prepared to justify that price when the potential buyer
tries to talk you down. Recognize, however, that your ability to set
the anchor will be limited by competitive force. For example, in the
‘‘Perfect Condo’’ example, the price must generally reflect what
similar condos in the city or neighborhood are selling for. An out-
rageously high price would be ridiculed.
If the other party has already set the anchor price—one that you
view as wide of the mark—try to ‘‘counteranchor.’’ For example, if
you were a potential buyer in the condo example, you might say
something like this:

‘‘I respect your wish to get the most for your condo, which
is a very nice property. You have every reason to be proud
of it. However, based on my analysis of it and comparable
properties, I believe that $395,000 overstates its true market
value. My study of comparable condos in this area, consider-
ing square footage and amenities, indicates that $330,000 is
closer to its true value. If you are willing to entertain that
price, I’d be glad to discuss the sale with you.’’

If you’ve done homework that supports that lower price—and

assuming that $330,000 is above the seller’s reserve price (the low-
est she’ll take for her condo)—there’s a good chance that your

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