Edgewood, WA Real Estate Blog

The rule of reciprocity is an unwritten rule with which we are inculcated at an early age. It’s present in all cultures and plays a large role in all negotiations, including real estate negotiations.

The rule is: if we receive something, we give something in return… tit for tat… a favor begets a favor.

Either implicitly or explicitly, unless you’ve been raised in the jungle by chimps since birth, you’re aware of this rule. The rule of reciprocity commands a very strong and powerful influence, probably more so than you know.

Note the first action (of a gift, favor, etc.) creates an obligation on the part of the receiver. The rule dictates mutual action.

There are several associated properties of which you may or may not be aware:

1. The rule of reciprocity creates a strong sense of obligation regardless of whether the initial offering was invited or welcome.
2. The sense of obligation created isn’t directly tied to the value of the initial offering.

Item one means that a sense of obligation is created if you receive something from someone you don’t know (or even dislike), and/or regardless of whether their gift was invited or not.

The property of item two is often used as a means of manipulation by inviting or offering an asymmetrical or disproportionate response.

For example, many charitable organizations send address labels when soliciting contributions by mail. Response rates have been shown to rise dramatically over solicitations that don’t include labels – because of the obligation created. The “gift” was uninvited, and contributions far exceeds the value of a few cents worth of labels.

Your sense of obligation increases if you actually use the labels, that is, you accept the “gift”.

You may now be disagreeing, saying to yourself “I simply won’t allow myself to be manipulated like that.”

But remember: how we react depends on our current mode of thinking. Most of the time we unconsciously respond emotionally, especially when under stress. It’s faster, easier, and effortless.

An intellectual analysis requires conscious effort and takes time. In other words, it’s work. It’s also difficult to perform under stress. You’ll do better responding rationally while understanding the other side’s emotionality. I’m not suggesting it’s inappropriate to respond in an emotional fashion after intellectually considering the impact of doing so.

It’s OK to “flinch” by design.

If you say to yourself, “Oh, I see they’ve sent labels as part of an advertising ploy designed to engender my response by employing the rule of reciprocity”, your response will most likely be far different than if you’d not thought about it as such… because you understand the tactic.

Let’s turn to a few scenarios typical of real estate negotiations and consider how the rule of reciprocity might come into play.

In normal (balanced) markets a buyer will typically submit an initial offer lower than the seller’s listed price. A buyer implicitly knows that if they can get the seller to begin negotiations starting with the buyer’s initial offer, there will be a strong tendency to move toward a price that is halfway between the buyer’s offer and the seller’s listed price. Implicit is the expectation both sides will make a fair concession in return for fair a concession. In general, the lower the buyer’s initial offer, the better they will do in the long run.

Ah, you say, but in real life it doesn’t work that way. If a buyer makes an unreasonably low offer it will be simply be rejected by the seller. As a matter of fact, if the seller isn’t consciously rationally thinking, they’ll probably respond emotionally and become irritated – possibly to the point of souring further negotiations.

Think about why this might happen.

The seller actually made the first move when they listed their home with an offering price. They made what they considered (normally) was a fair offer. Then the buyer then made what the seller considered was an unreasonable (unfair) offer. The implicit expectation is “fair” in return for “fair”. In other words, in the eyes of the seller the buyer violated the reciprocity rule.

Assume the seller rejected the buyer’s initial offer and simply said: “thanks for submitting the offer but it’s outside the range we consider reasonable and we won’t be responding.” The seller is determined not to allow the buyer to anchor the low end of expectations at, what he considers, an unreasonably low level.

The buyer goes away temporarily, then returns with an offer somewhat above their initial offer. In contrast (contrast is another important psychological factor in negotiation), this is a much better offer, but the seller would probably have considered it unreasonable had it been the buyer’s first offer. But frequently a seller will have an overwhelming urge to respond to the second offer because under the reciprocity rule they feel they have an unfulfilled obligation because they didn’t respond to the first offer. Like the label example above,

once you understand what is happening, it is no longer as effective.

Think about the flip side. Consider how the rule of reciprocity might affect negotiations with a seller who decides on a price and is determined to take “not a penny less.” A buyer comes along and makes an offer at less than asking price. The seller (if not totally outraged at the buyer daring to make an unreasonable offer, that is, less than the listed price), if he deems to respond at all, counters with his original price. How do you think the buyer will respond to this perceived lack of reciprocity? Let’s suppose further the buyer grudgingly accepts the seller’s response (at full listed price). What do you expect the buyer’s posture will be when it comes time to negotiate inspection repair items?

Adhering to the rule of reciprocity has additional psychological impacts. Simply because you’ve negotiated an agreement doesn’t mean it will necessarily be consummated, eg., the transaction will close. There’s a far better chance both parties will feel committed to a transaction if they both feel they’ve negotiated well. That rarely happens without some sense of reciprocity. The satisfaction obtained from a well negotiated transaction is often a component as important as the actual price.

I could go on and on with specific examples about how the rule of reciprocity and its usage impacts negotiation. But once you understand and consider its ubiquitous silent presence, you can do that yourself.