The purpose of the all-I-can-afford negotiation tactic is to establish a limit or a target – artificial or real – to focus the real estate negotiation on not exceeding that limit. This tactic can be used successfully by agents for both buyers and sellers. On the buyer’s side of the table: all I can afford to spend. On the seller’s side of the table: all I can afford to reduce.
Regardless of which side of the table uses this negotiation technique, the other side will want to respond tactfully. It is important to test the limit and see if it is true, but it also important to judiciously phrase the counter offer. If an agent tested by simply making a price jump, the other party could not accept without losing face. This will make further negotiations contentious, or may turn into a “take it or leave it” scenario.
A more successful negotiation strategy is to counter on price AND one other element that gives the other side a reason to adjust their position – such as including appliances or covering closing costs. “OK, since you included that I can go to _____.”
If it seems that the all-I-can-afford negotiation limit is artificial, you could counter by imposing your own limit or an outright challenge of their limit. This negotiation strategy can be accomplished by asking concrete questions such as, “Why is that limit important?” and, “What can we do to change that limit?”
In any case, the all-I-can-afford negotiation tactic is a concrete place to begin building towards a mutually successful real estate negotiation outcome.