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The market has changed and I hope that recruiters can realize that now isn't the time to toss up crap to see what sticks. This situation resonates with me because certain recruiters that I have dealt with recently just don't get it.
Remember, you can always fire the candidate - you can find someone different and better. The client will appreciate it if you are upfront about their change in behavior and I believe will reward you with more positions (I would - in my recent cases, I will not contract with the recruiters ever again). I've found this problem most often with software developers who think they are gods.
Many people say "do the transaction and get out of there" or "tell the candidate to sign and get out" but I guarantee the candidate will bring the same behavior and attitude to the job and the employer will regret hiring them and never hire you again.
If you do want to keep the candidate and complete the transaction sit down with the candidate and have a very frank conversation:
You: "Hi Arrogant Candidate, how are you?"
Candidate: "Great thanks, I'm just programming a new social media flash network"
You: "that's nice. I just talked with three other guys who are doing the same thing. The client will also if you don't cut the crap. Right now, the client is like a kid in a candy store when it comes to XYZ developers."
Candidate: "oh really?"
You: "Yes. Remember, an offer letter isn't a contract. Are you going to take the job or not?"
Something along those lines should work :)
Just because there are fewer buyers in your store it doesn't mean it's the time to serve up bad inventory to the customers. You may not remember it, but they sure will when they have more money to spend and lots of stores to buy from.
Great feedback!! A few of you thought it sounded like the candidate had a conversation with an "unhelpful" person who convinced them they could get a better deal. That is exactly what happened. I took your advice. I told him we might have to take the offer off the table. This seemed to surprise him but he still didn't change his behavior. Anyone need a diva PhD? Looks like he's going back on the market. Good lesson!