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EFFECTIVE Real Estate Negotiation

EFFECTIVE Real Estate Negotiation
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negotiatingEFFECTIVE NEGOTIATION

 

General Words of Wisdom

  • Negotiation is not a contest. A better deal can be found for both parties.
  • Never fear to negotiate, no matter how great the differences may be.
  • Stay rationally focused on the issue being negotiated.
  • Quick negotiations are bad. Deadlines put timelines on ourselves that can have a negative effect on the negotiation.

Preparation - Personal

  • Exhaustive preparation is more important than aggressive argument.
  • Write down your plan. The better you plan the better the results you will get.
  • No plan is complete without considering how you will defend yourself against arguments.
  • Think through your alternatives. The more options you feel you have, the better a negotiating position you'll be in.
  • Learn as much as you can about the strategy and tactics of the negotiation.
  • Never decide an issue unless you are prepared for it.
  • Set your sights higher. Be prepared to take risks that go with higher targets. Be prepared also to work hard and be patient.

Preparation - Team

  • Never enter an important negotiation without inoculating your team.
  • Don't negotiate with a second-rate team.
  • Train your negotiators. There is a zone of not knowing in every negotiation.

Sources of Power

  • Competition
  • Legitimacy and a sense of "rightness"
  • Commitment
  • Knowledge
  • Risk-taking
  • Time
  • Effort of work
  • Money
  • Negotiating skills
  • Friendly associations

Interpersonal Relationships

  • Find common ground on a personal level.
  • A tough negotiation involves conflicts.
  • Don't be intimidated by status or authority. Be willing to confront after you do your homework.
  • People who have higher aspirations do better in the outcome.
  • The man or woman who has a strong need to be liked is apt to give away too much.
  • "Normal" people raise their expectations after success and lower them after failure.
  • You have more power than you think. Look for the limits of your opponent's power.
  • If, in a negotiation, you pushed the other party too far, have the grace and goodwill to renegotiate. At the very least be sure you listen to his/her problem and have empathy for it.

Success and Failure

  • Neither success nor failure is experienced if targets are too easy or too difficult to reach.
  • A great success leads to greatly raised aspirations. A great failure results in a severe drop.
  • Moderate success leads to a small rise in expectations. Moderate failure leads to a small fall or none at all.
  • People appear to have downside resistance to small failures. It often takes an extended series of small failures to drive expectations down.

The Opponent's Position

  • Determine what your opponent really wants.
  • Spend less time talking and more time listening and asking good questions.
  • Let the other side make the first offer. If you're underestimating yourself, you might make a needlessly weak opening move.
  • Listen without being critical. Sometimes silence is your best response.
  • Don't be intimidated by facts, averages, and statistics.
  • Test your opponents. You never know what he/she will concede (partly because he/she isn't sure themselves). Take your time and be persistent.
  • Negotiate in depth. The other person cannot say "yes" unless you help him/her earn a "yes" answer from his/her organization.

Deadlocks

  • Don't emphasize your problems if deadlock occurs. The other party has plenty of their own.
  • Don't be intimidated by a last-and-final offer, a firm price, or take-it-ot-leave-it. They are negotiable.
  • Introduce new information.
  • Change the negotiator.
  • Change levels within the organization.
  • Go off the record (go to a less formal atmosphere).
  • Caucus.
  • Learn to walk out and, later, return.

Offering Alternatives

  • Change the time-shape of the risk (share unknown losses or gains).
  • Change the time-shape of money (pay periods, down payments, etc.)
  • Offer minor concessions.
  • Present a "What if..." proposal.

Miscellaneous

  • Some gurus advocate a bit of play-acting. Always seem put off at your rival's offer. Play up the importance of factors you don't care about so it'll seem like a bigger deal when you concede on them. Seem more befuddled than you are so your opponent will underestimate you.
  • Remember that profit is a gain in satisfaction. Look at the hidden part of the iceberg for real satisfiers.

 

TACTICS

 

Take It or Leave It

  1. Test it by walking out.
  2. Continue talking as though you never heard it at all.
  3. Protest to higher management.
  4. Determine if there are some things you can do for yourself and thereby reduce the price.

Take It To A Higher Authority

Those at a higher level:

  1. Apt to know less about the details and will be less prepared.
  2. Apt to show how decisive they are.
  3. Apt to have more latitude in interpretation and concession making.
  4. Apt to be annoyed in "wasting" their valuable time with the "small" matter.
  5. Apt to be more politically oriented than operation oriented.

Nibbler

Why it works

  1. The other party has a strong incentive to close.
  2. 99% of the work is done. Why waste it?
  3. The bite isn't much compared to the whole deal.
  4. It isn't bad to let the other person feel he/she is getting a deal.

Countermeasures

  1. Have a published price list.
  2. Do not give sales authority.
  3. Resist the tendency to give in. If you are patient, the nibbler will give up.

Escalation

The buyer and seller agree on a price. The next day the seller raises his price. Countermeasures to this tactic are:

  1. Give strong consideration to walking away from the deal.
  2. Have as many people as possible sign the memo of agreement.
  3. Counter-escalate. Change your offer or demand.
  4. Caucus. Give yourself time to think.
  5. Ask the other party before the contract is signed what assurance he will give to guarantee against escalation.

Crunch

The buyer receives three bids and tells all three bidders "You have to do better than that". The countermeasure is to ask for something in return, but the tactic works because:

  1. There is some slack in the original proposed price.
  2. The pricing people are always too high. They don't know what they are doing.
  3. Now I can go back to the boss and tell him/her the price has to be reduced.
  4. The buyer must have a lower price.
  5. The buyer likes me.
  6. The buyer knows something I don't.
  7. Boy, am I lucky. Last time I lost the job and never got a second chance.

Time

People need time to adjust to a new idea. Build acceptance time into your planning.

Time to Think

  1. Recess and caucus frequently.
  2. Develop rules among your own people as to how questions will be fielded.
  3. Do not have all back-up evidence available.
  4. Change a member of the team.
  5. Be hungry or thirsty, or go to the bathroom.
  6. Have the other party present his/her position before breaking for the evening.

Tactical Deadlock

  1. Deadlock is a severe test of resolve.
  2. Both are more apt to make concessions after deadlock.
  3. Deadlock sends a message to both organizations that their wants may not be consistent with reality.
  4. Deadlock jeopardizes the organizational schedules and financial plans.

Bogey

The Bogey occurs when one side tells the opponent that he/she loves the proposal but a problem needs to be resolved. The problem could be price, terms, or specifications.

Why It Works

  1. Whenever you raise the ego of the other person, you can expect something in return. You asked for help and will generally get it.
  2. Sellers know more about their product than buyers. The Bogey gives them an opportunity to show what they know.
  3. There is always a better deal available for both parties if they search for it. The Bogeys start the search.

Counter-Measures

  1. Have alternative designs, delivery, and price packages available before you come to the negotiation.
  2. Find out who is the real decision maker.
  3. Find out who has the money and who pays the final bill. Change the payment terms. Test the Bogey.
  4. Let the buyer do some of the things for him or herself.
  5. Stand pat.

Reverse Auction

The aim of the reverse auction is to have the seller offer the best price for the most work.

Why It Works

  1. Competition is fierce. The Seller is sure to be anxious if they see competition at close range.
  2. It puts heat on management.
  3. Each Seller has sunk a great deal of effort into making the proposal. Each feels that with a little more effort and a few concessions he/she can close the deal.
  4. The buyer knows that it takes more courage for a seller to risk a contract at negotiation than at an earlier stage.

Counter-Measures

  1. Be last in the auction, not first.
  2. Use your most skilled negotiator.
  3. Don't hurry to make concessions.
  4. Sell strengths and benefits.
  5. Limit your authority to bottom line figure.
  6. Bring expert. The buyer wants to believe somebody.
  7. Have an innovative approach in your hat if things go badly.
  8. Know who really makes the decision.

 

 

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