Negotiating situations may be getting tougher, but certain strategies are tried and true and will never fail you! The following are some Power Negotiating strategies I've used and continue to use with great success.
Never Say Yes to the First Proposal
Saying "yes" to the first proposal from the seller will automatically trigger two thoughts in the seller's mind: 1. I could have done better. 2. Something must be wrong.
I once bought 100 acres of land in the state of Washington. The sellers were asking $185,000 for the land, and I felt that if I could get them down to $150,000 it would be a terrific buy. (I don't recommend bare land as an investment. It's more of a speculation than an investment.) I asked the real estate agent to present an offer at $115,050. By selecting that price, I was using these two negotiating principles:
- Specific numbers have more credibility than rounded numbers.
- Bracketing your objective assumes that you will end up midway between the two opening negotiating positions.
I knew I was making a very low offer and thought I'd be lucky if the sellers responded at all. To my amazement, they accepted the offer. What was my reaction? Something must be wrong! I suddenly wanted to take a very close look at the preliminary title report when it came in. My second thought on that land in Washington was, "I could have done better."
Those two thoughts will go through anybody's mind whenever you say "yes" to the first offer.
Imagine if your son came to you, asked to borrow your car tonight, and you said, "Sure. Take it. Have a wonderful time!" Wouldn't he automatically think, "I could have done better? I probably could have gotten $10 for the movie out of this too!" And, wouldn't he automatically think, "What's going on here? How come they want me out of the house?"
What does this teach you? You should always go through the process of negotiating because you want the other side to feel that they've won. Never say "yes" to the first proposal.
Note: Always make your offer to buy real estate subject to your approval of the preliminary title report. That's important, because anybody who previously owned the property could have put a restriction on its use. I was once looking at a property that would have made an excellent shopping center development. When I checked the title, I found that a former owner had put a restriction on it that there could never be any liquor sold on the property. That nixed the deal because a liquor store not only builds traffic, but it is also a big money maker when leased on a percentage basis.
Win-win negotiating says if you and a seller get together and learn about each other's objectives, you can agree upon a magical solution that gets both of you what you want. Nobody has to feel he or she lost.
An example of this would be two people who both want the same orange. After they talk about it, one offers to split the orange down the middle and let each settle for half. To be sure that it's fair, they decide that one will do the cutting and the other will get first choice of the two halves. However, as they continue to discuss the situation, they learn their underlying needs are different. One wants the orange to make juice, and the other wants the rind to put into a cake. Magically, they have found a way that both of them can win, and neither has to lose.
Note that this win-win negotiation was successful because both sides did a good job of gathering information. Initially these two people made the mistake of assuming that the other person wanted the orange for the same reason he or she wanted it. That's a big mistake, especially when you're buying real estate. Never assume that sellers view properties the same way you do. Doing so will often create deadlocks over issues that are completely irrelevant to the problems the sellers are trying to solve. The best way to avoid this type of complication is by sharing information and trying to learn what each party is trying to achieve. Never assume that sellers won't do something just because you wouldn't do it.
Win-win negotiating is not a matter of just getting what you want, but also helping the other person get what he or she wants. And one of the most powerful thoughts you can have when you're negotiating with a seller is not, "What can I get from them?" but "What can I do for them that won't take away from my position?" People will give you what you want in a negotiation if you can help them get what they want.
Ask for More Than You Expect to Get
You can get a much better price from the seller of real estate — or anything for that matter — and a much better result in any negotiation — if you remember a simple but powerful rule: Ask sellers for more than you expect to get.
Henry Kissinger, one of the top international negotiators of the 20th century, once said, "Effectiveness at the bargaining table depends upon your ability to overstate your initial demands." Note that he says "ability." In other words, how well you can do it.
This is a critical principle for many reasons, the most important of which is that you are creating an environment in which sellers can have a win as well as you. If you make your first offer your best offer, you have nothing left to give sellers to let them feel they won something in the negotiation. That is one of the key objectives in Power Negotiating — make the sellers feel they've won as well.
There are also many other good reasons to ask for more than you expect to get in a negotiation:
You might just get it. This is obvious if you're a positive thinker. The sellers may just take the low offer! The only way you'll find out is to ask.
It prevents deadlocks. If you are dealing with sellers who are proud of their ability to negotiate, the negotiations will deadlock unless you leave room for them to have a win with you. Let's say that the sellers are asking $100,000 but they've been trying to sell the property for several months and haven't had an offer anywhere close to that amount. They need to sell and might even be willing to accept $85,000. If you make them a take-it-or leave-it offer of $85,000, the sellers will be reluctant to accept it because it would make them feel that they had lost. Offer them $70,000 and let them negotiate you up to $85,000, and they will feel much better.
It gives you some negotiating room. You can always go up on an offer to buy, but you can't go down. Giving yourself some negotiating room makes it easier to get what you really want. This simple rule is probably the most consistent of all the negotiating principles. Track every negotiation you've ever been in. Chances are, the more you asked for, the more you got.
Power Negotiating Tips
The following are some additional Power Negotiating techniques I'd like to share with you:
ALWAYS MAKE THE SECOND EFFORT
Perhaps the other side is agreeing to your core proposal but is balking at the expensive extras. Understand what goes on in people's minds when they make a decision. They fight the decision up to the point when they make it. Then their mind does a flip-flop, and they want to do things to reinforce the decision that they made earlier.
Danger Point: You've reached agreement on the core items, but you're reluctant to make a second effort on the extras because you don't want to lose the entire thing.
Solution: Wait until they've signed the contract and say, "Could we take another look at those extras. I don't recommend it for everybody, but for you I really feel strongly that it's the way for you to go." Because their mind wants to reinforce their earlier decision, you have a good chance of their agreeing to reconsider.
TAPER DOWN THE SIZE OF YOUR CONCESSIONS
The size of your concessions can create a pattern of expectations in the other person's mind. If each concession is bigger than the one you've made before, you encourage the other side to extend the negotiations.
Danger Point: Time pressure is building, and you're eager to reach agreement. Your concessions get bigger and bigger.
Solution: Start with a reasonable concession and then taper down the size of your concessions. If necessary, take a small concession off the table at the last moment.
POSITION FOR EASY ACCEPTANCE
Sometimes a negotiation will deadlock at the last moment. When a negotiation deadlocks like this, the ego of the other people probably got in the way. They want to accept your proposal, but they don't want to feel as if they lost to you as a negotiator. Position them for easy acceptance with a very small concession made just at the last moment.
Danger Point: You don't realize it, but the other side bragged to their boss that they would get a large concession from you. Now they are not doing as well as they hoped, and they are reluctant to give in to you.
Solution: Save a small concession for the last moment. Tell them, "I can't budge another dollar on the price, but go along with that, and here's what I'll do. I'll personally supervise the installation so that you'll know it will go well." Perhaps you had planned to do that anyway, but now you've been courteous enough to let them feel that they traded something off.
ASK THE TOUGH QUESTIONS
Gathering information is critical to conducting a successful negotiation. Don't be afraid to ask the tough questions.
Danger Point: You're asking only the questions that you think they will answer.
Solution: Ask the tough questions. Perhaps they will answer, because information that was confidential or privileged information is no longer so. But even if they don't answer, you're still gathering information.
PATIENCE IS A VIRTUE TO A NEGOTIATOR
The longer you can keep the other side in a negotiation, the more chance you have of getting what you want. When you're beginning to think that the other side will never come around to your point of view, think of the tiny tug boats that can move those huge ocean liners around — if they do it a little bit at a time.
Danger Point: The longer you are in a negotiation, the more likely you are to make concessions. Because your subconscious mind is saying to you, "I can't walk away from this empty-handed after all the time I've spent on this."
Solution: When faced with the temptation to make concessions to the other side, forget about what you've invested to get to this point. You cannot recoup that, whatever you do. Your only consideration should be, "Is it smart to move forward from here?"
Always make these techniques part of your negotiating arsenal!