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On Negotiation

  
  By David B. Zwiefelhofer  
     
  Many home sellers and home buyers fear "realtor-free" real estate deals for one simple reason. They believe they are poor negotiators. As is true of most endeavors, in negotiating a deal a little preparation goes a long way toward achieving one's goals.

With this in mind, review the following principles of negotiation and realize that you've already negotiated countless times in your life. Here's your chance to save yourself lots of money by remembering what you already know.


Principles of Negotiation


1) The least motivated party has the most control.

Prepare yourself to be patient. There are plenty of houses to buy and plenty of buyers. You don't need to deviate far from a fair price.

If you're not willing to walk away from the deal, and the other side knows it, then you've already lost. If you want to stay in control, don't fall in love with the house, or with your asking price.


2) The party with the most knowledge gains the most benefit.

All the arguments in the world won't change the value of a property. If you've independently determined what that is, then you're not going to sell too low or pay too much. At this point, negotiating becomes an attempt to learn the other party's level of knowledge.


3) Ask for more than you will accept.

Even if both sides of the bargaining table have perfect knowledge of the property they will still need to feel as if they have negotiated a good deal. It's hard to feel you've accomplished something by negotiating if the starting and ending points are the same.


4) Both sides must gain something.

You don't want a disgruntled party on the other side of the table causing you grief. Each party should feel that they've gained substantial benefit from the negotiation.



Fundamental Skills of Negotiation


1. Preparation.

There is no substitute for knowledge. Exercise diligence in your research and you'll have an accurate assessment of the subject property's value. This is the most important piece of information in negotiating a deal.


2. Know your bottom line.

Knowing what you want will make it much easier for you to bargain. If you're not quite sure what your house is worth (or how much you can afford to spend, if you're buying) you won't be a confident negotiator. You won't be able to commit to a great deal when you see one, because you won't be able to recognize it. Furthermore, your lack of knowledge will be evident to the other side and will further undermine your negotiating position.


3. Be detached.

The quickest way to lose control of a negotiation is to become too emotionally involved. Obviously, buying and selling something as expensive as a house is an emotionally loaded experience, but cultivating a detached manner will help convince your opponent that you are a competent negotiator who is comfortable with his/her position. Being too emotional will always be interpreted as desperation and that gives the upper hand to your adversary.


4. Hear the other side.

If you can manage to be detached you'll then have the opportunity to listen to and observe your opponent. You'll be able to tell if the other side is too nervous, if they're bluffing or if they're willing to compromise.

Deals fall through all the time not just because the two sides couldn't agree, but also because they misunderstood each other. Listen to the other side. If you're not sure what they're saying, ask for clarification.

Keep in mind that although the people on the other side of the table are likely nice folks, they are your opponent. Don't let their friendly attitude cost you money. You can bet they're not willing to shift their position because you're a charming conversationalist. Of course, you should always be polite and friendly. Offended by your opponent's offer? Politely tell them you enjoyed meeting them and appreciate their interest, but that you're so far apart that further negotiations would be fruitless.


5. Communicate clearly and concisely.

The more you say, the more you're likely to give away. You might even consider negotiating only on paper. After all, no verbal real estate deals are enforceable. A polite, "we'll carefully consider all written offers" can greatly enhance a nervous negotiator's ability to control the process. It will give you time to evaluate the offer fairly and greatly reduce the effectiveness of pressure tactics.


6. Don't be greedy.

When you've reached your goal be satisfied and close the deal.



The four principles of negotiation and the six negotiation skills paraphrased here originally appeared in the April 2000 issue of The Cheapskate Monthly, Vol. 9, No. 4.