Are you a good negotiator?
Last week I commenced this 2 part blog on the art of negotiation here.
Armed with your newly acquired knowledge of negotiation psychology from the first part, you have the capacity to clearly define your objectives and reach a mutually beneficial resolution for all concerned.
Now we get down to the nitty gritty, as it were, of honing these skills further.
It’s all well and good to have them in your arsenal, but you also need the ability to call on any one of your negotiation strategies at a moment’s notice.
Excellent negotiators are nothing, if not adaptable; while they approach mediations fully prepared and with an expectation as to the desired outcomes, they are also ready for anything.
Know as much as you can, but accept what you can’t
While you know about your own situation and circumstances, the other party’s goals and motivations are not something you will ever be fully privy to.
This is a fact you have to accept and work with.
While this might seem like a game of chance, rather than skill; clever negotiators are very good at viewing a deal from many angles and potential scenarios.
They ‘scratch the surface’ to get an insight into how they might be able to help the other party achieve their ideal outcome.
This knowledge then becomes a part of their negotiation strategy.
Let’s say you want to add an inner city, one-bed apartment in need of some TLC to your portfolio.
Upon viewing the property, you notice photos of a happy, smiling couple.
The woman appears to be pregnant and they’re standing in front of a home under construction.
You casually mention to the agent – “Looks like they’re making room for a growing family. Exciting times.”
Often open ended statements like this will illicit a response from the selling agent, who confirms your initial thoughts as to the vendor’s motivation – an impending upsize in property, with the financial pressure of juggling two mortgages as the household income is downsized.
Now you have an idea as to the vendor’s ‘pain’.
This means you can think about offering a fair, but slightly lower price with shorter settlement terms.
A nice, smooth transaction without any headaches is this couple’s win scenario.
To disclose or not to disclose
Many vendors find this to be a very tricky issue.
If you are backed into a corner for some reason and need to sell as quickly as possible, time becomes your primary motivator.
When the other party knows this, they will often make cheekier offers while dangling enticing settlement terms as a carrot.
Some things are disclosed as a matter of course while the deal is being discussed – such as a pregnancy!
However, when it comes to relationship breakdowns, financial pressures or serious illness, the ball is firmly in your court as to how open and honest you are.
Keep in mind that negotiation is about producing a win-win outcome.
Confiding in your agent as to why you need to move on can assist them in finding a potential buyer who can be an ideal party to facilitate a deal that pleases everyone.
Of course you are legally required to disclose certain things when you sell a property.
Failing to include information regarding things like mortgages, improvements, easements, planning controls, rates and taxes, can get you in hot water and quite likely sour the entire deal.
Learn the art of compromise
In my forty years as an investor, I have made more money saying ‘No’ to deals than saying ‘Yes’.
Knowing when to walk away is critical, but you have to make sure you opt out of a negotiation for the right reasons.
If you have attempted to make the deal work and the other party just won’t budge, then by all means don’t waste your time.
But if something like pride prevents you from realising the next perfect asset for your portfolio, swallow it and consider a compromise.
There’s no point missing out on a property that will generate hundreds of thousands of dollars over the course of ownership, for the sake of $5,000.
A fantastic way to compromise is by building giveaway concessions into your initial proposal.
Lengthier settlement terms for instance, are something you could later compromise on, particularly if you know the vendor is after a quick, no-mess sale.
Knowing when, where, how and why you are compromising, will give you the necessary confidence to do so effectively.
This is about using your head over your heart and considering the big picture result.
Make your decisions at the ‘negotiation table’ based on dollars and sense, not a need to win ‘the battle’.
Entering into negotiations with clearly defined outcomes is essential, but it’s also necessary to recognise when the best outcome is one that you may not have considered.
Always be prepared to take a flexible approach.
The vendor might propose a deal you had not yet entertained, but that could actually make good financial sense for all involved.
Again, just make sure any changes to your plans and end goal are favourable.
Coping with rejection
None of us like to be told ‘no’ outright.
Even if we’ve heard it a thousand times (as I have!), it doesn’t make it any easier the next time, particularly if we become emotionally invested in negotiations.
If the other party responds with an immediate rebuttal to your proposed terms, don’t give up on the entire deal in the first instance.
But don’t feel intimidated into throwing all your cards on the table and making your absolute best offer at that point either – unless of course, you’re prepared to walk away.
In property, no doesn’t always mean no.
In fact it rarely ever means no.
If it does however, and you can tell there is no more room to move in order to make this deal work for you, take it as a sign that it wasn’t meant to be.
I can guarantee that another deal is waiting to be done, just around the corner.
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