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Financial FAQs

How important is it to know how to negotiate? Particularly for real estate, which is a decision homebuyers may live with for years. We don’t think of it for everyday items or even in other areas of life. Americans don’t have the time for it, do we? Yet how is one to negotiate for the ‘big ticket’ items if we don’t become proficient at negotiating for the mundane? Psychologists will tell you that children tend to manipulate for what they want, while mature adults negotiate, hopefully.

A trait that makes it difficult to negotiate is imbedded in our culture. Americans tend to want to please others. We are a happy, fairly prosperous people, right? It is difficult to say no to someone, such as a salesperson, or to accept no—rejection in a word. Yet that is at the heart of learning how to negotiate. A trained negotiator will tell you to practice getting rejections, as strange as that may sound.

For instance, there is a trick to buying a car at the right price, if you aren’t a practiced negotiator. Negotiate for one you don’t want first, so there is a minimum of emotional attachment to the transaction. Or, is there a friend who is a good negotiator? Listen to him/her. They will ask more questions than give answers. Learning how to acquire important information is part of the process, but more on this later.

Learning how to negotiate is tough. It goes against many ingrained habits. One is thinking there has to be a winner—and loser. The competitive urge says it’s either ‘them’ or ‘us’, for instance. In fact, the most successful negotiations will achieve a win—win solution, so that both sides feel they have won something. If that basic principle is kept in mind then the negotiating process will not only be easier, but the outcome more successful. Also, if both parties feel they have accomplished something in the transaction, chances are better for repeat business.

This doesn’t mean hard work isn’t required. It is important, for instance, that the buyer knows not only their own ‘bottom line’ in costs and preferences, but must try to get as much information about the seller, as well. Does the real property seller have much time, for instance, or is a purchase waiting in the wings? Researching the history of the property is also important, to find out what the seller originally paid for it—and when. This is usually available in the public records.

Remember that the person who asks the questions and does the research gets the most valuable information. Much of the high profile negotiating we see in sports or politics is a jockeying for more information. The fact that they are adversarial doesn’t always help the process, of course.

What other information is important? One is the time element. It is not a good idea to let time rule a transaction. A rule of thumb is that the one who controls the clock has the advantage. If the seller knows you have to find a home by a certain date, then they have the edge. A seller’s foreclosure proceeding, on the other hand, is a classic example of a time constraint on the buyer’s side. A prospective buyer knows the property will sell for less because the clock is ticking, as does the lien holder in the foreclosure auction!

Wearing down the other side is another classic negotiating tactic. This is using time to your advantage. Act as if time is of no concern, for example. Walking away when there is an impasse, or putting pressure by setting deadlines are all examples of how valuable is time in any transaction.

But a good negotiator realizes that the other side has to win something, also. If the National Basketball Association’s season of several years’ ago had been completely cancelled nobody would have won. Salespersons realize that if they don’t sell the house or car, then nobody wins. And there might be return business if both sides feel good about the transaction, as we said.

There is much more to skillful negotiating, of course. In fact, studies have shown that it isn’t so much the skill level or knowledge of the negotiator as it is the desire that determines an outcome. An old saw is that they who want it the most usually succeed in getting what they want. So strong motivation will many times overcome a lack of negotiating skills. However one absolutely essential skill to cultivate is patience. For all good things will come in time, is another, very useful saw.

Next week: Art of Negotiation—Part II. Getting what is best for you.

Harlan Green © 2010