Like Flip Wilson’s Geraldine used to say, ‘What you sees is what you gets . This is particularly appropriate in any negotiation. If we’d be perfectly honest, the first person we have to negotiate with in any negotiation is ourselves.
Be candid. How many times have you started to discuss a purchase of a house with an owner and heard a little voice in your head start to give you reason after reason why he wasn’t going to sell to you at a price and on terms that would be attractive. That was your subconscious trying to protect you. It sensed that you were in danger. It was giving you the opportunity to escape b -lowering your sights and hence, your results.
Negotiation is a risky business. You might encounter a rear pro who knows all the ropes. But it’s unlikely. In some trades – say the garment industry, labor relations, commodities, etc. day to day negotiation is the rule rather than the exception. But in the real estate business you’ll find more wimps per square dollar than almost in any other business. Why? Because there’s so much potential profit in the product that it probably isn’t as important to the opponents’ survival, and, because there are very few practicing professionals in the business. Oh there are loads of people with licenses proclaiming themselves to be experts, but when it comes to negotiating experience, a real pro is as rare as fixed rate assumable loan at 6%.
So, screw up your courage and jump in. Here are some facts to support you. In numerous studies, it has been demonstrated that the higher you set your goals (low price for buyers, high price for sellers), the better you’ll do. The lower/higher your initial offer compared to the asking price, the better deal you will make — BUT — if you’re just trying to show how tough you are with a nonsensical offer , you won’t be very successful over the long haul.
I once knew two guys when I was in service. One of them owned a red convertible, wore tailored suits, spent every dime he made pursuing happiness – usually in the form of feminine companionship. The other was cut from plainer cloth. He sent 80% of his pay to his folks for safekeeping. He’d take the bus to San Francisco every weekend. He’d buy a bottle and a hotel room and always returned on Mondays with a wide smile and a closed mouth.
The guy with the red convertible finally asked the other guy for the secret of his success. His answer was that he knew if he kept asking he’d eventually find someone who’d take him up on his offer of a bottle and a room for the weekend. His aspirations were high, he EXPECTED not to return. He paid for his room BEFORE he went into the bar. He never considered that he’d fail. Negotiators can take a leaf from his notebook.
1. When you aim high, you’re making a promise to yourself that you’ll succeed. Anytime you set a target that you know can’t be reached, you’re just conceding failure in advance. Words like ‘I’ll give it my best’, ‘I’ll die trying’, ‘I’ll give 110%’ are much weaker than a firm commitment to do it whatever the cost in time or effort.
When I entered into the seminar business, I made a promise never to return home without a profit. Sometimes I didn’t get home for 3 or 4 weeks. But I knew that if I ever came home a loser, I might never try again. That brings us to another point.
2. Winning builds confidence – and synergistically generates more wins.
Failure does the opposite. It saps confidence, energy, resolve, ego When we win, we accept that as our new base line of achievement, an( we normally raise our expectations about the future. We let one success become the foundation for the next. And winning teaches us good habits.
Losing teaches us bad habits. It’s a vicious circle. The more we accept the credit or blame for winning or losing, the more pronounced the effect is on our future performance. At one time Arthur Anderson – the accounting firm – had a policy of dropping the low 10% of performers each year to eliminate those who’d given up their aspirations because of this effect.
3. In general, winning leads to a high increase in our expectations. Winning really big – setting extremely challenging goals and then going out and making it happen – builds much more confidence than setting small goals. When one sees Donald Trump or George Soros one can watch this phenomenon in action. The same is true of the long shot gambler. He has lots more fun than the guy who bets the favorite only to ‘show’ – then splits his ticket to reduce his risk.
4. A positive effect is to heighten your expectations and challenges by keeping these fixed firmly in your mind all the time, you will eventually begin to achieve more and more. On the other hand, you should work on lowering the expectations of the other party in any negotiation. Let’s take it from the top.
First you determine your overall game plan – long term. For example, at one time I decided to become financially independent by the age of 45 (I wish I’d done it in time to make it by 25, but I hadn’t raised my expectations yet. Didn’t know I was supposed to.).
In order to do this, I decided that I’d have to use leverage in a rising market to buy as many houses as possible. After looking at the overall credit picture and seeing the flaws in using institutional sources of loans with which to make purchases, I decided that owners would have to be my bankers, carrying back financing that would make my goals succeed.
From Jack Miller’s NEGOTIATIONS for Real Estate Investors 3-day seminar manual. Now available in any ebook format or paperback