What Is Negotiation? Negotiation is the process by which two or more parties with different objectives and needs work to find a mutually acceptable solution to an issue. Each negotiation situation will be different because they are influenced by each person's attitude, style and skills.
Negotiation does not have to be unpleasant and does not always involve disputes. It does not have to be underlined by bad feelings or angry behaviour. Once you understand what negotiation really means you will manage your negotiations with confidence and increase the chances of arriving at positive solutions for both parties.
3 Simple Negotiation Rules
You need to keep in mind these 3 simple rules:
- Don't ever assume that you know what the other party wants. The outcome you are negotiating may be totally different from what they have in mind. Make sure you keep an eye on their wants and needs.
- Keep your issues broad and don't narrow them down. Try to broaden the scope of your negotiations. For example, if early settlement is a key factor to the other party and you cannot meet it, maybe a slightly higher offer price will resolve the problem. By not narrowing your negotiations down to one issue, leaves both parties in a position of not having a winner or a loser.
- Remember that other people may have a different perspective on negotiations. Some may want to do a deal quickly and then it's over. Sometimes price is an important factor, but don't assume that money is the only issue. Other things can change the price that they are willing to accept or the price that you are willing to accept.
Principles of Negotiation
- Principle 1: Always go for a win-win.
This is to do with arranging things so each party comes out of the negotiations happy. For example, the sellers may be happy to drop their price by $1,000 if the buyer brings settlement forward two weeks because it will enable the sellers to make arrangements with the movers and arrive in their new property on time.
This is a win-win situation; when both parties give a little and both parties are happy with the final consequence. In this case the seller can make arrangements for the move and arrive at the new property on the planned date and the buyer is happy to bring forward the date of settlement (which did not make any difference anyway) and get $1,000 for his/her trouble.
- Principle 2: Sometimes it's not just about the money.
Something buyers often mistake (when negotiating with sellers) is the belief that the price for the property is everything. In many cases this is not correct. The seller may happily accept an offer from a buyer who is prepared to rush inspections so the deal can be settled a lot sooner. This will enable the seller to move overseas where there is a new job waiting, double his/her present income. A delay of two or three weeks could cause problems because the seller's family may not be able to arrange temporary accommodation in time for him/her to start the job on the agreed date. In this case the seller would be willing to reduce the price by $2,000 or $3,000 to get the early settlement. It's not always about money.
- Principle 3: Bring other people into the negotiations.
Sometimes it is better to have a third party, who is not present, to use as leverage when negotiating. Where the seller has clearly stated the price wanted, the buyer can bring up the third party by saying that his wife, or business associate, etc. will have to see the offer before they can make a final decision. This forces the seller to put the details in writing and it also give the seller the feeling that he/she may lose the deal because of the third party being involved. Using a third party in the correct manner is very successful.
- Principle 4: Be flexible.
Sometimes it is best to meet the other party halfway rather than lose the deal. For example, the other party may have a price on their property of $250,000 and the buyer is prepared to go to $220,000. Where the situation comes to a bit of a deadlock, it would be a good idea for the buyer to suggest that each party meets halfway. In this case, the buyer may suggest that the seller drop his/her price by $15,000 and the buyer will up his offer by the same amount. Very quickly, a deal is done
- Principle 5: Never embarrass.
Make sure that in your discussions you don't embarrass or upset the seller. Never make detrimental comments about the home that will put the seller off. If the home is painted in a horrible green, don't mention it in front of the seller. Say something like, 'I really like the home, but we are going to have to spend $25,000 to repaint it in the colour schemes we like', or something like that.
- Principle 6: Be happy in your negotiations.
If, during your negotiations, it clearly appears that the seller is hard to get along with or is even abusive, it may be time to back out. Unless you are comfortable with what is happening there's no point in carrying on. It would probably be best to bow out of the negotiations and move on to another property. No one should have to take any behaviour from anyone that is less than respectful.