The Long or the Short…Which Negotiation Technique Do You Use?

Question

Two thoughts on negotiation techniques. One, is the long, drawn out method by which you get the other party “invested”; time wise as well as emotionally in concluding the deal. With x number of hours in, and time to contemplate what life will be like with the transaction concluded, the other party is more willing to concede points, accept a less favorable outcome, and provide greater advantage to you.

The other thought is to QUICKLY separate the “real” deals from the overwhelming majority of buyers, sellers, borrowers, lenders, etc who MAY do a deal IF and only if they are getting the deal of the century. Under this method you make your one and only offer; no negotiation, if it’s not accepted you walk away.

When I started in real estate investing a couple of hundred years ago, I was a proponent of the first method. And I used it with some good success. In the last 15 years or so I’ve switched almost exclusively to the short negotiation technique. Since I’ve increased my deal flow to a significant degree, I find that this technique eliminates the wasted time and effort of dealing with people who aren’t highly motivated to close a transaction. Of course, it also eliminates some potentially profitable deals from the equation.

My inspiration for my version of the “quick” negotiation was Harold Helmsley. I read where he became famous for making one offer - his best and final offer - and if it wasn’t accepted he negotiated no further. It was a “take it or leave it”. His reputation for this became so well known in New York commercial real estate circles that he was able to buy great properties at bargain prices very quickly; before others had a chance to bid up the price.

To work most effectively, both of these techniques need to be “tweaked” or modified to best work with whatever the current real estate market is.

So, which of these negotiating strategies do you use, have you used, and what success or disappointments have you encountered in your negotiations?

Scott Mac · Answer

Well Don, it depends on the desirability of the asset to other possible buyers (As guessed at by me), as well as if the offer is predetermined to be a lowball offer.Some sellers do not have a lot of ability to go down much and a plethora of buyers may drive the price up above what I think it should sell for . Alongside Seller negotiation I think you have to keep in mind the financing for the deal and it's requirements as well as the interest rate. I am definitely not pro adjustable rate interest financing.A newbie investor may not see very much flexibility in some lenders, like someone who has a larger portfolio might be able to accomplish.The reason I mentioned both together is the lender is basically a partner in the deal- a senior partner in a way. With rights to extinguish the buyer's ownership and take the asset for himself.And if there is some flexibility on some issues with the lender that might make up for the inflexibility of the seller on some issues including price. And is low balling being used, because you know at certain times it's a waste of time due to high demand for that asset.So I kind of spoke about this in a cloudy manner because I approach it non methodically, and try to maintain flexibility. And I am not in favor of trying to be manipulative of the other party.

Jay Hinrichs · Answer

but 1978 we were ahead of the curve ... people were still using carbon paper.

Jay Hinrichs · Answer

your the man I love it.. when I started I did my deals on the hood of the car and my contracts were on NCR paper so I just ripped them off their copy :) my contract was also just one page and included escrow instructions.. Now in our timber deals with that demographic it could take months and a lot of fresh and smoked salmon and if it was elk season some fresh steaks and jerky would win the day.. this is the PNW of course :) I also got a lot of timber deals by advertising on the Christian radio station..

Joe S. · Answer

I get (most of) my contracts on the first appointment. Very few deals I get through follow up. I walk into the house with my binder of all my needed contracts and if we come to an agreement I fill out the contract right then and there.

Mike Dymski · Answer

I try to find out what problem they are trying address and attempt to solve it (and also follow the Helmsley approach).

Joe S. · Answer

Our contracts are on NCR paper as well.lol

Jay Hinrichs · Answer

each of them lived 100 years !!!short for me as well and sometimes in the middle.. bigger land plays do take time.. But for vanilla every day deals we look at short.. now this is deciding if we are going to loan on it or not.. And since i have a very specific niche and pricing structure I am always the last one they call and the clients usually have run out of time and are going to lose the deal and their deposit if they cant close in 3 to 5 days.. :) So i turn them to yes or no in 24 to 48 hours so i dont hold anyone up.Just had one today Pacific Palisades land deal appraised 50mil but guy will take 20 mil if we can close in 10 working days.. needs dough for a deal in Vegas.. I told the guy I cant do it.. Not sure many that could .. And of course those are highly difficult locations in CA for development and building permits..

Chris Seveney · Answer

I stay away from those "we need to fund it next week" deals - I do not like to be rushed.

Theresa Harris · Answer

I agree with Chris, though I will negotiate a little bit.Chris-your side note-no idea who that president was (I'm not American)-I guess that is what happens when you have 15 kids and your second wife is younger than some of your older kids (as was also the case with the father of the grandkid who is still alive)! Amazing at how long some generations last.

Chris Seveney · Answer

@Don KonipolDefinitely short tactic don’t have time or patience to draw things out- just my style.Speaking of a few hundred years - what is crazy is president john Tyler born in 1790 one year after George washington was sworn in has grandchildren alive today….Yep grandchildren… useless fact of the day.