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

[Don Konipol]

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]

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.