I am doing a lot of negotiating these days. Negotiating to sell a house, negotiating to buy a house, negotiating for funding, negotiating for services, etcetera, etcetera, etcetera.
The 2 biggest rules in negotiating:
- Keep the emotion out of it.
- Be willing to walk away.
We are emotional creatures and, while that is good in relationships and the enjoyment and appreciation of life in general, it is not good for decision-making or negotiating. Emotion impedes winning.
You see this in sporting events. Player A taunts Player B in order to create emotional distraction. Player B loses focus and responds impulsively. Player A scores.
Keep your emotions in check. Recognize when your counterpart in the negotiation is testing you. Maintain your focus. Remember your goal in the negotiation.
- Is your goal to make money?
- Is your goal to make a deal?
- Is your goal to make a friend?
- All three? Be careful! You must prioritize.
Be cautious of a goal to make a deal at the expense of making money.
Be Willing to Walk Away
A good negotiator will have you making multiple small concessions over the course of a long negotiation that will cause you to ultimately give up a lot more than you would ever have given up in a shorter concession. It is like the frog who is placed in a pot of hot water. He will jump out right away because he recognizes that this is dangerous for him. But if you put him in a pot of cold water and slowly increase the temperature, he will not notice and will die when the water becomes too hot. Don’t be that frog!
Set your parameters before the negotiation starts. Write down, for yourself, the lowest price you will accept or the highest price you will pay. Have this number where you can see it and keep checking in with it.
Auction bidding is a good example. The price starts out low and goes up gradually. The bidders are frogs in cold water. The water temperature goes up as the bids increase. The bidders get caught up in the excitement of the auction and make snap decisions to raise their self imposed limits. Suddenly, they find themselves in hot water and not caring because now it is about winning. Whoops!
Escrow negotiations
A house that I rehabbed is currently in escrow. The buyers and I negotiated a price reduction, then we negotiated helping them with closing costs. By that point, I had given up as much as I was willing to give up in order to complete this sale. I am keeping my eye on the profits I want to see from selling this house. When they came back after the inspection with a list of work requests, I said no. If I don’t sell this house, I can rent it out and make more money over the long term than if I sell it right now. I haven’t heard back from the buyers yet but I’m secretly hoping that they will decide to withdraw from the purchase. I’ve actually decided that I’d like to keep this house.
Recommended Reading:
A great book on this topic is “Never Split the Difference: Negotiating As If Your Life Depended On It” by Chris Voss.
I bought the Audible version of this book and have listened to it twice.