Can we learn anything about negotiation from other professions? Recently I compared notes about negotiation tactics with one of the top realtors in Chicago, Joanne Nemerovski. Here are some of the negotiation principles that have made her so successful.
2. Find other terms. If you're stuck on the money part, look for other terms to break the deadlock. There could be beautiful furniture. "I just had a deal for $4.5 million and they really wanted the grand piano. That helped." It never hurts to ask. In one deal, Joanne was concerned when the buyer insisted she ask the seller for all of the furniture. Surprisingly, the wife immediately said yes. She had been looking for an excuse to get rid of it.
There could be closing date issues. Sometimes a quick closing is important because people are moving out. Sometimes a deferred closing is important; for example, winter is coming and the buyer doesn’t want to move then. Once, allowing the decorator to come in repeatedly before closing made the deal. Another deal was struck by selling the property "as is" and letting the buyers take their chances.
3. Find out what it takes to close. People are strange. To make one deal, the couple had to be at the unit at 5:30 in the morning to see the sunrise. Another deal depended on the dog's approving the house. Once, to test the noise at night, the prospective buyers had to be able to sleep over in their sleeping bags. Once, an actress-singer requested intimate time with her boyfriend at the house to check the vibe. The seller agreed to give them an hour. In another deal, the seller worked in finance and helped the young buyers afford the house by getting them preferred financing.
4. Try to understand the dynamics. If a buyer is trying to get the property next door, the seller obviously knows that that particular buyer is probably willing to pay a premium for an adjoining lot. Couples often negotiate between themselves about what they want. Knowing the dynamics is important to making a deal work. In the middle of showing one luxury condo, the buyer told Joanne not to waste any more time because she hadn't yet told her husband she was leaving him. Joanne said nothing, the couple did stay together and it all worked out. In another deal, the prospective buyer insisted on talking directly to the seller. The buyer came at him hard with chapter and verse of reasons he was asking too much. The seller just rejected him outright, asking Joanne to find someone who would "uniquely appreciate my house."
5. Do your homework. "Know what the neighbor sold for, know what comparable properties should sell for so that you can get not only a better deal, but an enlightened deal." Get all the comparative listings and sales. Know your property. Differentiate this house from the others; for example floor heights, views and interiors may affect value even in the same building.
6. Keep your word. The stereo was specifically omitted from one sale. The buyer agreed, until the inspection when he decided it should be included. The sellers felt the buyers were not showing integrity, not standing up to what they had agreed. The sellers were entertaining another offer when the buyer quickly wrote back that his wife would divorce him. He had to have the house. The deal squeaked through. Once you agree to something, keep your word.
7. All that ultimately matters is, what is it worth to your client? Everyone has their own individual tastes. A property is worth what one individual will pay and another will accept, no matter what the comps may be.
8. Listening is key. It doesn't appear that brokers use techniques that we use such as hypotheticals or brackets. Listening, though is always key. People will often tell you what they want. Someone selling a property for two million five hundred thousand may say, "Well, it has to have a 'two' in front of it." Meaning, they are signaling something close to two million or even just under. Brokers get to know each other and they learn whom to respect, and how to deal with each other.
9. Stick to your principles. In one deal, the seller let a buyer come to the closing without having paid the earnest money by cashier's check. The buyer then tried to use a trivial defect at the inspection to delay the closing. Everyone was very stressed but the deal did close. The lesson was, stick to the rule. If you are going to take a risk, prepare for possible consequences.
10. Don't give up. In many of these examples, the deal faced a serious challenge. Don't give up. Work to find a solution. Once, a snow storm severely damaged a property after the sellers had moved out. A deal was worked out where the buyers stayed at a hotel (a premier hotel—"it was like a vacation”) for six months while insurance paid to restore the property. Everyone ended up happy.
11. Caring costs. "The best negotiator is the person who cares less because if you're willing to really walk away, you're probably going to get a better price." In negotiation theory, that's called knowing your BATNA (Best Alternative To a Negotiated Agreement). In real estate, it's another buyer or another property. In our cases it's going to trial. In either situation, whoever wants the deal more usually pays for it. The key is to develop your other alternatives.
Joanne's negotiation principles are darn similar to what we do, and applicable to most negotiations lawyers engage in. In the end, negotiation is negotiation and we can all learn from how others do it.