The Tool of Smaller Steps
One of the tools our Team uses in negotiating offers is to decrease the size of the steps you take. With offers and counter offers, the two sides are moving closer on price. Start with your biggest change. Then, move less and less with each step. It takes the fun out of it for the other side and indicates that you are getting close to your limit.
Negotiation by Harvard Business Essentials makes the point that negotiating experts interpret a large concession as an indication that you have significant additional flexibility.
So, if you give a large concession, your counterpart will think they can get additional significant concessions. Particularly in a buyer’s market, it is important to get the buyer to want to continue the negotiations.
In some parts of America, buyers will occasionally make one offer and if they do not like the response, they will walk away, as their implicit needs are to show they are in control and the buyer wants demonstrate dominance. So, the large initial reduction makes it more likely the negotiations will continue, and the implicit needs of the buyer will be satisfied.
The Negotiation book also makes the point that a small change generally signals that process is approaching the party’s walk away price, and that further efforts will result in smaller and smaller concessions.
For example, if the seller is asking for $300,000 and the first offer is $275,000, the seller might come down $5,000 the first time, $3,000 the second time and $1,500 the last time while saying that the seller will not pay for the home warranty at that low price. When the buyer gets the feeling that they will only get a couple hundred dollars by going through one more round of negotiations, they are more likely to just accept the counter offer so they can wrap up the sale before another buyer appears.
There are fifteen real estate negotiating tools in Tim’s upcoming book Create a Great Deal, that you can pre-order now.
If you want to develop your negotiating skill, you can discuss these rules in detail as a part of the Real Estate Negotiating Institute. I hope this idea will help you in your negotiations.
March 19th, 2010 at 11:57 pm
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