The Art of Ethical Negotiation, part of a series of master classes in the NYRS program, takes place in the wood paneled boardroom at the Real Estate Board of New York. It’s an intimate venue that allows 30+ participants to engage in a lively discourse about bargaining and winning. It’s less about revealing real estate war stories and more about successful professionals discussing best strategies. For the past several years, it’s been led by Warburg’s President Frederick Peters and his life long friend, veteran investment banker Alec Haverstick, a principal at Bessemer Trust. Following is my take-away on guidelines for conducting a successful negotiation.
By definition, negotiation is a communication process between two or more parties whose aim is to reach a mutually satisfactory agreement. For a smooth real estate transaction to occur, good relationships must be fostered and all sides must win.
Establishing strong alliances with our co-brokers is arguably as important as developing trustworthy relationships with our buyers and sellers. Over the course of our careers, we may be fortunate to close handfuls of repeat deals and even more referral business with each buyer and seller, but we will interact with our co-broker colleagues week after week and year after year. The agent whose email offer pops up suddenly in the sellers’ agent’s Outlook Inbox without having made a preliminary “feeler” phone call misses not only an opening to build rapport but also the opportunistic chance to learn something about motivation, rejected offers, and even emotional triggers. The agent who is arrogant, overbearing or confrontational reveals an adversarial hand and foreshadows an unwillingness to be a cooperative ally during the next all important step of preparing the co-op board presentation.
Advisors, Advocates and Architects
As advisors to our buyers and sellers, effective agents mix product knowledge with the realities of the marketplace. Armed thoroughly with as much information as we can uncover, our task is to persuade each side to raise or lower expectations while always advocating for each side and portraying the parties in the best light. Cultivating good will between buyers and sellers, we refrain from speaking badly of the other, filter any negative comments, defuse any bad feelings and keep emotions in check to maintain distance and objectivity. When we promote mutual understanding, we make room for empathy and flexibility to follow.
As architects of the deal, we devise a bargaining structure at the outset when a bid is first offered or received, and we prepare for successive moves. While each negotiation is different and there’s no one size fits all formula, generally all offers merit a counter. A token response to even low bids signals good faith to continue the bargaining dialogue. When that occurs it’s important to add the qualifying caveat “but unless your next offer is significantly higher, I won’t be able to get you another response.” If we were to follow the textbook negotiation sequence, there would be three moves of diminishing amounts. Compromise or splitting the difference is best reserved to bridge a narrow gap at the end of the progression.
In a successful negotiation each party needs to have a vested interest in the exchange in order to feel good about the outcome. If the time is too long, momentum and even interest are at risk; if too short, a deal that’s won too easily is questioned. Hitting the pause button when negotiations are moving too quickly to take a 24 hour breather from communication helps each side to reset to consider the other. Adding reverse psychology to a stalemate—“This isn’t working, so let’s move on to another property/buyer”—often gets a deal back on track.
Managing the negotiation process requires self discipline. Part of the negotiating skillset is the ability to listen. The agent whose silence makes room for the other side to speak stands a better chance of advancing a position. Allowing the principals to think they originated a compelling maneuver and complimenting them goes further than taking personal credit.
At the bargaining table there’s no room for ego, hostility or bullying. I’m always especially pleased to do a deal with another NYRS agent. There’s no question that to reach an agreement, we will demonstrate mutual respect and good faith and will treat all parties fairly. It will be win-win as we exchange bargaining chips as equal counterparts aligned to make deals happen.