Simple Rules To Follow When Negotiating
Rule one - Understand that this is a game.
Rule two - In a game there are rules.
Before we start, realise that if you are dealing with an agent for a property, he or she does this for a living so is probably better than you at the game. Knowing this does not mean that you will lose. It means that you understand your position.
Now let's look at the techniques involved one by one.
Bracketing is a mixture of psychology and fractions. The psychology of establishing a pattern and fractions being, well ... plain old fractions from school.
Lets take an example of an item advertised for $120. You offer $80. Your price of 80 is countered at 110. Your next offer might be 90, an increase of 10. As the process continues, your counter offers must get smaller and smaller hence 95 (+$5) then 97.50 (+2.50.)
Two things are at play here.
One– the seller realises that you're slowing down in the process.
Second – the seller will see that your round figure of 80 is now starting to become more specific. This means that you are getting closer to your real price. It is a subtle innuendo that works extremely well.
Keep in mind the agent’s reactions are part of the game. If their reaction is surprise, upset, or anger know that this is part of the process to make you feel uncomfortable and agree to the price.
Feel free to use your own emotions to help you feel more at ease here.
If you feel uncomfortable at suggesting such a low price, say that. Explain how you feel uncomfortable about such a low offer but you are restricted by cashflow right now.
Credit: Sean Allen
From the sporting field we can use a technique called a fake. This means making the opponent think you are moving in one direction and then changing.
A negotiation is a game in the same way.
With the initial stages of the process, an early feeling of confidence can be conveyed by you. As the process continues, an agent will be pressing for finality, for a finish. Your decreasing confidence in continuing will convey a feeling that you are reaching your final offer.
What is negotiable?
Everything. Bond, rent free period, lease payments, outgoings, setup… everything. But remember who the power belongs to. The person that is willing to walk away.
Now an agent will read this and trivialise these techniques, saying that it isn’t a game. He or she is right. It isn’t a game, but you can play it like one.
Remember that negotiating is the fastest money you will ever earn. If you are buying a car for $10 000 and offer $9000 and it is accepted you have just earnt $1000 in a few seconds. Fast, fast money.
Finally a real life example.
I ran a business from a factory that was leasing at $80 a square metre. I was expanding and the unit next door was offered for lease. I offered $40 a square metre. Right next door for half the price. The estate agent was a man who had been in commercial leasing for over 50 years.
“Young man, that's rude,” was his comment.
I knew that this was just his reaction. His response was part of the game. Unperturbed, I pressed on. We settled at $45 a square metre.
I saved $35 a square metre or $7700 a year just by asking and knowing the procedure.
It's a game.