Real estate negotiations – Jerusalem Post Column September 2016
When strolling through Machne Yehuda market you might notice a peculiar phenomenon or actually the lack of one – no one haggles over prices. Compare this to the market on Friday afternoon, and you will immediately notice the difference: Suddenly everyone is reducing their prices and fighting for costumers.
To explain the difference, I want to use a term coined by Roger Fisher and William Ury of the Harvard Program on Negotiation. BATNA stands for Best Alternative To Negotiated Agreement. What are the alternatives of the Shuk (market) proprietors on weekdays? If they negotiate and make the sale, they stand to gain a few Shekels, but raise the wrath of their fellow sellers. If they don’t negotiate, they stand to lose the deal. Knowing that all across the market prices and perceptions are similar, this isn’t a huge threat.
On Friday things change – the alternative to negotiating are either staying late in the market, on a day they want to go home. Or throwing away produce. As both alternatives seem displeasing, sellers prefer negotiating.
How does this relate to real estate? Strongly!
Developing a BATNA is crucial for negotiating. How can one know how far to go, without knowing what the alternatives are? Such alternatives may be: buying another similar property, buying another entirely different property – perhaps one for renovating, renting and many other alternatives. Of course, once determined to buy, the most important alternatives to explore and research are other similar properties.
It is very common to “invent” BATNAS – other properties you’re considering, for the purpose of negotiating. (It’s even more common with sellers, to invent other buyers for the same purpose.) Doing this harms your cause in two ways: first – if you don’t really have a BATNA, is sounds much less unconvincing. Even more important – do you really want to give up a deal that is good for you for a non-existent alternative?
Developing your own BATNA isn’t easy. Often people start the process when they already found the house of their dreams, and who want to give it up? It complicates even further when financial matter come into play such as the lifelong cost, or mortgage evaluations. Though this process is challenging, one must NEVER skip it when buying.
Think you’re done? Think again!
After completing your own BATNA, you should start analyzing your negotiation partner’s BATNA. Obviously this will involve even more guessing than developing your own, but this will help you understand your partner, which in turn leads to a higher percentage of success, and to a better deal. This stage is a bit tricky for first timers, and you might want to consult with someone when attempting this.