Commercial Spotlight | Negotiations Happen Everyday
We often find ourselves in a situation where our own desires differ from others around us. It is human nature to have differing opinions and to believe that our own opinions are the correct ones. This individuality makes us unique, but also may cause disagreements, arguments, fighting, and struggle. It can also lead to good debate, resolution, and improvement. One of the ways we get to the resolution stage is through negotiation and determining what works best for the parties involved, so that they each get what is most important to them.
Government and politics in our country are great examples of how diverging opinions can lead to disagreements. To avoid fighting, each party must offer concessions on issues that are less important to them so they may gain consensus and move forward with issues that are more important to them. Negotiations enter our own lives often, such as when we get a job and negotiate salaries, vacation time, and work schedule; make a large purchase such as buying a car or house; or in everyday topics like making dinner plans with friends or family. We may negotiate forming a partnership, ending a partnership, our children’s allowances, college expenses, and getting a new pet. Having good strategies to negotiate or someone on your side who can help you, may be pivotal in assisting a successful outcome.
The most important part of negotiating is finding out what is of greatest importance to each party. Both sides do not need to agree on everything, but if each party feels that they are receiving something they genuinely want, they are more likely to concede on something else. Just this past week, I negotiated school expenses with my stepdaughter, house chores with my wife, and vacation days with my assistant. I heard friends negotiating the rate they pay for their cable bill and the terms of their divorce settlement.
Many facets of real estate require good negotiation skills. When listing a property, I need to come to an agreement with my client on the offer price, term of the listing agreement, and commission. In exchange for the terms that I ask for, I offer marketing, knowledge, access to buyers/tenants, and the capability to get the client the best price in the shortest amount of time.
I negotiate the terms of purchase agreements and leases for my clients, and in some cases both in the same transaction. I recently was involved in the sale of a large industrial building. Comparable sales were obtained for the building and both parties readily agreed on the sale price of the property. The challenge was that the seller was winding down a branch of their business and relocating to another site and needed 2-4 years of occupancy after closing. The buyer was obligated to move out of their building at the end of their lease term, or renewal, and a major part of the negotiation was getting the buyer to exercise a renewal at their current location and have the seller agree to a specific date for their move-out that coincided with the end of the buyer’s renewal term. There were also roof repairs and environmental remediation that needed to be done. We had to negotiate an equitable split of these expenses for each party to move forward. Because of the delayed occupancy, we also had to negotiate a leaseback to the seller and agree to the terms of a lease which included rental rate, maintenance responsibilities, and personal property that would remain in the building at the end of the lease. Just like a sales agreement, every component of a lease agreement can be negotiable.
Successful negotiation skills can be learned and below are 4 tips that help in all matters of negotiation:
- Don’t give away anything too early. Find out all the points the other party is looking for before crafting a solution. Have they read the contract and given you a redline? If not, you may offer a concession such as price and then they may ask for several other changes.
- Don’t start with your bottom line. Ask for a little bit more than you want so that you have room to compromise. When the other party sees you moving in their direction, they are more likely to concede on a point that may be more important to you.
- Don’t be afraid to say ‘no’. Sometimes saying no instead of compromising is the best way to let the other party know this is an important issue. It gives them the knowledge they need to ask for compromises in other areas.
- Don’t respond right away. When someone asks for something that seems like too much, leaving a silence and letting them keep talking will lead to a better understanding of the issue and the ability to craft a better response. Asking for clarification as to why a party is asking for something instead of agreeing or disagreeing, may lead to other ideas and creative solutions to get them what they want with terms that are beneficial to both parties.
Determining what is most important to each party (price, timing, occupancy, etc.) and curating an offer to address each party’s priorities is more of an art than a science. People work with people they like. Being thoughtful, relatable, and having a good rapport will help people be more open to acceptable compromises. I find that negotiations are the most fun part of the sales process and crafting solutions that address both parties’ needs is one of the most satisfying parts of my job.
Dan Stiebel, CCIM