Wednesday, August 6, 2008

“Win/Win” Is For Amateurs.

We rarely are given what we want. Rather we negotiate for it.

Even more, we HAVE to fight for it, or the deal is likely to fall apart. Part of negotiating successfully is offering satisfaction in “reaching” a conclusion, and also knowing what the other party wants and needs to come to a suitable settlement. Simple Win/Win negotiating is inadequate in many situations as illustrated in the following scenario.

Two hunters went hunting together looking for a large buck to take home. Finally a trophy animal showed up and both hunters shot at the same time. The deer fell over dead.

Upon investigation, they could only find one bullet hole in the animal, and neither of the hunters knew whose bullet killed the animal. Now it was a "win/win" dilemma to figure out which hunter “owned” the trophy.

Well, there’s no conventional “win/win” solution to this dilemma. After all, in this instance, both hunters wanted the rack, and so one or both is screwed. At best, one hunter has to settle for the left hand side of the rack, and the other has to settle for the right hand side, or one must give up the whole rack. Or they have to have a tug-o-war match to decide who gets what ---- and/or shoot each other to come to a conclusion?

Well, a mutually satisfactory solution has to be worked out nonetheless. So I say, “Win / Win is for amateurs!”

There’s a better solution to win/win.

For starters, we ask more questions of these hunters. Do they actually both want the racks, or is this an assumption? Do both hunters actually want the skin? Or is there anything else they want specifically? Is there a focus of need or desire that doesn’t clash with the other party?

Barney Zick calls this “targeted negotiation” or, “He who talks first “wins”. Yes, instead of making assumptions that each party wants the same thing, we instead ask lots of probing questions before we ever begin negotiations.

To our ultimate surprise, and sake of discussion here, we discover that the one hunter wants the rack, and the other hunter wants the meat, and neither wanted the skin.

Well, isn’t that convenient?

So after some questions we achieve a satisfactory "split" of the animal. In this case we discovered what is beyond the “obvious” --- in this case the real needs --- the non-negotiable needs, if you will and achieve a successful, targeted negotiation.

Well, this is no less true in real estate negotiations. We have to get beyond price in many cases and target our negotiations toward a specific objective. Price then isn’t always the primary motivation for all parties. However finding out what the true motivation for selling is the professional negotiator’s responsibility. And “win/win” for sake of “win/win” in these cases is not adequate to reach a solution.

To illustrate further, I bought a house from a bank at a huge discount. The price wasn’t the most important factor for the bank at that moment, but regaining the ability to borrow several times the value of that bad loan from the government, and making ever more loans was ---- way MORE important than price. Who knew?

In another case, a seller couldn’t complete a remodeling project because he was in jail. Who knew? His wife needed cash to pay legal bills, and she was willing to discount the price heavily to get the cash quickly. So, because we asked lots of questions, we got passed all the normal lies sellers tell us about why they’re selling --- and used that information to help solve her problem --- quickly --- because we couldn’t steal in slow motion.

Meanwhile, we ask lots of questions until we get down to the meat of the motivation, and use that information to go after the kill. Sounds a bit too aggressive for you? Then you’ll be a victim of someone who knows better than you. Keep reading.

We make profitable offers after we get all the facts, and then let the sellers say “yes” to our offers because they now “want” to, because we will solve their “real” problem.

Here’s a list of problems we’ve uncovered and solved over the years:

  • assumed seller’s liabilities and negotiated a discount after we closed on the property.
  • purchased appliances for seller to use in new house
  • negotiated discount of seller’s second/third mortgages.
  • paid off seller’s vehicle loan
  • bought life insurance for seller
  • bought down (shorted) the seller’s second mortgage
  • paid off seller’s bad debt (at a discount) and upgraded their credit
  • gave seller moving money instead of conventional down payment
  • took over seller’s mortgage payment to protect seller’s credit.
  • took over seller’s car payments
  • gave seller cash in return for car in the garage
These are qualified win/win examples. We uncovered the real motivations the sellers had for dumping their property, and focused on solving THOSE problems. It allowed us to buy cheaper, whether through speed, discounting, assuming debt, or whatever. But we wouldn't have known without uncovering the seller's true motivations for selling, and negotiated those problems away in return for a great price.

To illustrate this more closely to home...

A few years back, my true motivation for selling a house had nothing to do with price, but just getting rid of a tax burden. I wanted to dump the house a.s.a.p. by discounting the price by 20% off retail to a friend (who didn’t know the market) --- just to get it out of my hair.

What’s interesting is that since I didn’t force my friend to “work for the deal”, and he was not appreciative of the facts of the deal --- I had a much more difficult time selling to him. It's like trying to get a horse to drink, that doesn't know he's thirsty!

In other words, I removed all the road blocks and normal marketing ploys I used, and it resulted in taking longer to unload the steal, than if I had listed the stupid thing conventionally and marketed it professionally. I guess I learned that, “No good deeds/deals go unpunished”, huh?

This was a classic, amateurish, albeit inadequate win/win” solution. I assumed that my discount would be immediately obvious and create motivation, but I failed to take into account that part of the “win” for the other party was “fighting” for the steal deal. So taking away the “fighting” part, nearly destroyed the deal, because the satisfaction level of the buyer (and myself) was short-changed.

The fact that because the buyer didn’t know the market, hadn’t been “working” to find deal in the first place, and that I made it too easy to buy, the buyer then resorted to “creating work” for himself in order to feel some satisfaction in an otherwise negotiation-free situation. Moreover, the buyer second-guessed the terms and price I offered --- with stalls, over-analysis, but finally grinding himself down to the conclusion that I was actually giving him the deal I said it was.

You’d think my credibility was enough? Nope.

Finally I also should have tried to “take away” the deal, by informing my friend of my “other buyers”; my reluctance to sell so cheaply to a friend; my “other alternatives” I had in mind about selling; etc., etc. This would have lit a fire under his feet and not allowed him to "steal in slow motion" ---- which is how it turned out.

So, asking the seller's why they're selling (repeatedly until we get to the root of their motivation), forcing both parties to work for a solution, and focusing on solving problems rather than on price is what defines a better win/win strategy called "targeted negotiations".

In a future post, I’ll discuss the “Take Away” in more depth and why it’s the “be all, and end all” in motivating "wanters".

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