Tip #1: Let the Other Party Speak First
You’ll often hear people say, “Never make the first offer…let the other party do it.” This is great advice, but do you know why that will help your negotiating position?
There are two reasons:
- It allows you to define a mid-point. Many inexperienced negotiators will find themselves “splitting the difference” in their negotiations; for example, if one inexperienced negotiator starts by asking $200 in the negotiation and another inexperienced negotiator starts by offering $100 in the negotiation, the negotiation result generally will end up somewhere around $150 (the mid-point). When the other party states their position first, you have the ability to define the mid point of the negotiation!
- It’s quite possible that the other party’s first offer will be better than the first offer you would make. By stating your position first, you’ve given away valuable information to the other party (your maximum price), and they will use that information to extract the most money possible from you.
Tip #2: Stop Talking and Start Listening
One of the strongest maneuvers when negotiating is to keep your mouth shut. Unfortunately, it’s also one of the most difficult. People are naturally uncomfortable during a negotiating silence, but this is exactly why you should work to ensure those silent periods occur. If you’re uncomfortable, you can be sure that the person you’re negotiating with is uncomfortable as well. The common result of this uncomfortable situation is that one party will make a concession to break the awkward silence. Silence can force a surprising amount of pressure on the other party.
This may be the most basic — but most useful — negotiating tactic you’ll ever employ.
Tip #3: Information is Power
It is estimated that 95% of all negotiations between experienced negotiators, the one with the most information will walk away with the better outcome. When negotiating, it’s important to know as much as possible, not just about the object of the negotiation, but also about the party you’re negotiating with and their motives.
Most people tend to assume that negotiation is always about money, but often it is not. Clever negotiators realise that in many cases, it’s more important to solve a problem than to offer the most money.
Tip #4: Always Get the Last Concession
Part of being a good negotiator is “training” the other party to do what you want, without them even realising it. Always make sure you ask for and get the last concession in the negotiation (a concession is something the other party gives in a negotiation — a price drop, better terms, etc). By always asking for — and getting — the final concession, the other party will, over time, learn to stop asking for things once he essentially has what he wants/needs from the negotiation.
If the other party realises that every time he asks for something, he will need to give something, he will naturally shy away from asking for more than what he needs in fear that he will be asked to give up something important in return for additional (non-essential) demands on his part.
For example, when negotiating with a contractor, let’s say that they throw out a final price that you both agree on. Instead of saying, “I agree with that price, we have a deal,” instead try saying, “I agree with that price, if you can start first thing tomorrow morning.”
Tip #5. Be Willing to Walk Away
Even if it’s the house fits into all your buying rules, if the seller won’t come down to the maximum price you have set for your budget, force yourself to walk away from the deal. This strong stance more often than not will get you the price you’re looking for, as the seller doesn’t want to lose the sale.
Tip #6. Practice
The only way to become an expert negotiator is to practice a lot. Spending a day or two bickering over t-shirts or used furniture will improve your negotiating skills and give you the confidence that will be valuable when you purchase a house.