The first thing to note is that negotiation is more of an art than a science. A science means I will do this and I will get this result and I can repeat it. It’s the same thing every single time. An art, on the other hand, means you will try something. It might work. It might not. That doesn’t mean that your technique was incorrect. Sometimes it just doesn’t work out.
The 5 ways to persuade in a negotiation
- Social proof
Let’s look at them in a little bit more detail.
The rule is that there is a higher perceived value in something that is limited. Almost every person knows the scarcity tactic. It’s the buy now before you run out of seats.
There is only limited options available on sale now for the next two or three weeks. You know, those are the ways in which people can entice you to make a decision using scarcity.
Let’s say that you’re going to speak to an estate agent. I would go to them and I would say, “Hi, Mr./ Ms. Estate Agent. I’ve got roughly a million rand that I’m looking to invest. And the first deal that gets accepted, I will move forward with.”
What I’m saying to the estate agent is that I have money, but that it’s limited and whoever gives me the best deal first wins my business. I’m trying to entice the estate agent to show there’s limited situations here and I’m taking it away from you. That’s how the scarcity model works.
Basically what that means is people tend to give when they first receive.
Before you try and take from someone, give. That’s what this process is about.
Giving first gives you more opportunity to receive more in the future.
One of the best techniques I have when trying to negotiate a discount on a property is to go to the estate agent or to the seller with proof of funds.
It’s a little document that you can get a bank statement or some sort of approval in principle from a financial institution. You go to the seller or to the estate agent and say, “I’m in the market for a million rand and here’s my proof of funds.” What I’m doing is showing them and giving to them first before asking in return, because that’s going to take such a headache away from the seller.
Most of the time sellers are distressed because they’ve gone through a couple of offer to purchases that have fallen through because interested buyers couldn’t get financing. They start to get more motivated because time is running out. By giving the seller proof that I’m not going to waste their time, they become more open to negotiate favourable terms.
This is herd mentality. People like to follow other people.
Whenever I approach an investor, I give them a business case of a successful deal that I’ve done before. I would say, “Please call this person. I’ve worked with them personally or I’ve used this person’s money and brought them a return of fifty percent. Please give them a call.”
That previous investor is social proof that I did a good deal and gave back their money. This makes them more likely to lend you money.
When I’m negotiating with an estate agent and I need to discount my offer significantly, I use credible information from a credible, independent third-party to justify my offer. For example, I’ll say to the agent, “I’ve reviewed the LightStone Property report and I’ve looked at the last three comparable sales in the area. I can see that the average resale value for this type of property is actually one million rand and that’s why I’m making this discounted offer. It’s in line with the current market.”
That’s the quickest and easiest way to get an estate agent down to my offer because there’s no disputing the Lightstone Property report. It’s got authority.
People want you to be consistent in words and in actions. One of the tactics that some insurance sales people use is this consistency tactic, which is crazy. They have a large set of questions, say about fifty, and these questions are designed to get you to say yes.
Are you thirty? Yes. Do you live in Cape Town? Yes. They get through 49 of these really easy questions and all of them are have an answer of “yes”. Then question number 50 is, do you want to buy insurance products from us now? Because I’ve said yes 49 times. There’s a good chance that I might just say yes again. That’s the tactic that some of them use. Terrible sales tactic. But I think it explains how, you know, we want to be consistent in our actions and our words.
The example that I like to use, especially when dealing with estate agents, is I’ll say to them right up front on our first interaction, “I’m not going to give you the offer that you’re looking for. I’m not going to give you market price because isn’t negotiation part of the sales process?” When they say yes, and they’re likely to say yes, they are not going to be upset when you come later on and negotiate. If they are upset, you can just say, “we spoke about this the first time we met. I told you that I was not going to come in at the seller’s asking price and I told you that negotiation is part of it, and you agreed.” They’ll have to desire to be consistent because that’s what builds credibility and trust.
Next time you go buy a property, remember that negotiation is not a science. It’s an art. It’s something you continuously have to work on.