ForeclosuresMass - ForeclosuresMass Monthly - Interview With The Expert

For any real estate investor, negotiation is a part of everyday life. Whether negotiating with tenants regarding details of a lease, negotiating with contractors on work to be done, or negotiating with a home owner during the purchase of a property, any time you are trying to influence someone else, you are negotiating.

This month we caught up with Richard Cohen, founder of 22-year-old School Mediation Associates and a real estate investor himself, to understand more about this critical skill.

ForeclosuresMass: For starters, why do so many of us find negotiation difficult, if not downright scary?

Richard Cohen: Fundamentally, when we're negotiating, we're trying to meet our needs, mollify our fears, achieve our aspirations. The prospect of not doing so is often frightening.

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In addition, negotiating is a life mastery skill. it takes time and practice, and the more you do it, the better you get at it. Most people have no formal training, little experience, and in many cases haven't even reflected very much on negotiation. So lack of practice is certainly another factor.

When you add in the fact that real estate involves a lot of money and is basically a bet on an uncertain future, it's no wonder there's the potential for anxiety.

FM: For many people, the word "negotiation" conjures up the concept of haggling back and forth. Is haggling a bad thing?

RC: It's not bad per se, and it is an approach to negotiation with which most of us are familiar. I make a low offer, you make a high offer. I make a small concession and exaggerate its value, you do the same. Basically, we haggle back and forth, and often meet somewhere in the middle. This adversarial approach starts with what's already on the table and then has us divide it up.

An alternate, and often more productive way to negotiate, is to try to work with your negotiating partner - first to create more value, and only then to divide it. In any negotiation, even in real estate where the relationship between buyer and seller is time limited and money is the focus, there are often things I can do that are of high value to you and low cost to me, and vice versa.

RC: Sure. You may need to close quickly on a property so that you can renovate it and have it ready in time for the September rental season. If my timing is flexible, and I know that you have this need, I may be able to help you get the deal done quickly. By working together, we create more value.

RC: One of the keys to becoming a good negotiator is to develop your communication skills. To listen more than talk; to express your needs without angering or belittling the other person. Spending time listening and developing a positive relationship with the other person might make the difference in you learning about potential problems with a property, or having your counterpart be helpful or accommodating down the line. It takes more energy (but only a little), and is energy well spent.

RC: Doing your homework. When I look at a property, I try to learn as much as possible about the neighborhood, the market, the building and its history, etc. Whether you're negotiating with a potential contractor on the cost of adding a new roof, or with a homeowner on the price of a property, information is power. Only then, if you reach an impasse, are you in a position to say, "Based on these facts, the price should be X, not Y. Help me understand how what you're offering is fair."

In addition, I also try to learn whatever I can about the seller and his or her needs and interests. The final price paid is certainly one factor, but sellers may also be concerned about their reputation, their credit rating, the timing of the deal, or even how it feels to have you as the future owner of their longtime home. It's rarely just about the money.

RC: Lots of people assume that working together with the other side puts you in a position of weakness, and that in a negotiation, "nice guys finish last." Certainly if you give away value in a way that doesn't meet your needs, you are going to do poorly. That is not at all what I am recommending.

The idea is to do the best that you can for yourself... to create deals that meet your interests. However, if in addition, you can demonstrate to the other party that you are responsive and interested in their well being, they will usually reciprocate. When that happens, life will be a ton easier - and more profitable - for you.

RC: Much of what I've talked about is captured in a wonderful little book, a classic in the negotiation field, called Getting To Yes, by Robert Fisher and William Ury. It's a worthwhile read for any investor.

Richard Cohen is a negotiation coach and consultant with over 25 years of experience. He is the author of two books on conflict and negotiation, as well as the founder of School Mediation Associates. Contact Richard at sma@schoolmediation.com.