3 TOOLS FOR NEGOTIATIONS
Plenty more goes into a deal in commercial real estate than an offer , a counteroffer , and an agreement to meet somewhere in the middle .
He hit me with a zinger ! I certainly didn ’ t see it coming when I was showing a building and the prospective buyer asked after a long pause , “ Well , what would you pay for the building if you were the one buying it ?” Thus far , the tour had been a run-of-the-mill showing . I pointed out all the amazing attributes of the building , and the investor asked me leading questions alluding to potential deficiencies . It was the same rhythmic dance we always do , filled with questions of unbelieving doubt from the buyer and answers of remarkable certainty from the broker . Neither dare make mention of the word — negotiation — even though that is exactly what was happening .
In commercial real estate , we often view the concept of a negotiation as a highlow game , analogous to the proverbial used-car salesman — and we , as highly accomplished professionals , are much too sophisticated for that . Although if we are honest , the high-low game is the script for nearly every deal in commercial real estate , even if we refuse to admit it . But this approach is an easy pitfall , and there are more productive methods , especially in today ’ s data-driven commercial real estate industry .
When it comes to negotiation , there is a spectrum that exists . On one end lie people who are flippant , unaware , or nervous . The other side is made up of people who are measured , savvy , and confident . As usual , most CRE professionals fall somewhere in between . Let ’ s equip ourselves with additional
We cannot get to where we are going without helping the other side get to where they need to be . So , how do we understand where our counterpart needs to be ? This isn ’ t a trick question — just ask .
tools to achieve more directed and successful outcomes in our CRE deal negotiations .
TOOL # 1 : IDENTIFY YOUR MOST IMPORTANT DEAL POINTS In “ The 7 Habits of Highly Effective People ,” author Stephen Covey suggests we “ begin with the end in mind .” Whether you are a buyer or seller , landlord or tenant , or lender or borrower , identify where you want to be at the finish line of the negotiation . It is even better to take it a step further by writing it down . For example , if you are a seller , prioritize your deal points . What deal terms are most important to you ? And , of equal importance , what deal terms are less consequential ? Then , identify where you would like to be in each of your areas of priority and write it down . The act of documenting it not only prevents drifting during the process , it also serves to unify the team , because a single person is rarely involved on each side of a deal . Once the goals are set , then develop a road map to get there .
My team represented a seller of a vacant office building . In the process , our client identified that price was important — when is it not ? — but of greater significance was timing . The deal needed to close by the end of the calendar year . On the other hand , the amount of refundable earnest money and other typical deal points were of lesser concern . Armed with that information , my team was equipped to structure the deal in such a way that we agreed with the buyer on some key deal points to ensure the preferred date of closing .
TOOL # 2 : SEEK TO UNDERSTAND THE OTHER SIDE ’ S MOST IMPORTANT DEAL POINTS “ Be sympathetic with the other person ’ s ideas and desires .” That bit of wisdom comes alongside many others in Dale Carnegie ’ s book , “ How to Win Friends & Influence People ,” one of the greatest works ever written on negotiation . The truth is that human beings — that includes CRE professionals , believe it or not — are naturally self-centered . We are born selfish and oftentimes , even
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COMMERCIAL INVESTMENT REAL ESTATE MAGAZINE FALL 2021