GETTING AND NEGOTIATING THE DEALS · tips. 20 •High volume and established mortgage brokers are...
Transcript of GETTING AND NEGOTIATING THE DEALS · tips. 20 •High volume and established mortgage brokers are...
GETTING AND NEGOTIATING THE DEALS
OVER THE NEXT 90 DAYS, WE WILL COVER THE FOLLOWING
MODULE 1
Drafting your Vision
MODULE 2
Identifying the Gap
MODULE 3
Identifying your Obstacles
MODULE 4
Mastering your Money Mindset
MODULE 5
Joint Ventures
MODULE 6
How to Make Big Money with Small Apartments
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MODULE 7Getting and Negotiating The
DealsMODULE 8
Talking to a Potential Investor or Joint Venture Partner
MODULE 9Drafting your Story into a
PresentationMODULE 10
Positioning yourself to Attract Joint Venture Partners
MODULE 11Getting Online
MODULE 12Systematizing the Process
WELCOME
Change your perception of success while building $5,000/month passive income through real estate investing.
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GETTING THE DEALS
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-HOWARD STEVENSON, HARVARD PROFESSOR
ENTREPRENEURSHIP
IS THE PURSUIT OF
OPPORTUNITY BEYOND
THE RESOURCES YOU
CURRENTLY CONTROL.
CHOOSING YOUR MARKET
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When choosing
your market - It
is important to
be crystal clear
on the kind of
property or
project you
want, including
the exact price
range and
neighbourhoods.
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Real Estate Investing is a
business.
It is important that you
understand your market
better than anyone else.
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When selecting your
market, you want to
consider communities
with:
• Increasing
population
• Diversified
employment
• Transportati
on and
infrastructure
projects 9
Resources with
accurate data:
Statistics Canada’s
Census Report and
your local City
Planning and
Economic
Development
Departments.
It is free and offers
current population
and demographic
data. 10
In order to jump on
the good deals
quickly, you want
to do your research
beforehand so you
are able to focus
your attention
where it belongs…
negotiation.
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COMMON MISTAKES WHEN ANALYZING
DEALS
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Analyzing the wrong thing:
• You want to identify the numbers you truly
need for your analysis and hunt those numbers
down.
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Gathering analysis from only one source:
• Investors risk ROI by looking to just one
source for information. If there is any kind of
error, your analysis will not be accurate.
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Ignoring Context:
• Become an expert on the context you are
investing in and trust that above everything else.
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Impatience
• Establish criteria that your deals need to
meet and do not let your impatience lead to
irrational decisions.
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Getting locked into one-way thinking
Your analysis should inspire you to consider other
alternative strategies.
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-DON CAMPBELL
“REAL ESTATE
SHOULD BE
BORING.
THE RESULTS OF
THE INVESTING
ARE WHAT
CREATES THE
MEANS FOR
EXCITEMENT.”
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LOCATING MOTIVATED VENDORS
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•You will find more success in building solid
broker relationships than chasing random
tips.
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•High volume and established mortgage
brokers are your point of leverage in locating
desperate vendors.
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•Your goal is to build a business relationship
with the 20% of brokers who do 80% of the
business. When they come across desperate
vendors, you want them to think of you.
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Other points of leverage include:
• Realtors
• Local Bank Managers
• Real Estate Lawyers
• Property Managers
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Your goal is to
make sure you
stay up-to-date
on what is
happening in
your preferred
area.
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ENTREPRENEURIAL INVESTORS
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Are inspired by a larger vision.
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Understand that being too
optimistic or too realistic
is dangerous.
A balance of the two is
perfect.
•Understand that not every action will be
correct but they take action anyway.
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•Are pro-active
about
exercising their
due diligence
because
investing is
their business.
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•Understan
d the value
of a good
team.
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•Welcome
acceptable risks
because on a
scale, the
rewards are
greater.
•Are long-term
thinkers.
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•Are driven.
•Embrace challenges and thrive on creating
solutions.
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Are professional networkers who understand that who you know is more important than what you know.
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SELLING YOURSELF TO AN INVESTOR
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•You need the BIG THINK: The ability to convey a future vision of the world and then help investors believe that vision of the world is possible.
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You need to demonstrate:
•What you are doing is important
•That you are not going to waste their money
•That you have a strong moral background
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Morality should not be taken lightly:
•You need to be reasonably forthright about your risks and opportunities.
•Your credibility comes when you say: I have thought about the risks and here is the way I will overcome them.
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LOCATING MOTIVATED VENDORS
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•You want to
look for
properties that
have been on
the market for
a long time. You
may find the
vendors are
more willing to
negotiate the
sale.39
Do your homework on the mortgage programs available to you
(EXAMPLE: CMHC).
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•Use your local knowledge to your advantage:
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• Keep an eye
out for vacant
properties
• Take the
time to tour
streets that
you aren’t
normally on.
You may find a
hidden
treasure. 42
•Foreclosure lists:
• The key to getting the lowest rate is offering a quick
close.
• Because most investors focus on these lists, the
negotiations can become competitive. It is important to
know your limits before you begin.43
Spread the word:
Use free sites to let people know you are willing to buy quickly.
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BUILDING A BROKER RELATIONSHIP
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•It is important to keep in mind that high
volume brokers are often inundated with
investors wanting to work with them.
•You do not want to call or email brokers then
plan for them to remember you.
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Your goal is to figure out ways to
stand out from the crowd.
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EXAMPLE: Send a package with goodies to
accompany an introduction letter.
Your introduction letter can explain why you can
act quickly if a motivated vendor comes along.
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THE NEGOTIATOR
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WHAT HOLDS YOU BACK?
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• Cultural constraints
• Low self-esteem
• Fear of hurting the other’s feelings
• No experience in negotiation
• Low expectations
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• Lack of discipline
• No system for negotiating
• Poor record keeping
• Poor preparation
• Inability to stack value or sell
• Failure belief or fear of poverty52
THE EMOTIONAL NEGOTIATOR
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It is important to understand how emotions can effect a negotiation.
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Regulating our emotions by using specific strategies can help us to improve our technique.
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Common emotions are:
•Anger, sadness, disappointment,
anxiety, envy, excitement and regret
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THE ANXIOUS NEGOTIATOR
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DO ANXIOUS NEGOTIATORS DEVELOP LOW ASPIRATIONS AND
EXPECTATIONS?
YES!
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•You could end up making a timid first offer (which will not benefit you)
•You are more likely to respond faster than necessary.
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• You are more likely to exit the negotiation sooner.
• Expressing your anxiety (intentionally or unintentionally) will make you more vulnerable to your opponent.
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ANXIETY & NEGOTIATION
Anxious people are:
•Less confident.
•More likely to consult others before making a decision.
•Less able to discriminate between good and bad advice.
•More likely to be taken advantage of during a negotiation.
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HOW TO CONTROL YOUR ANXIETY AND PUT IT TO WORK FOR YOU
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The more comfortable you are, the less likely you will be anxious.
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You want to keep your negotiation skills sharp
through:
•Training (learn strategies and increase your
skills)
•Practice
•Rehearsing65
•Some
negotiators
will try to
make their
opponent
anxious on
purpose.
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THE ANGRY NEGOTIATOR
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BRINGING ANGER INTO A NEGOTIATION IS LIKE THROWING A BOMB INTO THE PROCESS, IT’S APT
TO HAVE AN EFFECT ON THE OUTCOME.
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ANGER & NEGOTIATION
•Anger can harm the negotiation process by
escalating conflict, alter perceptions and make
challenges more likely.
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•Many people believe anger can be a productive
emotion that will help them win.
•This perception means that you see negotiation as
a competition rather than a collaboration.
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•Anger reduces
joint gains,
decreases
cooperation,
intensifies
competitive
behaviour and
increases
rejection.
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•Inexperienced negotiators assume negotiation is a
game where their interests conflict directly with
their opponent.
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ANGER & NEGOTIATION
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• Experienced
negotiators
look for ways
to expand the
deal through
collaboration.
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•Angry negotiators are also less accurate in judging and interpreting the situations.
•Showing anger during a negotiation could damage the long-term relationship between the parties.
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•It can also reduce trust and result in people walking away from the table.
•If tensions do flare up, ask for a break so you can calm down and regroup.
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JUST AS YOU PREPARE YOUR TACTICAL AND STRATEGIC MOVES
BEFORE A NEGOTIATION, YOU SHOULD INVEST EFFORT IN
PREPARING YOUR EMOTIONAL APPROACH.
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-ALISON WOOD BROOKS
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MANAGING YOUR OPPONENT’S EMOTIONS
A critical component of emotional intelligence is to be observant.
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Tune in during
your negotiation:
• Body
language,
tone of voice
and choice
of words
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•Do your best to
understand their
perspective as
this will make it
harder for your
opponent to
deceive to you
(most people
prefer to deceive
through
omission).
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•If your opponent
seems anxious or
angry, lighten the
mood to put them
at ease.
•If your opponent
seems overly
confident or
pushy, expressing
well placed anger
can inspire a
healthy dose of
fear.83
•If you display an emotion that your opponent
picks up on, you will shape his/her interpretation
of it.
•Building a rapport before, during and after a
negotiation will go a long way.84
NEGOTIATING WITH SOMEONE MORE POWERFUL
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• This can be daunting and the approach can affect your chance for success.
• It is important to remember that there is often strength in weakness.
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• Listen well and ask questions this builds trust and encourages the other party to take you seriously.
• Keep your side of the negotiation focused on the results – no matter what the more experienced party brings to the table.
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NEGOTIATING WITH SOMEONE MORE POWERFUL
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HAVING POWER TYPICALLY REDUCES A PERSON’S ABILITY TO UNDERSTAND HOW OTHERS THINK, SEE AND
FEEL.
THIS MEANS BEING IN THE LESS POWERFUL POSITION ACTUALLY GIVES YOU THE STRONGER VANTAGE TO
ASSESS THE SITUATION.
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ONCE YOU DO YOUR HOMEWORK, YOU MAY FIND YOU HAVE UNDERESTIMATED YOUR POWER AND
OVERESTIMATED THEIRS.
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•Be OVERLY Prepared
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Brainstorm in
advance for
solutions that
will work for
everyone.
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• Make sure you have accurate data at your
disposal.
• Preparation gives you the information you
need to get more of what you want.
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• Being properly prepared
when dealing with a
more experienced
negotiator will provide
you with the necessary
confidence to be
successful.
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Understand
your goals and
theirs
Make a list of
what you want
and why
This will help you
to build your
strategy within
acceptable terms.
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• Studying your opposition’s motivations,
obstacles and goals will assist you in framing
your strategy to include solutions to their
problems.
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NEGOTIATION
SOMETIMES
THE BEST
BARGAIN IS
THE ONE YOU
CREATE FOR
YOURSELF.
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EXAMPLE:
5% OFF A 400k PROPERTY IS $20,000.00 IN SAVINGS!
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RULES FOR SUCCEEDING
AT NEGOTIATION
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Look like a million bucks.
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•Write up your intentions for how the negotiation will go.
•Anticipate challenging questions and write up draft responses.
•Be gracious and grateful no matter the outcome.
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•Deals have a greater chance of success if they affirm:
• Appreciation
• Affiliation
• Autonomy
• Status
• Fulfilling a Role
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NEGOTIATION
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•In order to be successful, you must do more than find a good deal, you must be persuasive.
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Negotiation is about strategy and tactics:
• Identify and consider alternatives
• Use leverage
• Execute the choreography of offers and counter-offers
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Negotiation requires:
• Strategic focus
• Imagination to see the alternatives
• Knack for assessing, reading people and bluffing
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•Goal is to get the most money or profit from the process.
•Use open-ended questions to gauge vendor motivation.
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Stay flexible – Don’t limit yourself to one strategy
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The best negotiators have prepared enough that
they understand the whole terrain instead of a
single path.
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Negotiations:
Put yourself in their shoes while remembering your own value.
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•Frame your negotiation as a problem-solving challenge.
•Stress on the areas on which you both agree.
•Do not cave on issues because you think you will win.
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•Do not mistake impact for intent. The other side may have their own unique pressures that restrict their ability to maneuver.
•Don’t be afraid to ask your opponent what they want and why they want it.
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NEGOTIATION
• Never give something without getting something.
• Be up front and quick to respond to people. Don’t lead anyone on.
• Have thick skin and remember: If you aren’t embarrassed by the price you are offering, you are not going low enough.
• Stay skeptical – don’t allow yourself to get so comfortable or excited that you become over confident. This could lead to an escalation of commitment or insufficient information.
• Be considerate of your opponent and don’t let your excitement make them think they lost.
• The best negotiations end with each side having achieved some of its goals and not others – a mix of wins and losses.
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INVESTING IN REAL ESTATE IS FOR ANYONE WILLING TO
LEARN AND DO THE NECESSARY INVESTIGATIVE WORK.
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BEFORE YOU BEGIN YOU WANT TO PREPARE
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Get as much
information on
the vendor’s
situation as
possible.
A good place to
start are with
public records
and land titles.
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•Timing is
important. If you
can offer
something
others cannot,
you could win
yourself a price
reduction.
• EXAMPLE:
Does the
vendor need to
sell quickly or
need a specific
date? 117
Preparation is the most important part of the process
You need to determine:
• What you actually want
• What you will give up
• What you will not give up
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●Research your opponent
●Research the deal
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Keep a negotiation log with records and notes
• Notes should include: three scenarios foryour negotiation (best, realistic and worst),potential offers and numbers & stats
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HE WHO IS MOST PREPARED
USUALLY WINS.
REMEMBER:
Just because someone contacts you and sounds desperate, does not mean it is a good deal.
Have a Property Score Card ready when you take the call.
It will remove emotion and help you figure out if you have located a good deal.
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3CS OF NEGOTIATION
Collect
Clutter
Close
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COLLECT - QUESTIONING
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•The one asking questions is in control
•Determine the personality style of everyoneinvolved and communicate with them
•DISC – Dominance, influence, submission,compliance
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•Give nothing and take everything
•Have a pleasing personality
•What they want is not what you want
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•Find their hot buttons
•Find their motivation
•Ask the same question in multiple angles toreveal their lies or half truths
•Better questions make better answers
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FOUR TYPES OF PERSONALITIES
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TYPE DESCRIPTION
DOMINANT Independent, persistent, direct• Energetic, busy, fearless• Focus on their own goals rather than
people
INFLUENTIAL Social, persuasive, friendly• Energetic, busy, optimistic, distractible• Imaginative, focus on the new and the
future• Poor time managers• Focus on people rather than tasks
STEADY Consistent, stable• Accommodating, peace seeking• Like helping and supporting others• Good listeners and counsellors• Close relationships with a few friends
CONSCIENTIOUS Slow and critical thinker – perfectionist• Logical, fact based, organized, follows
rules• Doesn’t show feelings• Private
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THE MORE TIME YOU SPEND COLLECTING INFORMATION, THE HIGHER YOUR CHANCES ARE OF VICTORY.
DO NOT MAKE AN OFFER UNTIL YOU HAVE ALL OF THE NECESSARY DATA AND POSITIONS.
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CLUTTER – THE OFFER
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•Deception is power
•Buyers and sellers are both liars
•What the opposing side wants is not whatyou want
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•Most people are afraid to “clutter”
•Create extra “clutter” by raising issues
•Items will be traded, challenged and phasedout: the person with the most items usuallywins
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•Wants and needs are two different things soknow what you want and what you need
•Ask for everything
•Charge for concessions
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CHALLENGE EVERYTHING
TO FIND REAL VALUE.
CLOSE – TRADING & CONCESSIONS
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•Make trades for what you want
•Give away low value items and take awayhigh value items
•Go for what you want and give them whatthey ACTUALLY need
•Positions will change throughout thenegotiation process
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IF YOU FOLLOW THE 3CS IN THE RIGHT ORDER, YOU WILL:
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• Get what you want
• You won’t have to give up everything
• The negotiation will flow
• Know where you are in the process
• Maintain maximum leverage
WHAT CAUSES FAILURE?
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•Skipping preparation
•Rushing the collection period
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•Forget to clutter
•Building zero value
•Trading poorly
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•Speak to the wrong style of DISC
•Try to close too early (longer the negotiation the higher the chance of closing)
•Try to complete the steps out of order
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GAMBITS
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GAMBITS
• Gambit is a chess term meaning “to trip” where white sacrifices a pawn in the hope of achieving a resulting advantageous position
• Gambits are offered to the other side and are “accepted” or “declined”
• Create a time advantage or positioning advantage
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GAMBITS & STRATEGY
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The nibble
• Move: After the major decisions have been established, come back and ask for something more
• Countermove: Make them feel cheap
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Not my problem
• Move: Someone is trying to give you their problem
• Countermove: Test for validity, avoid taking other people’s problems OR give your problems to the other side
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Displace Authority
• Move: Always displace your authority onto someone else
• Countermove: Remove their authority before you start negotiating
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3 Step Counter to Displaced Authority
• Appeal to their ego
• Get their commitment
• “Subject To” Close
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MORE GAMBITS & STRATEGY
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The Set Aside Technique
• Move: Other side is forceful and won’t budge on one item
• Countermove: Let’s set this issue aside and talk about other moves
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The Neutral Third Party
• Move: Negotiation is frozen in a deadlock
• Countermove: Bring in a third party that benefits you, not them
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Good Cop / Bad Cop
• Move: Negotiating with two parties, one mean and one nice, both are on the same side
• Countermove: Call them out
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3
Counters to Good Cop / Bad Cop
• Identify the tactic
• Go over their heads to their higher authority
• Turn them both into bad cops
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Never Take the First Offer
• Move: Always reject the first offer to avoid buyer’s remorse
• Countermove: Always challenge their offers and counter offers for validity
Always Agree “feel, felt, found”
• Move: Always agree to diffuse their spirit
• Countermove: Agree with them and challenge the issue or find a trade
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Dumb is Smart and Smart is Dumb
• Move: Appear to be stupid in the negotiation
• Countermove: Call them out on playing dumb
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Diminished Value of Services
• Move: Services diminish in value rapidly after they are rendered, whenever you give a concession, take something right away
• Countermove: Negotiate your fees and services up front
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GAMBITS & STRATEGY
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• Walk Away Power
• Move: Always be prepared to walk away from the negotiation. The one who wants it less has all the power
• Countermove: Have multiple negotiations and multiple options open at all times
• Showing Pain
• Move: Visually or audibly react any time a proposal is made to you
• Countermove: Ignore their flinch, re-propose or just wait in silence
• Trade off Principle
• Move: When they ask for something, ask for something in return
• Countermove: Make a big deal about their trades and trade in unequal value. Give things that are cheap to you but perceived high in value
MORE GAMBITS & STRATEGY
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You’ll have to do Better than that
• Move: They make a proposal to you and you reply, “You’ll have to do better than that” or “You’re close but I know you can do better”
• Countermove: How much better?
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Power of the Written Word
• Move: People believe that written words are true
• Countermove: Change the written word
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The Withdrawn Offer
• Move: Other side is arm-wrestling you but you know they want to do business
• Countermove: Take the best offer or walk away and call their bluff.
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Positioning is Easy for Acceptance
• Move: Make them feel good about giving in to you
• Countermove: Ignore the easy concessions and focus on the main issues
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TROUBLESHOOTING GAMBITS
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Always be the one to Write the Contract
• Move: The one who controls the writing controls the details
• Countermove: Cross out and initial small details you do not agree on
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The Done for you Technique
• Move: Send a fully finished contract, filled out, with a cheque attached and just needing their signature
• Countermove: Cross out and initial small points you do not like or accept the contract as is
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Funny Money
• Move: Manipulating money into nonsense terms
• Countermove: Think of money in REAL terms, do not accept their funny money
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The Decoy
• Move: Take the other sides’ mind off the ball by using nonsense decoy items
• Countermove: Challenge all of their nonsense items and find the real ones
Put them in the Driver’s Seat
• Move: Get them emotionally involved in the decision
• Countermove: Focus on the real issues, don’t get emotionally wrapped up in the feelings
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Ask for the Moon
• Move: Ask for more than you know you will get
• Countermove: Challenge and counter all points
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The Apathetic Buyer
• Move: Approach the other side with reluctance instead of enthusiasm
• Countermove: Know that the pressure is on them just as much as you. Typically you aren’t talking unless they want something
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The Low and Flexible Offer
• Move: Make your first offer very low but indicate that you are flexible
• Countermove: Counter high and flexible, challenge all points and find the real issues
Splitting the Difference
• Move: Never split the difference yourself but encourage them to split the difference in your favour
• Countermove: Always make the difference in your favour
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Keep your Eye on the Ball
• Move: Keep focused on the one item you want in the negotiation and avoid the emotions and clutter
• Countermove: Make them emotional about the small points in the negotiation and make them pay for their “hot buttons”
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Maintain Perspective
• Move: Avoid getting sucked into the small points. Look at the big picture and ask, “How will this look one year from now?”
• Countermove: Get them fixated on whatever suits you (big or small picture)
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WHAT IS STOPPING YOU FROM BECOMING
A MASTER NEGOTIATOR TODAY?
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QUESTIONS
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NEXT WEEK
TALKING TO AN INVESTOR OR POTENTIAL JV PARTNER
Learn what it takes to get an Investor to believe in you. You will be surprised to learn that most of the time, it is not
about you – it is about the deal.
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CONNECT WITH EDNA
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