Negotiation: The Three Currencies

 

Every sticking point in a negotiation can be put into one of three categories: money, time or strife. At any given moment, one of these is going to mean more to a buyer/seller than the others, which means that concessions will need to be made in at least one of the other two categories. If you train your clients right from the beginning to recognize that there is more than money to be bartered in their transaction, you empower both of you to maneuver through even the toughest negotiation. Here are a few examples of how this strategy has been put to use:

• Example 1: A seller lived by herself in a large home, the sale of which was the last piece of a long divorce preceding that had her emotionally at the end of her rope. Just like every seller she had good reasons to want to maximize every angle of the negotiation triad. When an offer came in, the buyer would not budge past a number that was much lower than what the seller had hoped for (money). However, when the buyer promised to close quickly and accept the house in ‘as is’ condition, the prospect of a fast, painless transaction (strife) took some of the sting out of the disappointing purchase price.

• Example 2: In a bank-owned sale many banks require that a buyer make a big deposit very early in the purchase process (time). They also generally require buyers to sign an ominous addendum which strips away many of a buyer’s traditional forms of recourse (strife). Yet every day buyers agree to these terms because they are getting properties for rock-bottom prices (money).

• Example 3: The heirs to their father’s estate are presented with two offers side by side. One is a cash offer. The other carries a mortgage contingency but it is measurably higher than the cash offer. After much deliberation, they elected to assume the risk (strife) of the mortgage contingency in order to net a higher inheritance (money).

So the next time you find yourself with a client who has locked down a negotiation over ‘The Principle of It’, remind them that they are now heavily invested in the currency of strife. And you can help them win that battle, just as long as they let you know which of the other two currencies they are willing to give up.