A Good Motto for Commercial Real Estate Negotiations – Be Prepared!

The following is an excerpt from a blog post by Holly Schroth, Ph.D. – read the full article here

Preparation is the key to a successful negotiation outcome.  Here are some elements you should prepare before entering into a negotiation:

Resistance point: A resistance point is the point at which the negotiator will walk away from the table.  This bottom line value of a negotiator may also be referred to as resistance price or reservation price/point.  It is not just a monetary value but a total value assigned to all of the issues for an entire package. The resistance point is set prior to negotiating while the negotiator is in a rational state and should never be changed at the table because of influence (e.g., intimidation, attractiveness or confidence) exerted by the other negotiator (Galinsky, Mussweiler, & Medvec, 2002).

Aspiration point: An aspiration point is where a negotiator would ideally and realistically like to settle.  Similar to the resistance point, this is also set prior to a negotiation and is based on research.  The aspiration point sets the ceiling to counteract the power of the floor (resistance point).  Setting a realistic but optimistic aspiration point helps parties to work harder to think more creatively to find value in order to achieve their goals (Thompson, 1995).

Best alternative to a negotiated agreement (BATNA): The negotiators’ BATNA are the alternatives that are available if they walk away from the negotiation (see Fisher, Ury, & Patton, 1991, for review).  Those with a strong BATNA have increased leverage in a negotiation. If there are several alternative vendors who can supply the same part, the buyer is in a strong position to use leverage.  However, if there is only one vendor who can supply the needed part, the buyer has little leverage and is at the mercy of the other party.

Issues: Issues are what is to be discussed in the negotiation between the parties.  A common mistake that is made in a negotiation is to overly focus on one issue (e.g., money) which tends to lead parties to take on a distributive approach.  Including additional issues in a negotiation helps the parties to increase value (also known as expanding the pie), allowing for integrative negotiations to occur.  It is important for negotiators to put themselves in the other side’s shoes in order to understand whether there are issues of importance to the other side that may need to be considered.

Interests: Interests are the underlying reasons a negotiator has for holding a position in a negotiation.

Objective criteria: A standard or precedent that can serve as a benchmark for legitimizing the fairness of the current offer is called objective criteria (Fisher, Ury, & Patton, 1991).

Researching the other party: It is important to research the culture of the other party’s company, and the other party themselves, in order understand how they may approach the negotiation.

Learn more about strategic business negotiations and influence and meet Holly Schroth, Ph.D. on Friday, October 14 from 3:30 pm – 5:00 pm at the IREM Fall Leadership Conference

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