Negotiations — Real Life Bargaining and Negotiation
The negotiation process never has — nor will it ever have — a “one-size-fits-all” strategy. In fact there so many theories, strategies, tactics and books with hands-on advice about how to negotiate a deal (whether for business or personal purposes) that a party to negotiations could become bewildered and confused by all the approaches to negotiating. Indeed there are so many different kinds of situations that call for negotiation — labor contentiousness, city-versus-police union, National Football League vs. The player’s union, parent vs. teenager vis-a-vis use of the family car, and more — that a wide range of knowledge is important in the negotiation process.
To become familiar with the myriad number of approaches and styles to negotiation, a careful review of strategies and theories is important for the individual or group involved. Being forearmed is being forewarned, the old saying goes, and in the case of negotiations, that is an extremely wise piece of advice. This paper presents a negotiating situation between two neighbors, one neighbor that owns a two-acre wooded lot which that neighbor intends to keep; the second neighbor is considering selling her house that is on one and a half acres directly adjacent to the first neighbor’s wooded property. Even the most well prepared individual can become out-witted or out-maneuvered during a negotiation process if he or she is not flexible and resourceful. The lay people involved in this negotiation base the thrust of their efforts on person-to-person discussions — with some outside help from professional real estate brokers.
Thesis
The seller in this paper was not in the negotiations to “win” but rather to “make a deal” (Pollan, 1988, p. 133). In fact both parties to this paper’s negotiations were not looking to beat the other party but instead to approach the process “honestly and fairly, seeking a deal that will satisfy both parties’ needs” (Pollan, 133). Deals don’t have to be win or lose, and they are not win or lose if one of the two parties shakes hands and walks away from the potential transaction, postponing negotiations until a more fruitful window of time.
The families and issues involved
The Brown family — a single parent family with 2 teen-aged children and a divorced mother (who is the sister of the writer preparing this research paper) — owns a 4-bedroom home on an acre and a half that is adjacent to a 2-acre parcel that is undeveloped, with stands of pine and eucalyptus trees. The Brown family also owns a 2-bedroom home in a near-by suburban community that has lower taxes and better schools. The two-bedroom home was bequeathed to Mrs. Brown by her parents, who died in an auto accident three years earlier. Mrs. Brown has been renting that house since her parents’ passing, but now that one of her sons is about to enter middle school and the other is finishing his senior year in high school, she sees that it would make sense to sell the four-bedroom house they live in and move to the home her parents left for her in their will.
The neighbors that own the three-acre stand of trees adjacent to Mrs. Brown’s property, Mr. And Mrs. Randolph, have thought about purchasing the Brown’s property for several years. The Randolph family has a home several miles away they are happy with but they would love to own the Browns’ property because they have a married daughter with 3 young grandchildren who live in a gang-infested neighborhood in a distant city and the Randolph’s daughter and her husband need a safe and health place to raised their children. The Randolph family is well to do and they see how much value would be added to their undeveloped woodsy lot if they owned the Browns’ property as well; plus, the woods would be a wonderful place for young children to safely play, within eyesight of their parents. The fence between the two properties could come down and an enormous space would be available for the Randolph’s children and grandchildren.
As for the Brown family, the two-bedroom home also has a garage in back and an apartment built above the garage with a small kitchen, bathroom with shower, and is perfectly adequate for Mrs. Browns’ high school senior to live in. Moreover, there is a well-respected community college near the two-bedroom home and the older boy wants to attend two years of community college before deciding which four-year school he might wish to attend.
The downside of moving out of the four-bedroom home (that is 33 miles from the two-bedroom that Mrs. Brown hopes eventually to move her family into) is that the four-bedroom property had a huge back lot, with plenty of room for the boys to invite their friends over for Frisbee, badminton, playing catch, flying kites, cook-outs with friends, camp-outs, touch football games and more. In addition, Mrs. Brown has an organic garden in a portion of the back lot — with protection against gophers — and she thoroughly enjoyed harvesting squash, tomatoes, herbs, carrots and corn from that garden. She would miss it a great deal, because the two-bedroom house she would move into if the four-bedroom house sells has just a small back yard, about one-tenth the space that the four-bedroom property offers.
The bottom line is that Mrs. Brown and the boys will be happy either way; they love the bigger home and they know how precious it is to have the Pacific Ocean 4,200 feet away so they can hear the ocean’s roar much of the time. Also their present living arrangement allows ample room in the back lot for recreation and nature observations (turkey vultures roost in the tall eucalyptus trees on the other side of the back property line; there are deer that come in to feed on the plum tree leaves and provide a thrill from the kitchen window viewing area; woodpeckers, jays, doves, red-winged blackbirds and a myriad of songbirds frequent the bird feeders; a pair of red-shouldered hawks nest in neighboring trees and make an appearance several times a week) and yet the smaller home has more positives in terms of the boys’ education and future careers.
Mrs. Brown, a licensed civil engineer, took early retirement from the local electric / gas utility (she enjoys a generous pension) and presently earns her living as a freelance writer, contributing journalism for regional daily and weekly newspapers and contracting out to do copy editing for an online marketing firm.
The negotiation issues
The Brown family home was valued at between $395,000 and $402,000 prior to the collapse of the housing market in 2007-2008. Currently the Brown property is valued at $244,000, which is great when it comes to paying property taxes, but not so good in getting value out of a property that the owner believes is worth far more than the assessment by the county. Mrs. Brown has not put the property on the local real estate listings, but she has been in contact with the Randolph family off and on for over a year, and while they have contacted her in a friendly way to establish a price for the property, she resisted up until now. It should be noted that she had not planned to even talk about selling the property until the housing market firmed up again, but given the situation with her boys, and paying property taxes on two properties, she is entertaining a possible deal with the Randolph family.
Mrs. Brown was extremely thorough in her research as to how to best negotiate a deal on her house. She read the Pollan book (Field Guide to Home Buying in America) to prepare her for the interaction with potential buyers. Pollan asserted in page 133, “…the best negotiations are those that treat both sides fairly. You are in the negotiation to make a deal, not to win… if you don’t aim at winning, you probably won’t open yourself up to losing.” She paid strict attention to Pollan’s advice as to how important it is to “…set the proper tone, because sellers are under more stress than buyers” (p. 133). On page 134 Pollan explains that the seller often “…brings a lot of emotional baggage to the transaction” since the home has been much more than “four walls and a roof.”
Hence, the seller, Mrs. Brown, has a huge emotional investment in the property and the truth according to Pollan is that the home-buying process “is wrapped up in the egos of buyer and seller.” Having read Pollan’s book, Mrs. Brown promised herself she would not get into a battle of egos with the Randolph family and yet she realizes that if the Randolphs come back with a counter offer that is far below her asking price she might feel “that an attack on [her] price is an assault on [her]” (Pollan, 134).
Strategies reviewed by Mrs. Brown in preparation for negotiations
A close friend of Mrs. Brown who once dabbled in real estate suggested Mrs. Brown spend substantial time critically reviewing general negotiation strategies — not only those specifically tied to real estate, but practical theories and tactics to employ in any situation — as well as sound strategies related to home buying and selling. Mrs. Brown was also advised that a lot of the literature related to negotiations is directed at union issues, corporate negotiations and other situations that are not what she will be engaged in specifically.
Mrs. Brown read Peter B. Stark’s book, It’s Negotiable: The How-To Handbook of Win/Win Tactics, which provided some good general ideas and some ideas that she certainly wouldn’t need. For example, on pages 9-11 Stark offers “Four Keys to Creating a Win/Win Outcome” which essentially apply strictly to negotiations between organizations. But on pages 31-32 of Stark’s book, Mrs. Brown gleaned good information on questioning during negotiations; a) “have a questioning plan,” Stark suggests (when you are asking questions and your counterpart is reacting, you are the driver); b) “know your counterpart” (which Mrs. Brown will know better after inviting them over for a barbeque); c) have good timing and move from the “broad to the narrow”; and d) “build on previous responses” (keep track of all that’s been asked and answered).
An article by Luke Mullins in the “Money” section of U.S. News — “The 7 Biggest Home Price Negotiation Blunders” — caught Mrs. Brown’s eye because it offered guidelines for the Randolph family, which in turn could help Mrs. Brown in terms of understanding her neighbors’ perspective. “It’s essential to look at the deal from the opposite side of the table,” Mullins explains (Mullins, 2008). The keywords in Mullins’ article are self-explanatory: a) don’t show your cards right away; b) be sure to have options; c) don’t get “caught up in the game”; d) use face-to-face negotiation strategies (no emailing or faxing responses to proposals); and don’t “forget your homework” (which would be a disaster for either side in the negotiations) (Mullins, 2008).
Mrs. Brown was alerted to an article that her oldest son — searching in a scholarly database — found called “Communication Quality in Business Negotiations.” The article (like many she located) didn’t precisely fit her needs as a seller, but offered some practical advice. For example, the authors explain, “arguing” involves “making claims of factual truth or normative validity with the intent to convince,” while “bargaining” contains “…promises and threats, and intends to change behavior” (Schoop, et al., 2008, p. 196). Mrs. Brown of course wasn’t trying to change the Randolph family’s behavior but she did intend to argue the case that her house and property were worth substantially more than current assessed value. She did receive good advice from Schoop’s piece on page 202, which asserts that “mutual trust” must be shared with the parties that are involved in negotiations.
Mrs. Brown’s younger son found a book online that described real estate mogul Donald Trump’s approach to negotiations, and shared it with his mother. While Mrs. Brown gave the son the benefit of the doubt and read portions of the Trump strategies, she quickly dismissed Chapter One’s assertion that “…lying, cheating, and deception” are indeed permitted in negotiations (Ross, 2007, Chapter 1). “…Everyone involved in negotiations is free to act as he or she sees fit without restrictions,” editor Ross explains on the same page as the previously quoted material. That is not Mrs. Brown’s style, even though she has worked through some tough negotiations when she was employed by the electric and gas company as an engineer.
An article in the Journal of Organizational Culture, Communications and Conflict posits that the outcome of negotiations largely depends on “to what degree [negotiators] have control of the negotiated outcome” (Spears, et al., 2009). Mrs. Brown decided that the outcome of her negotiations with the Randolph family should be favorable whether they reach a deal or not because she is under no pressure at all to sell. She figures the power is in her hands because keeping the four-bedroom home and continuing to rent out the two-bedroom home works out well in the short-term.
Theoretical Model — Relationality in negotiation
Writing in the Academy of Management Review, Michele J. Gelfand and colleagues put forward the concept they refer to as “relationality in negotiation.” At the “core” of this theory the authors present “the construct of the relational self-construal (RSC).” This psychological approach is in stark contrast to the view of one’s self as “largely independent,” the authors point out (428). In fact RSC reflects a “…cognitive representation of the self as fundamentally connected to other individuals” (Gelfand, et al., 2006, p. 428). Relationality means being connected to another person as its starting point. Relationality has been linked to an “impressive array of psychological processes,” the authors explain, including “attention, memory and inference, emotional regulation and expression, and motivation” (428).
This is a potentially helpful process for Mrs. Brown to research in advance of launching negotiations with the Randolph family. The use of relationality theory could present Mrs. Brown with an opportunity to connect to the Randolph family in a deeper way than she has to date, and could help her achieve “a cognitive attunement to others’ verbal and nonverbal behavior” (Gelfand, 430). “Relational cognition” is the part of the psychological process that focuses one party in the negotiations on “the similarity” she has with others in the process.
In this instance, Mrs. Brown certainly has similarities with the Randolph family: they both have children as part of the motivation for property change; they both live in the same community; they own properties that are adjacent; and they are responsible members of a close-knit community.
Another part of the process that Gelfand and associations describe as a component of RSC is “relational emotion” — wherein connections become a source of positive feelings “and self-esteem.” Embracing relational emotion assures a kind of “empathy” with the experience of others’ emotions in the process (430), the authors continue. And the third component of RSC is relational motivation, Gelfand explains (431); which is the motivation to “help others achieve their goals” and a “desire for mutual empowerment.” In this case, Mrs. Brown would like to help the Randolph family achieve their goal of moving their children and grandchildren out of the dangerous big city and into a safer, quieter, healthier environment — that is, into the very house where the Brown family now resides. The broader point to be understood in the context of negotiation is that relationality brings into focus a sense of cooperation and interdependence needed in negotiations — rather than the “autonomy” and “competition” that typically come in play during negotiations (Gelfand, 443).
Preparing to Negotiate — a four-phase pre-negotiation framework
Northern Illinois University professors Peterson and Shepherd assert that going into any serious negotiation requires some serious homework in front of that negotiation. That is, following their prescribed pre-negotiation activities can lead to a successful conclusion (Peterson, et al., 2010, p. 67). The first part, “intelligence gathering,” requires collecting, processing, “analyzing and evaluating” data that relates to the negotiation (like the market value of Mrs. Brown’s property). The second step is to “formulate” one’s goals, one’s specific objectives, and “setting the parameters for each issue” in the negotiation; number three is “strategy development” (integrating goals, objectives and “action sequences into a cohesive whole”); and the third step. Being prepared by actually “rehearsing verbal communication” and “attending to logistical concerns” (67). Mrs. Brown took notes as she read through the Peterson article and went back over her notes and used a yellow highlighter on “formulating” her goals.
A neighbor friend — like Mrs. Brown, a divorced mother of two children — loaned Mrs. Brown a copy of the book Women Don’t Ask, which Mrs. Brown read all the way through on a single afternoon. Research by the female authors shows that men ask for things the want “and initiate negotiations much more often than women — two to three times as often” (Babcock, 2003, p. 3). There are many research studies presented in this book, but of particular interest to Mrs. Brown was the study that shows women typically spend a month preparing for a negotiation while men spend a week in preparation. “This means that men may be initiating four times as many negotiations as women,” Babcock writes, but moreover, it just points to the fact that in “negotiation” women are “much less likely than men to use negotiation to get what they want” (ix). Mrs. Brown was determined to do her homework and use all available resources to make this negotiation with the Randolph family a success for both sides, albeit she would essentially be going head-to-head with Mr. Randolph.
Mrs. Brown’s negotiation with the Randolphs
Quite seamlessly the two families — having enjoyed a barbeque and a bottle of merlot on Mrs. Brown’s spacious back deck, with hawks and turkey vultures floating on the thermals high above — agreed to begin the process of negotiation. Without placing her home among local real estate listings, she handed Mr. Randolph an envelope containing a two-page formal statement reflecting the price she expected to receive for her property, and the justifications for her asking price. Mrs. Brown researched the value of properties in her immediate neighborhood (average assessed value, $266,000) and framed the asking price of her home ($342,000) in the context of: a) key signs that the economy was robust and the housing slump was ending; b) the importance of its size and safety vis-a-vis a young family’s needs; c) the fresh asphalt driveway improvements; d) the quality of the paint, the interior and exterior structural soundness; e) the fact that her lot is twice the size of neighboring properties; and f) the proximity to a pastoral, undeveloped three-acre stand of healthy trees. Mrs. Brown researched the value of homes in the U.S. that are situated adjacent to forested open space, and found that nearness therein enhanced property value significantly. Mrs. Brown’s packaging within her formal letter to the Randolphs included an option for mediation, if the two parties were close enough to each other’s goals but still needed independent outside assistance.
Conclusion
Mr. Randolph politely came back to Mrs. Brown with a written counter ($267,000), saying Mrs. Brown’s asking price was too far above current assessed value. Mrs. Brown did not see that as an insult and yet it seemed far too low to even continue negotiations. After consulting the family attorney (who also owns a real estate business) Mrs. Brown met face-to-face with the Randolphs and said that she would keep her four-bedroom home for now — there were no hard feelings — until the housing slump has ended and then approach the Randolphs with another price in mind. In turn, the Randolphs invited the Brown family to a friendly barbeque on the Randolph’s back deck to keep the relaxed negotiation open, in a sense. Hence all the negotiation homework Mrs. Brown had done wasn’t needed after all — or was it? The answer is yes it was important, because as time goes she will again entertain the idea of selling her property, for all the reasons mentioned in this paper, and she will be fully prepared.
Works Cited
Babcock, Linda, and Laschever, Sara. (2003). Women Don’t Ask: Negotiation and the Gender
Divide. Princeton, NJ: Princeton University Press.
Gelfand, Michele J., Major, Virginia Smith, Raver, Jana L., Nishii, Lisa H. And O’Brien, Karen.
(2006). Negotiating Relationally: The Dynamics of the Relational Self in Negotiations.
Academy of Management Review, 31(2), 427-451.
Mullins, Luke. (2008). “The 7 Biggest Home Price Negotiation Blunders.” Money / U.S. News.
Retrieved May 20, 2011, from http://money.usnews.com.
Peterson, Robert M., and shepherd, C. David. (2010). Preparing to Negotiate: An Exploratory
Analysis of the Activities Comprising the Pre-Negotiation Process in a Buyer-Seller
Interaction. Marketing Management Journal, 20(1), 66-75.
Pollen, Michael, and Levine, Mark. (1988). Field Guide to Home Buying in America. New York: Simon and Schuster.
Ross, George H. (2007). Trump-Style Negotiation: Powerful Strategies and Tactics for Mastering Every Deal. San Francisco: John Wiley and Sons.
Schoop, Mareike, Kohne, Frank, and Ostertag, Katja. (2008). Communication Quality in Business Negotiations. Group Decision and Negotiation, 19(2), 193-209.
Spears, Martha, and Parker, Darrell F. (2009). Negotiation Recognition and the Process of Decision Making. Journal of Organizational Culture, Communications and Conflict, 13(1),
55-63.
Stark, Peter B. (1994). It’s Negotiable: The How-To Handbook of Win/Win Tactics. San Diego:
Pfeiffer & Company.
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