Good Negotiating Skills - Term Paper Example

Negotiating for a Home Situation and Negotiating Environment Under the circumstances of the 2007-8 economic crises, the analysis of the aftermath reveals details beyond any rational fact that the origin and perhaps the most affected industry was the housing sector. In light of the revelations, major mortgage financing institution in the US took part in risky business that exploited the innocence of the unsuspecting customers to make astronomically abnormal profits (Ross, 2010). Major real estate and housing financing banks bore the greatest responsibility under the watchful eye of financial market regulations that allowed trading in mortgage-backed securities that took high risks. Different criticisms have emerged on different participants in the allowing of such risky trading, but a nearly unanimous indictment of the authorities and commercial interests raises concerns on the safety of the industry into the future. These historic factors alongside other economic considerations that the majority of Americans continue to experience in the housing sector expose home ownership negotiations to a unique and challenging setting. According to economic times in the US and around the world today, households increasingly find it difficult to support capital expenditure that was the case slightly before the mortgage-precipitated volatility. Levels of employment continue to hit record month-to-month lows since the origin of economic crisis. Disposable income among the young generations in need of housing seems to fluctuate with the developments in the market and economic performance figures. Austerity measures embarked by the government illustrate the levels of economic volatility, which raises fears of the future of the economy and the implications that huge expenditures would have on economic stability at the household level. The low rate of economic recovery makes it unpredictable for jobholders to estimate how long they can remain in a job. Fears of mass layoffs within the austerity provisions therefore make it difficult for house buyers to make the correct timing when they are most stable in such expenditure. World economy performance as analyzed by observers still remain unpredictable, with reliable data sighting further recovery difficulty in the months ahead (Hirshleifer and Siew, 2009). With the developments of the economic struggles in Europe, world economy remains an issue of consideration by important expenditure decisions. When such domestic and international economic profiles indicate troublesome business environment, it implies that the real estate and the housing industry as defined by market forces will continue to attract high costs to remain in operation. Interest rates to fund such purchases will certainly rise to correspond with forces of demand and supply. Banks and other financial institutions providing funding to mortgage customers find it difficult since dramatic business decrease since the crisis still affects their profitability. Real estate deals are sensitive under these circumstances where the sellers and buyers both pressed by the realities of the industry trying to make the best possible business move without compromising their future financial status. As enumerated below, specific negotiations and discussions must form the basis of a deal, that I will make as a young person where both parties will feel comfortable within the troubled business environment. The property of choice is an old house that has gone vacant, since newly constructed house prices are usually set very high. Parties to the Negotiation and Initiation Generally, every homebuyer finds the properties on offer according to the various determining details such as location, design, cost, size and comfort. In the next few months, the task of buying a home will therefore include searching for an appropriate home on offer from different sellers. Some of the most effective ways to locate the appropriate property of choice nowadays is the internet, either on real estate websites or on social media. Alternatively, making physical searches around the locations in consideration for possible sale notices will be tried to supplement other search efforts, and trying to make the search as efficient and cheap as possible. Having made the correct choice in terms of the enumerated factors, a few of the sellers will need to be contacted, to confirm the offer (Hunter, 2011). The initial stage of the negotiation with the seller will involve asking for the price quoted to facilitate arriving at the fairest deal to purchase the property. In terms of the expected negotiations, personal presentation may not be guaranteed due to various commitments ranging from career to studies. As usual, it may therefore lead to involvement of a representative to continue with the proceedings as a chosen agent (Juan, 2012). Apparently, real estate agents have the best information regarding the market and may prove to be the best consultants to take over the negotiations with dealers that they could also have dealt with in the past to make things easier and faster. Information privy to those property consultation experts depends on the comparable market analyses (CMA), which give the detail of several available properties and their specification for customers to approve. Alternatively, it may not be possible to directly engage with the real owner of the property, but an agent representing the owner can take part in the negotiation proceedings. Negotiations involved at the initial stages will include the reservations held about the ideal property and the reasons why the seller must find a compromise quotation for the property. Depending on the fair market valuation of the property and the quotation given by the seller, it will be possible to engage the seller to ask for reduction in price where elements of overpricing emerge (Koselka, 1996). In the circumstances of the economic and industry setting as enumerated above, the listing price is expected to be more than the property’s value, to recover operation costs under the difficult times. Gathering as much information as possibly supported by the agents and owners is important in making the initial quotation to counter the listing price quoted by the seller. It is expected that scrupulous dealers and agents set the prices very high to increase their sale commissions, defying the market pricing mechanism that ought to rely on the fair market valuation of the property. In terms of building the case for the bargaining arguments, it will be important that information on the property will be sought in good time before engaging in determinative quotation. For instance, it will be important to obtain information in the number of offers placed for the house, to determine the relative attention that the seller accords each of the competing buyers since the highest bidder is likely to acquire the property. The more bidders having an interest on the property, the less tolerant is the seller likely to approach negotiations, particularly in opinion challenging the valuation of the property. As mentioned above, a few factors exist, which must be considered in the negotiation as far as the home properties are concerned. In view of the condition that the various properties offered have, the case for the fair price estimation will be built (Koselka, 1996). Alternatively, third party information that will be considered for making the appropriate decision in the negotiations will include information on inspection reports carried on the house for a considerable duration before the negotiations. In order to determine the appropriate valuation of the property with regard to its current condition, comparisons of the property with related properties in the neighborhood is important. The condition facilitates in the building of a case of its value, against other similar properties using factors such as their state, price over years, improvement and extra amenities. Comparative assessment for this work may require extensive research in order to engage the seller in negotiating for a bargain challenging he offered quotation. Condition issues such as the number of rooms that the house has, space and other polishing features may also facilitate in the definition of a market competitive property. Third Party Intervention In the expected home buying agreement, the possible presence of agents engaged to represent both parties in the initial discussions is inevitable if the negotiations take hard positions. Property valuation advisers may be engaged to find the market value of the property. The cost of engaging the property valuation expertise and other related consultation may however raise the overall cost of the entire deal, which may discourage such extensive intervention. However, vital interventions such as legal advice in difficult deals may be inevitable. Alternatively, certain property owners place their properties under management agencies, which must be involved in the property sale procedures on behalf of the seller (FAO, n.d). Third party intervention in the negotiation will include relying on information offered by other people with an insider perspective on the property, for instance the immediate occupant. In such an intervention, the information given by the seller will be to confirm firsthand use details of the property to determine how the valuation corresponds with the service. For instance, comfort features such as wind, direct sun lighting qualities of the house may be below the expectations of the occupant, and the confirmation with the third party may facilitate arriving at an agreement. The negotiations may therefore call in a third party to offer confirmatory information with the aim of agreeing on the value of the service that the property will give from purchase. Financial advice from personal bank will form part of the negotiation interventions sought from third parties. Involving the bank in obtaining the advice on the most valuable option fitting in the circumstances of the need will come in handy from an expert or consultant’s perspective. Some property deals expected in the negotiations for the transaction may not favor the project, citing the above-mentioned economic restrictions. However, it is important that the financial consultancy available from financial institutions be sought to ensure that the most feasible financing choice is made. For instance, the dealer may demand a deposit and he balance amortized over a particular period, quoting a higher deposit than what can be availed in such an arrangement. Alternatively, the extended payment arrangement attracts extra cost element, information on which can be sought from the bank regarding time-dependent effects on the market (Hunter, 2011). In terms of generating the Best Alternative To the Negotiated Agreement (BATNA), possible properties observed in the CMA research will be prioritized in order to identify the next probable deal in case the first one fails. Using the analytical consideration of the two houses in time before possible termination, the next alternative deal will be prepared based on pros and cons (Juan, 2012). It will be important to take sufficient decision-making alternatives within the shortest time possible due to the time-bound nature of real estate business. The identification of the next possible deal and subsequent comparative analysis of the terms associated with each deal enables determination of the most feasible purchase, which must be guided by the conditions of the economic constrains. Finally, the best decision will be made out of the two top priorities after the analytical outcomes, making it possible for the purchase to continue even if one deal fails. BATNA generation requires critical skills of analysis and decision-making, which go beyond numbers in terms of considering about own position against that of the other parties (Alvarez and Kennedy, 2006). Various negotiation skills to be employed will correspond with common theoretical postulates on how the process will be conducted. Among the most useful theories to employ on the negotiations includes the position to be taken in terms of approaching loss and gains. Theoretical postulate that losses almost certainly expose better than potential gains will guide negotiation attitude in that no discussions must lead to a losing position, as the negotiator is a businessperson out to make profits (Venter, 2012). The approaches used in the delivery of arguments must support the objective to obtain a profitable deal, which must be guided by a thorough understanding of interests, the negotiating partner, having clear alternatives to support the BATNA, following regulatory requirements as well as commitment and efficient communication for both verbal and nonverbal cues (FAO, n.d). The direction taken by the negotiation is determined by the motivations behind the positions taken by the negotiating parties, which could be personal or handed down from a superior. It therefore implies that different skills will be employed to determine the origin of the stance and use appropriate skills. Analytical skills will depend on the matter before negotiations and cues such as behavioral, rationale, processual, as well as outcome anticipation will be employed (FAO, n.d). Mechanics to be employed in the presentation of bargaining arguments will touch on framing, which will take care of presentation of ideas to the negotiating table without diverting the substance of the statement. The presentation of the perspective taken on different topics of the negotiation will require specialized framing needs convincing presentation without putting off the negotiating party. A firm position must always be presented in the framing, which is backed by the packaging concept that details the specific demands and reservations in the negotiation. In case the initial presentation fails to capture he intended argument, reframing and repackaging must always be swiftly made to ensure that the original position is maintained in the deal (Venter, 2012). The negotiations progression will be determined largely by the quality of interaction between the parties and communication must be two ways, where questions and clarifications must be sought throughout the discussions. The proposals presented to different alternatives must capture the motivational objectives behind the project, keeping in touch with the needs of behind the home purchase (Koselka, 1996)1. Strategies to be employed will rely heavily on the projected outcomes for the negotiations, taking different considerations on a rationale perspective. The choices taken will be dependent on a clear strategy to achieve the set out targets, which is backed by the BATNA concept that considers taking the best option landing the deal closer to the strategy. For instance, if the house under negotiation appears to have little space for various activities beside the house or a backyard, negotiations backing a house with such features would either lead to enhanced space or exit to the next priority. An analysis on the strategy to use in the negotiation will consider the balanced concerns, which anticipate a standoff with the other negotiating party leading to compromise, rejection or assertiveness. Tricky decisions will be solved using the Prisoner’s Dilemma Game (PD) perspective, where strategic moves will have to be based on the outcomes of cons and pros or cost benefit assessment (FAO, n.d.). Taking certain decisions that are competitive against the seller will not always lead to a better deal, which introduces the other alternative of using cooperation. To determine the most appropriate choice is a strategic approach that will be well deliberated. Using such deliberations and strategic anticipation of negotiation tasks, the negotiations will be planned according to the objectives set in the loss anticipation perspective set in the theoretical approach. It therefore implies that the most effective way to anticipate positive outcomes will involve setting a goal, backing the goal with a BATNA, considering the seller’s goal, anticipating the BATNA laid by the seller, complying with market cues and using effective communication during negotiations. Alvarez, M., & Kennedy, J. M. (2006). “Negotiation Theory and Practice.” Retrieved from http://med.stanford.edu/careercenter/management/Negotiation_Skills_MA_JMK_2_16_06.pdf FAO. (n.d) “Negotiation Theory and Practice.” Retrieved from http://www.fao.org/docs/up/easypol/550/4-5_negotiation_background_paper_179en.pdf Hirshleifer, D., & Siew, H. T. (2009). "Systemic Risk, Coordination Failures, and Preparedness Externalities: Applications to Tax and Accounting Policy." Journal of Financial Economic Policy, 1(2):128 – 142 Hunter, T. (2011). “First-time Buyers: Do New-Build Property Incentives Add-Up?” Retrieved from www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/8903505/First-time-buyers-do-new-build-property-incentives-add-up.html Juan, R. (2012). “For Entrepreneurs: Negotiating Advice.” Retrieved from http://www.gaebler.com/BATNA-Negotiation.htm Koselka, R. (1996). “Strategies: Good Negotiating Skills can Help You Buy a House or Sell a Company.” Retrieved from http://www.negotiate.com/articlearchive/dream_house.pdf Ross L. (2010). "An Autopsy of the US Financial System: Accident, Suicide, or Negligent Homicide." Journal of Financial Economic Policy, 2(3):196-213 Venter, D. (2012). “Framing Your Negotiations.” Retrieved from http://www.negotiationtraining.com.au/articles/negotiating-reframing/ Read More