The Art of Principled Negotiation, by Dave Beson, Real Estate Business, Fall 1987, p. 22-24.

Reproduced with permission of the

copyright owners, Council of Real Estate Brokerage Managers and Council of Residential Specialists. Further reproduction or distribu-
tion without permission is prohibited.

THE ART OF PRINCIPLED

NEGOTIATION
A professional approach to mediation

BY DAVID E. BESON, CRS

Picture this scenario. Two students are studying at the same table in the public library on a warm
summer day. One of them, feeling that the room is too warm, gets up and opens a window.

After a few minutes, the second student is disturbed by a draft and he goes over to the window and
slams it shut. The two students argue, and the librarian comes over to see what the trouble is. The
students both protest that they are right, and neither one will give way. The librarian listens to their
arguments for a few minutes, and then goes to an adjoining room and opens a window. This gives
better air circulation to the first room, without causing a draft.

How did this happen? It took the intervention of a third party. Neither of the principals to the "trans-
action" could get beyond themselves to get to the real problem. Their personal bias and interest kept
them from being good negotiators.

The same type of thing happens numerous times every day in our lives. In real estate sales and list-
ing, in your home life, in social situations—we are called to become negotiators, both as an impartial
third party and as active participants.

Types of Negotiations
Unfortunately, most people think there are only two types of negotiation—hard negotiation where
you have to "beat" on your opponent until he gives in, and soft negotiation where you give in to
avoid being beaten upon.

The hard style of negotiations either brings about an agreement for the parties involved, or such
irreconcilable differences that the whole process grinds to a halt. The process begins to resemble a
complicated kind of minuet, with both sides starting in extreme positions, withholding their true views
and making small concessions only to keep the negotiations moving. Hard-style negotiation is
extremely time consuming, and can often keep both sides from achieving a compromise.

Soft negotiators (most often seen within families) are usually at the mercy of the hard negotiators.
They may yield in order to avoid confrontation, only to find that the subsequent agreement gives
unfair advantage to their opponent.

There is an alternative to these negotiation methods—principled negotiation, where the main

strength lies in the fact that it is hard on problems, but soft on people. This concept was outlined in
the book, Getting to Yes, by William Fisher and Roger Ury, Penguin Books, 1983.

Principled negotiation breaks down into four main elements:

1. Separate the people from the problem.

2. Focus on interests, not positions.

3. Invent options for mutual gain.

4. Insist on using objective criteria.

Separate People from the Problem

Remember that people are human—we all have strong emotions and egos, and communicating
those emotions and desires is often difficult even under the most positive circumstances.

People also have a tendency to let their emotions become entangled in the problem's objective mer-
its. They then take positions on the problem, and ultimately they identify themselves so strongly with
the position they have taken that they can't back down from it.

Before any solution can be achieved, you first have to focus on the people involved. Try to really
understand the perceptions of the people you are negotiating with. Don't assume you automatically
know how they feel. Being able to see the other side as the other side sees itself is a key to being
an effective negotiator. The ability to have empathy with their point of view will help you influence
them later.

One way to deal with different perceptions is to discuss them openly. Each side has the chance to
discuss how they view the problem, without blaming anyone for the problem.

Focus on Interests, Not Positions

The problem in negotiations is most often the difference in ideas, needs and desires, not the differ-
ences in the two positions.

Even though the positions of the two sides may be at odds, often the underlying interests are quite
compatible. Sometimes looking at these interests will show that the two sides are not as opposed as
they seem.

How do you take advantage of looking for the other side's interests? One way is to look at each
position from the other person's perspective. You can, of course, ask him why he takes a particular
position, but to get an unbiased answer you have to assure him that you are looking to understand
the needs and wants behind it, not a justification of his position.

Remember that the basic needs of life are the most important. These include: security, economic
well-being, a sense of belonging, recognition and control over one's life. Although these needs seem
obvious, they are often easy to overlook. Often we believe that the only thing that matters in negotia-
tion is money. Yet even when the matter being discussed does involve money, often there is a more
fundamental need behind it. When a homeowner wants to set the price of his home too high, it could
be because he wants recognition for the superiority of his house over others, or because he wants
to retain control over his life.
Talk about interests: It's important for both sides to discuss their interests. After all, the two sides
may not be aware of what the interests are. However, it's important that this discussion focus on the
interests, not on the positions. Remember that they should be specific; concrete details should be
used as often as possible to make the interests more credible. This helps establish the interests as
being real and valid.

It's also important to recognize the other side's interests; if you acknowledge their interests, they'll be
more likely to acknowledge yours. If you show that you understand their interests and are sympa-
thetic, they will be more likely to listen to you.

Remember that people often get "stuck" in the negotiation process. They sometimes will seem to be
negotiating, get waylaid by one particular point, and begin to argue back and forth. An argument is
simply that; it does not seek to find a solution, it only perpetuates the problem.

If this happens, ask the two people what outcome they would like to achieve. Often the two sides
get more involved in the actual argument itself, and react to what has been said or done. They lose
sight of their main objective. By putting them back on track and focusing their attention on the future,
you can help in the negotiation process. And remember, one of the most important points of negoti-
ating is to be flexible.

Invent Options for Mutual Gain

Instead of arguing who should get the biggest piece of the pie, try to find ways to enlarge the pie.
This means generating the largest number of options possible.

People involved in a negotiation often believe that their offer is the only acceptable solution. They
don't see the value of generating different options to get the best possible result for both parties.

Be aware that there are four barriers that prevent generating enough options:

• Premature judgment: Brainstorming is the most effective way to come up with options. However,
we often make critical judgments on the ideas that a brainstorming session generates, and throw the
ideas out without examining them more carefully. Don't judge these ideas too quickly; they could
lead to a solution.

• Searching for a single answer: People often are looking for one possible answer instead of being
able to select from a large number of possible answers. They see negotiations as narrowing the gap
between the two sides, not expanding the number of possibilities.

• Assumption of a fixed pie: Many people see negotiation as an either/or situation. This also
severely limits the number of options that are generated.

• Their problem is solving their problem: Many people fail to create different options because
they limit their concern to their own immediate interests. Instead of coming up with different options
that have some appeal to both sides, these people are only concerned with solutions to their own
problems.

Consider the seller who demanded all cash for the sale of her office building. She explained that the
cash would be used to send her sons to college, and that if she didn't have the cash, she wouldn't
be able to send them at all.
Because both sides generated a number of options, the owner learned how the down payment could
be invested in zero coupon bonds to provide for the first year of school, and to amend the annual
payments on the owner-carried financing to better conform to the cash-flow needs of the student.

The sale of this office building might have never been closed if the parties had not sought to solve
each others' problem.

Insist on Objective Criteria

The more often you bring standards of fairness or scientific merit to the particular problem, the more
likely you are to arrive at a solution that is fair to everyone.

In a real estate transaction, the standards for setting the price of the house include the recent sale
prices of comparable houses in the neighborhood, the adjustment for depreciation and inflation and
the opinion of an independent appraiser.

Be specific: Take a moment to ask yourself, could you assist this buyer who says, "I'm looking for a
good, secure investment with lots of future potential." You probably wouldn't, even if he were an
astute and experienced investor with more than $100,000 in ready cash. The reason you wouldn't
assist him is the specifications he listed are not specific. The words he used—good, secure, future,
potential—are all fluff words and are not measurable criteria.

Insist on developing specific criteria. If you have buyers who say they want to see only two-story
homes, they may really be looking for a four-bedroom home, privacy or an image of success.

Never yield to pressure: There are many forms of pressure—a threat, bribe or simply a refusal to
compromise. To diffuse this tactic, ask the person who is trying to pressure you why he is doing it,
offer some objective criteria and refuse to change your mind except under the conditions you've out-
lined. This is the principled approach, and although you may not always win, it will usually give you
an edge.

Alternatives
What do you do if the other side is more powerful than yours? There are several alternatives you
can try. These include:
Develop your BATNA (Best Alternatives to a Negotiated Agreement): This serves as a standard by
which any proposed agreement would be evaluated. To develop your BATNA, ask yourself the fol-
lowing questions:

• What will you do if you do not reach agreement?

• Which of your options is most attractive, all things considered?
• How does that option compare to the best offer you have received?

To protect yourself from negotiation "with your eyes closed," the BATNA works because it establish-
es an early warning system, or buffer which allows you to stop negotiating at an appropriate time.

Leverage: This is based to a great degree on how attractive it is to you to leave a meeting without
reaching agreement. To maximize leverage you need to:

• Write a list of actions you could take if no agreement is reached.

• Try to improve on the most promising ideas and convert them to practical options.
 • Select, on a tentative basis, the one option that seems best.
• Determine if both sides have attractive alternatives; in this case, maybe the best alternative is not
to reach an agreement.

As an example of how leverage is used, look at the release of the Iranian hostages in 1981. The
timing of their release coincided with the inauguration of President Reagan. Why?

Herb Cohen, noted negotiation expert and author, predicted the time of the release within approxi-
mately 19 minutes. How did he do it? By understanding leverage. The Iranians had a substantial
investment in the negotiations with President Carter. The limit of their negotiation was eliminating
him as president. The release was a last-hour settlement. (By the way, it is interesting to note that
Cohen was only wrong by a few minutes because the plane carrying the hostages was late in leav-
ing for the United States.)

The similarity to real estate in a "hot" market of multiple offers may be that the sellers feel it is
appropriate to negotiate as though they had unlimited leverage. After all, another buyer will come
along tomorrow, right? Not always!

Then What?
If all this material doesn't work, then what do you do?

• Continue to negotiate on a basis of principled negotiation.

• Concentrate on using their strategy against them. If they offer a ridiculous idea, it's all right. If they
attack your idea, that's all right too. This method is sometimes referred to as negotiation jujitsu.
When attacked, do not push back. Instead, deflect the attack against the problem. Acknowledge
their efforts to solve the problem, and look for interest behind the position. Treat their position as a
possible option.

If all else fails, sit there! Silence creates the impression of a stalemate, and this puts the pressure on
the party to make a new suggestion or offer.

Conclusion
Perhaps the greatest value we as professional real estate sale associates bring to any buyer-seller
negotiation is our third party limited negotiation authority. Our job is to keep buyers and sellers apart,
so they can get together. By using the techniques of principled negotiation, you will be using an effi-
cient method that will generate a wise and fair decision.

This article was based on Getting to Yes, by Roger Fisher and William Ury, Penguin Books, 1983.

David E. Beson, CRS, Minneapolis, MN, is a senior instructor for the RS Council, a speaker at
national and state conventions and consults with organizations on a national basis. He is the pub-
lisher of the Professional Edge newsletter, has published many articles on sales and management
topics and produced two tapes for the RS Council's Tape Series 1 and 2.

The Art of Principled Negotiation, by Dave Beson, Real Estate Business, Fall 1987, p. 22-24. Reproduced with permission of the
copyright owners, Council of Real Estate Brokerage Managers and Council of Residential Specialists. Further reproduction or distribu-
tion without permission is prohibited.