Five Ironclad Rules of Negotiation

I actually enjoy negotiating. Yes, I am that guy. I will negotiate just for fun. Often, I want to see what I can make happen. Negotiating is like a game to me. I like to see what I can get and you never know until you try. 

These are my Five Ironclad Rules of Negotiation.

I personally use these tactics every time I make a purchase. 

I am going to give them to you but I am kindly asking that you use my rules in an ethical manner. Try not to exploit sellers too much. In the wrong hands, these rules can be deadly.

1. Always negotiate from a position of strength.

Before you begin start on solid ground. No debt. Have a pile of cash. Get your life in order. You never want to negotiate when you are desperate EVER. When you work from a position of strength you will be able to make offers that are non-negotiable. Your presence must be ironclad. Stoic.

This the most important rule. 

Pros can smell when you are hungry. They are trained to exploit weak people. Come into every negotiation strong. You always want to play it cool or your emotions will be used against you.

2. Let THEM make the first offer. 

This tactic is so simple. I NEVER make the first offer. I learned a lot about this while flipping. Sellers sometimes will be so desperate for cash that they will box themselves into a weak position even before we begin. Always let the other person begin the negotiation. Quite often they low-ball themselves out of the gate. Take advantage.

I won big on a brand new house using this tactic. I went to many different builders. I finally found one that was sufficiently hungry. Without even working hard I was able to lower their list price by over $100,000. They wanted to move onto other projects and their first over was beautiful. They wanted to make a sale and they knew I had the money for the close. 

I happened to find the right seller. Often, this is what it comes down to.

3. Use silence to your advantage.

I have spoken about this before. The most underrated negotiating tactic is to remain silent. When presented with a weak offer just sit there. People naturally hate silence. Let your target squirm. They will flinch. That is what you want. 

I went to purchase my first home right in the middle of the Great Recession. I knew home builders were weak. They lacked a position of strength. It was time to take advantage.

I went home shopping and followed Rules 1 and 2. My cash was ready.

Then, we let them make the first offer.

They came to me with an offer, but it was poor. I found this unacceptable.

I sat in their office completely still. Tension. Silence. I did nothing. 

After 30 minutes of silence, the builder finally picked up his offer sheet. He took 20% off of his initial offer. Just like that. I literally did nothing and saved myself tens of thousands of dollars. Pretty cool.

4. Leverage your target against other targets.

Children love to play parents against each other. This is the same kind of thinking. Rarely do I purchase anything without working multiple targets. This is particularly useful when flipping. 

If you see something for sale turn to Buyer-A and be direct. Tell them…

“I can purchase from Buyer-B at a much cheaper cost. Why should I buy from you?”

Your target will be forced to counter. If not, you walk. But usually they will lower their price.

Now, (this is key) if they counter, you must get that new price in writing. That’s when you leave and turn back to Buyer-B. Play them against each other.

Go back and forth ad nauseam. You can even introduce a buyer-C. It helps if multiple people are selling the exact same product. You are basically taking advantage of high supply. 

5. Good cop, Bad cop

This is mostly a counter tactic.  When facing off against a two-negotiator team, you may find that one person is reasonable and the other is tough. This is a classic move used by car dealerships. Just recognize they are working together. Do not fall for their tricks.

But how can you use this to your advantage?

There is a clever way YOU can employ this strategy. Turn the tables on the pros. It works best if you are solo. The key is to create an Imaginary Bad Cop. It works like a charm.

If you are negotiating, just act that someone else always has your hands tied. 

Example:  Let’s pretend you are going to buy a car. Your wife, who happens to not be there, will not let you spend over 25K. You both set a budget and she will kill you if you go over this number. It’s not gonna happen. Just make up some story. You don’t even need to be married. Act like some imaginary person is always holding you back from closing.

The beauty of this strategy is that professional sellers are trained to work over hesitant buyers.

But, they cannot work an imaginary person over because they don’t exist.

It’s like having an invincible bad cop by your side. Sneaky.

Now you know my rules. All of this takes some practice. So, go get some practice.

The more deals you negotiate, these strategies become second nature.

There is no excuse for getting a good deal. 

Oh, I almost forgot. Please remember the most important rule.

Everything is negotiable.