6 tips for negotiating (almost) everything

Harvey Mackay, Contributing Writer

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No matter what industry you’re in, or how far you go in your career, the ability to effectively negotiate can make the difference between success and mediocrity.

Within the past few years, some of the best-known names in American industry have disappeared down the gaping maws of other companies. Other seemingly unassailable fortresses have been disassembled, and the parts sold off separately.

Nothing unusual about that.

If huge enterprises, some so valuable their assets exceed those of many of the world’s nations, can be bought and sold, cut up into little pieces, or put together into bigger pieces, then there’s no deal that you and I can contemplate that can’t be put together. A deal can always be made when the parties see it to their own benefit.

Nine out of 10 lawsuits are settled before judgment is rendered in the courtroom because even the bitterest of adversaries will sit down at the same table when they can be shown there is a greater advantage to themselves in negotiating than in fighting.

Whatever it is you are trying to buy or sell can be bought or sold if you can get the other side of the table to see how the deal works to their advantage.

No matter what industry you’re in, or how far you go in your career, the ability to effectively negotiate can make the difference between success and mediocrity. Whether it’s a multimillion-dollar contract or a job offer, keep this advice in mind:

1. Know what you want

Don’t go to the table without a clear, realistic idea of what you want to achieve. It will help you negotiate with confidence.

2. Ask for what you want

Let the other person make the first offer, then respond and set the tone for the discussion. That way you’ll know how far you need to go to get what you need.

3. Understand what the other side wants

A successful negotiation should satisfy both sides. Instead of trying to crush your competition, find out what he or she hopes to get, and try to work together toward a solution that works for you both.

4. Don’t concede unilaterally

Usually one side or the other has to give something up. If you do that, be sure to get a comparable concession from the other person. Giving away something for nothing will be interpreted as a weakness to be exploited.

5. Don’t rush

Time can be your friend if you are willing to wait for the right deal. If the other side senses a deadline, they may be motivated to hold out until the last minute, or try to force you into accepting unreasonable terms. Be patient and let the time pressure work against the other side.

6. Be ready to walk away

This can take a certain amount of courage, but it’s necessary to avoid being backed into an agreement you don’t want. If possible, keep an ally in reserve — someone with the power to approve or reject the deal. This can give you an out if you need to turn down a deal, or motivate the other side to make the best offer possible.

Mark McCormack, author of ” What They Don’t Teach You at Harvard Business School,” said, “I find it helpful to try to figure out in advance where the other person would like to end up — at what point he will do the deal and still feel like he’s coming away with something. This is different from ‘how far will he go?’ A lot of times you can push someone to the wall, and you still reach an agreement, but his resentment will come back to haunt you in a million ways.”

And that’s an important point to remember. People or companies that you make deals with on a regular, or even infrequent basis, have long memories. If you don’t fight fair, or embarrass them, or make them feel like they have been disrespected or used, then forget about doing business with them again.

Consider the negotiating strategy used by two iconic business titans. J. P. Morgan wanted to buy a large Minnesota ore tract from John D. Rockefeller. So Rockefeller sent his son, John D. Jr., to see what Morgan had in mind.

Morgan opened, “Well, what’s your price?”

To which John D. Jr. replied, “Mr. Morgan, I think there must be some mistake. I did not come here to sell; I understood you wanted to buy.”

Mackay’s moral: Negotiation is not just about winning, it’s about win-win.

Harvey Mackay is the author of New York Times No. 1 bestsellers “Swim With The Sharks Without Being Eaten Alive” and “Beware the Naked Man Who Offers You His Shirt.” Both books are among the top 15 inspirational business books of all time, according to The New York Times. In total, Mackay’s books have sold 10 million copies worldwide, been translated into 37 languages, and sold in 80 countries. He has been chairman of Mackay Mitchell Envelope Co. since 1959.

Weekly Market Report

For Week Ending August 15, 2015

According to statistics jointly released by the U.S. Census Bureau and the Department of Housing and Urban Development, privately-owned housing starts rose 0.2 percent when comparing July 2015 to the prior month and 10.1 percent when compared to July 2014. These numbers are at the highest levels the market has seen since October 2007. This bodes well for the eventual landing of a flock of potential buyers currently holding in a rental pattern or the wakening of those resting in extended parental basement hibernation.

In the Twin Cities region, for the week ending August 15:

  • New Listings increased 3.1% to 1,746
  • Pending Sales increased 18.9% to 1,268
  • Inventory decreased 12.3% to 16,950

For the month of July:

  • Median Sales Price increased 4.7% to $225,000
  • Days on Market decreased 7.4% to 63
  • Percent of Original List Price Received increased 0.8% to 97.6%
  • Months Supply of Inventory decreased 19.6% to 3.7

All comparisons are to 2014

Click here for the full Weekly Market Activity Report. From The Skinny Blog.

The Inflatable Price Raft

By David Arbit on Tuesday, August 18th, 2015
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“Accept certain inalienable truths: Prices will rise. Politicians will philander. You, too, will get old. And when you do, you’ll fantasize that when you were young, prices were reasonable, politicians were noble and children respected their elders.” – Mary Schmich

We hear a lot about home prices and how they change over time. But by far the biggest pitfall of dealing in absolute dollar terms is that a dollar in 2015 does not buy what a dollar used to get you in 1960 or even in 2010. If you’ve ever purchased the same product or service even just several years apart, you implicitly know this, though you may not be familiar with some of the rationale and technical aspects of tracking and adjusting for inflation. And let’s be clear here: that is ok!

While the nominal (not inflation-adjusted) home price has certainly increased in absolute terms, the typical home that cost $15,977 in 1960 dollars would actually cost exactly $127,635 in 2014 dollars. So a lot of what appears to be price gains is actually attributable to inflation, though not all of it. This is why it’s important to separate out inflation-adjusted prices from nominal, reported prices. It’s the best way to answer the question: excluding the effect of inflation, how much did real home prices actually increase?

The Consumer Price Index (CPI) is the most common method to account for inflation when dealing with time-series data stated in currency units. Using the Bureau of Labor Statistics (BLS) CPI, we’ve adjusted historic home prices and restated them in constant 2014 dollars. Note how far apart the trendlines start versus where they end up. Only when nominal prices approach 2014 do the trendlines converge—since, at that point, both nominal and adjusted prices are stated in 2014 dollars.

Enough with the buildup. So what’s really going on here?

Between 1960 and 2015, nominal home prices increased from $15,977 to $261,963, a gain of 1,539.6 percent. During the same period, inflation-adjusted prices increased from $127,635 to the same $261,963 for a more modest gain of 105.2 percent. That’s a big difference, and shows just how much of the run-up in prices can be attributed to inflation.

But it’s also important to note that home prices more than doubled during the 54 year study period (1960-2014) even after adjusting for inflation and despite the downturn. That means after factoring for inflation, home prices kept pace with inflation AND doubled in 54 years. An increase of 105.2 percent spread out across 54 years translates into a 1.95 percent real annualized average growth rate. That finding supports the roughly 2.0 percent annual home price increase that is referenced quite often. It also supports the fact that real estate is an effective inflation hedge.

Equally or perhaps even more importantly, while nominal home prices are quickly nearing their 2006 highs, inflation-adjusted or real home prices are still well below their previous peak in 2005. In other words, while nominal prices seem to be approaching their previous peak, real home prices are still a bargain, especially compared to 2004-6 prices stated in 2014 dollars. That means real home prices have to increase 26.4 percent before they break even with 2005 levels. Nominal home prices have about 6.6 percent to go before reaching 2006 levels.

But life is all about choices, and choices—at least in the strict economic sense—represent a series of opportunity costs. An opportunity cost of a choice, such as buying a house, is what you give up to get it. Most of us have to choose between two major investments at any given time. Sure, gold and other precious metals might also keep pace with inflation and then some, but you can’t live in a pile of bullion. You can only visit your gold periodically. Investing in a home is one of the most effective inflation hedges out there. Plus, while you’re quietly slaying the inflation dragon and enjoying some appreciation, you’ve got a place to live!
Inflation-Chart1-702x506 From The Skinny Blog.

Weekly Market Report

For Week Ending August 8, 2015

That time of year is here for some and on its way for others: School. The summer’s fun is winding down. Perceived as good for some weary parents, bad for some summer-loving kids and standard fare for real estate professionals that know August as a quiet identifier of the expectation of housing market slowdown. That said, home sales and housing prices have both continued to edge up across the country on a macro level compared to last year’s numbers. Let’s take a look at the local trends.

In the Twin Cities region, for the week ending August 8:

  • New Listings decreased 2.8% to 1,746
  • Pending Sales increased 13.5% to 1,293
  • Inventory decreased 11.0% to 17,038

For the month of July:

  • Median Sales Price increased 4.7% to $225,000
  • Days on Market decreased 7.4% to 63
  • Percent of Original List Price Received increased 0.8% to 97.6%
  • Months Supply of Inventory decreased 19.6% to 3.7

All comparisons are to 2014

Click here for the full Weekly Market Activity Report. From The Skinny Blog.

Housing Continues to Delight as Summer Activity Starts to “Cool”

By Erin Milburn on Thursday, August 13th, 2015

Minneapolis, Minnesota (August 13, 2015) – After purchase demand reached a 10-year record high in June, the Twin Cities metropolitan housing market continued to delight in July. With the spring and summer peak buying season coming to a close, activity levels should begin to cool month-to-month, though most indicators should continue to show year-over-year improvement. The number of signed purchase agreements rose 12.1 percent to 5,716 for July, but are up 18.7 percent so far in 2015. Closed sales increased 17.7 percent to 6,275, but have risen 16.7 percent so far this year. Seller activity was flat compared to last July, new listings fell just 0.4 percent from 7,997 to 7,963. Given that combination of supply and demand movement, the number of available properties for sale fell 11.0 percent to 16,940 homes.

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“While those selling their home are yielding top dollar, others wonder if today’s younger generation will be renters forever,” said Mike Hoffman, Minneapolis Area Association of REALTORS® (MAAR) President. “But a National Association of REALTORS® (NAR) survey found that millennials comprised 32.0 percent of all home buyers and 68.0 percent of first-time buyers—both the largest share of any group.”

As interest rates continue to normalize this year, even more pent-up demand from all age brackets will likely be released during this period of historic affordability.

Since demand increased while supply indicators fell—and because a larger share of sales came from the higher-priced traditional segment—the July 2015 median sales price rallied another 4.7 percent to $225,000. The median price per square foot increased 3.4 percent to $120. While the July 2015 median sales price was slightly lower than the June 2015 price, the July 2015 price per square foot was slightly higher than June 2015.

Again due to the factors mentioned above combined with a sense of urgency among buyers, the number of days a property spent on the market fell 7.4 percent to 63 days. Sellers are accepting offers at a median of 98.5 percent of their original list price but 99.7 percent of their final list price, suggesting near-full price offers come quickly once a seller is priced right.

The Twin Cities metropolitan area has 3.7 months’ supply of inventory, which means the region as a whole is a seller’s market. That figure dropped 19.6 percent since July 2014. However, not all local areas, market segments and price points reflect that metropolitan-level reality. This metric is a ratio of supply and demand and indicates how long it would take to completely clear the market assuming no new homes enter the marketplace.

Barring suddenly negative economic data, the Federal Reserve is poised to normalize rates by lifting the Federal Funds rate off of zero starting in September. Mortgage rates are still just below 4.0 percent, compared with a long-term average of over 7.0 percent. Nationally, the economy added 215,000 new private payrolls in July while the unemployment rate held steady at 5.3 percent. The most recent data from the Bureau of Labor Statistics shows the Minneapolis-St. Paul-Bloomington metropolitan area has the third lowest unemployment rate of any major metro.

“We have so many different things going for our region,” said Judy Shields, MAAR President-Elect. “Twin Citizens are smart, and they realize that when rents are high and rising, interest rates are under 4.0 percent and prices are still below their peak, it’s time to consider investing in the stability and predictability of homeownership—in most cases, it’s cheaper than renting.”

From The Skinny Blog.