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Never Say Yes To the First Offer PDF Print E-mail
Written by Roger Dawson   
Friday, 26 March 2010 16:14

Power Negotiators know that you should never say Yes to the first offer (or counter-offer) because it automatically triggers two thoughts in the other person's mind.

Let's say that you're thinking of buying a second car. The people down the street have one for sale, and they're asking $10,000. That is such a terrific price on the perfect car for you that you can't wait to get down there and snap it up before somebody else beats you to it. On the way there you start thinking that it would be a mistake to offer them what they're asking, so you decide to make a super low offer of $8,000 just to see what their reaction is.

You show up at their house, look the car over, take it for a short test drive, and then say to the owners, "It's not what I'm looking for, but I'll give you $8,000." You're waiting for them to explode with rage at such a low offer, but what actually happens is that the husband looks at the wife and says, "What do you think, dear?"
The wife says, "Let's go ahead and get rid of it."
Does this exchange make you jump for joy? Does it leave you thinking, "Wow, I can't believe what a deal I got. I couldn't have gotten it for a penny less"?
I don't think so. I think you're probably thinking
1.    I could have done better.
2.    Something must be wrong.

In the thousands of seminars that I've conducted over the years, I've posed a situation like this to audiences and can't recall getting anything other than these two responses. Sometimes people reverse them, but usually the response is automatic, "I could have done better," and "Something
must be wrong."

Let's look at each of these responses separately:

First Reaction: I could have done better. The interesting thing about this is that it doesn't have a thing to do with the price. It has to do only with the way the other person reacts to the proposal. What if you'd offered $7,000 for the car, or $6,000, and they told you right away that they'd take it? Wouldn't you still think you could have done better? What if that bearing salesperson had agreed to $150 or $125? Wouldn't you still think you could have done better?

Several years ago, I bought 100 acres of land in Eatonville, Washington-a beautiful little town just west of Mount Rainier. The seller was asking $185,000 for the land. I analyzed the property and decided that if I could get it for $150,000, it would be a terrific buy. So I bracketed that price and asked the real estate agent to present an offer to the seller at $115,000.

I went back to my home in La Habra Heights, California leaving the agent to present the offer to the seller. Frankly, I thought I'd be lucky if they came back with any kind of counter-offer on a proposal this low. To my amazement, I got the offer back in the mail a few days later, accepted at the price and terms that I had proposed. I'm sure that I got a terrific buy on the land. Within a year, I'd sold 60 of the acres for more than I paid for the whole hundred. Later I sold another 20 acres for more than I paid for the whole hundred. So when they accepted my offer, I should have been thinking, "Wow. That's terrific, I couldn't have gotten a lower price." That's what I should have been thinking, but I wasn't. I was thinking, "I could have done better." So it doesn't have anything to do with the price-it has to do only with the way the other person reacts to the proposal.

Second Reaction: Something must be wrong. My second reaction when I received the accepted offer on the land was, "Something must be wrong. I'm going to take a thorough look at the preliminary title report when it comes in. Something must be going on that I don't understand, if they're willing to accept an offer that I didn't think they would.
The second thought you'd have when the seller of that car said Yes to your first offer is that something must be wrong. The second thought that the buyer of the bearings will have is, "Something must be wrong. Maybe something's changed in the market since I last negotiated a bearing contract. Instead of going ahead, I think I'll tell this salesperson that I've got to check with a committee and then talk to some other suppliers."

These two reactions will go through any body's mind if you say Yes to the first offer. Let's say your son came to you and said, "Could I borrow the car tonight?" and you said, "Sure son, take it. Have a wonderful time." Wouldn't he automatically think, "I could have done better. I could have gotten $10 for the movie out of this"? And wouldn't he automatically think, "What's going on here? Why do they want me out of the house? What's going on that I don't understand"?

This is a very easy negotiating principle to understand, but it's very hard to remember when you're in the thick of a negotiation. You may have formed a mental picture of how you expect the other side to respond and that's a dangerous thing to do. Napoleon Bonaparte once said, "The unforgivable sin of a commander is to 'form a picture'-to assume that the enemy will act a certain way in a given situation, when in fact his response may be altogether different." So you're expecting them to counter at a ridiculously low figure and to your surprise the other person's proposal is much more reasonable than you expected it to be.

For example:
1.    You've finally plucked up the courage to ask your boss for an increase in pay. You've asked for a 15 percent increase in pay, but you think you'll be lucky to get 10 percent. To your astonishment, your boss tells you that he or she thinks you're doing a terrific job, and they'd love to give you the increase in pay. Do you find yourself thinking what a wonderfully generous company this is that you work for? I don't think so. You're probably wishing you'd asked for a 25 percent increase.

2.    Your son asks you for $100 to take a weekend hiking trip. You say, "No way. I'll give you $50 and not a penny more." In reality, expect to settle for $75. To your surprise your son says, "That would be tight, Dad, but okay, $50 would be great." Are you thinking how clever you were to get him down to $50? I don't think so. You're probably wondering how much less he would have settled for.

3.    You're selling a piece of real estate that you own. You're asking $100,000. A buyer makes an offer at $80,000, and you counter at $90,000. You're thinking that you'll end up at $85,000, but to your surprise the buyer immediately accepts the $90,000 offer. Admit it-aren't you thinking that if they jumped at $90,000, you could have gotten them up more?

So, Power Negotiators are careful that they don't fall into the trap of saying Yes too quickly, which automatically triggers in the other person's mind:
1. I could have done better. (And next time I will. A sophisticated person won't tell you that he felt that he lost in the negotiation; but he will tuck it away in the back of his mind, thinking "The next time I deal with this person I'll be a tougher negotiator. I won't leave any money on the table next time.")
2. Something must be wrong.
Turning down the first offer may be tough to do, particularly if you've been calling on the person for months and just as you're about to give up, she comes through with a proposal. It will tempt you to grab what you can. When this happens, be a Power Negotiator-remember not to say Yes too quickly.
Many years ago, I was president of a real estate company in southern California that had 28 offices and 540 sales associates. One day a magazine salesman called on me. He was trying to sell me advertising space in his magazine. I was familiar with the magazine and knew it to be an excellent opportunity, so I wanted my company to be in it. He made me a very reasonable proposal that required a modest $2,000 investment.

Because I love to negotiate, I started using some Gambits on him and got him down to the incredibly low price of $800. You can imagine what I was thinking at that point. Right. I was thinking, "Holy cow. If I got him down from $2,000 to $800 in just a few minutes, I wonder how low I can get him to go if I keep on negotiating?" So, I used a Middle Gambit on him called Higher Authority. I said, "This looks fine. I do just have to run it by my board of directors. Fortunately, they're meeting tonight. Let me run it by them and get back to you with the final okay."

A couple of days later I called him back and said, "You'll never know how embarrassed I am about this. You know, I really felt that I wouldn't have any problem at all selling the board of directors on that $800 price you quoted me, but they're so difficult to deal with right now. The budget has been giving everyone headaches lately. They did come back with a counter-offer, but it's so low that it embarrasses me to tell you what it is."
There was a long pause, and he finally said, "How much did they agree to?"
"That's okay. I'll take it," he said. And I felt cheated. Although I'd negotiated him down from $2,000 to $500, I still felt that I could have done better.
There's a postscript to this story. I'm always reluctant to tell stories such as this at my seminars for fear that it may get back to the person with whom I was negotiating. However, several years later I was speaking at the huge California Association of Realtors convention being held that year in San Diego. I told this story in my talk, never imagining that the magazine salesman was standing in the back of the room. As I finished my presentation, I saw him pushing his way through the crowd. I braced myself for what I expected to be a verbal assault. However, he shook my hand and said with a smile, "I can't thank you enough for explaining that to me. I had no idea the impact that my tendency to jump at a quick deal was having on people. I'll never do that again."

I used to think that it was a 100 percent rule that you should never say Yes to the first offer. Until I heard from a man in Los Angeles who told me, "I was driving down Hollywood Boulevard last night, listening to your cassette tapes in my car. I stopped at a gas station to use the rest room. When I came back to my car, somebody stuck a gun in my ribs and said, 'Okay buddy. Give me your wallet.' Well, I'd just been listening to your tapes, so I said, 'I'll give you the cash, but let me keep the wallet and the credit cards, fair enough?' And he said, 'Buddy, you didn't listen to me, did you? Give me the wallet!'" So sometimes you should say Yes to the first offer, but it's almost a 100 percent rule that you should Never Jump at the First Offer.

Key points to remember:

Never say Yes to the first offer or counter-offer from the other side.
It automatically triggers two thoughts: I could have done better (and next time I will) and Something must be wrong.
The big danger is when you have formed a mental picture of how the other person will respond to your proposal and he comes back much higher than you expected. Prepare for this possibility so it you won't catch you off guard

Basic Principles Make You a Smarter Negotiator PDF Print E-mail
Written by Roger Dawson   
Friday, 26 March 2010 16:06

How Acting Dumb Can Make You Even Richer!

The way you conduct yourself in a negotiation can dramatically the outcome. I've been teaching negotiating to business leaders throughout North America since 1982 and I've distilled this down to five essential principles. These principles are always at work for you and will help you smoothly get what you want:
Get the Other Side to Commit First

Power Negotiators know that you're usually better off if you can get the other side to commit to a position first. Several reasons are obvious:

1.    Their first offer may be much better than you expected.
2.    It gives you information about them before you have to tell them anything.
3.    It enables you to bracket their proposal. If they state a price first, you can bracket them, so if you end up splitting the difference, you'll get what you want. If they can get you to commit first, they can then bracket your proposal. Then if you end up splitting the difference, they get what they wanted.

The less you know about the other side or the proposition that you're negotiating, the more important the principle of not going first becomes. If the Beatles' manager Brian Epstein had understood this principle he could have made the Fab Four millions more on their first movie. United Artists wanted to cash in on the popularity of the singing group but was reluctant to go out on a limb because United Artists didn't know how long the Beatles would stay popular.

They could have been a fleeting success that fizzled out long before their movie hit the screens. So they planned it as an inexpensively made exploitation movie and budgeted only $300,000 to make it. This was clearly not enough to pay the Beatles a high salary. So United Artists planned to offer the Beatles as much as 25 percent of the profits. The Beatles were such a worldwide sensation in 1963 that the producer was very reluctant to ask them to name their price first, but he had the courage to stay with the rule. He offered Epstein $25,000 up front and asked him what percentage of the profits he thought would be fair.

Brian Epstein didn't know the movie business and should have been smart enough to play Reluctant Buyer and use Good Guy/Bad Guy. He should have said, "I don't think they'd be interested in taking the time to make a movie, but if you'll give me your very best offer, I'll take it to them and see what I can do for you with them." Instead, his ego wouldn't let him play dumb, so he assertively stated that they would have to get 7.5 percent of the profits or they wouldn't do it. This slight tactical error cost the group millions when the director Richard Lester, to every one's surprise, created a brilliantly humorous portrait of a day in the group's life that became a worldwide success.

If both sides have learned that they shouldn't go first, you can't sit there forever with both sides refusing to put a number on the table, but as a rule you should always find out what the other side wants to do first.

Act Dumb, Not Smart To Power Negotiators, smart is dumb and dumb is smart.
When you are negotiating, you're better off acting as if you know less than everybody else does, not more. The dumber you act, the better off you are unless your apparent I.Q. sinks to a point where you lack any credibility.

There is a good reason for this. With a few rare exceptions, human beings tend to help people that they see as less intelligent or informed, rather than taking advantage of them. Of course there are a few ruthless people out there who will try to take advantage of weak people, but most people want to compete with people they see as brighter and help people they see as less bright. So, the reason for acting dumb is that it diffuses the competitive spirit of the other side. How can you fight with someone who is asking you to help them negotiate with you? How can you carry on any type of competitive banter with a person who says, "I don't know, what do you think?" Most people, when faced with this situation, feel sorry for the other person and go out of their way to help him or her.

Do you remember the TV show Columbo? Peter Falk played a detective who walked around in an old raincoat and a mental fog, chewing on an old cigar butt. He constantly wore an expression that suggested he had just misplaced something and couldn't remember what it was, let alone where he had left it. In fact, his success was directly attributable to how smart he was-by acting dumb. His demeanor was so disarming that the murderers came close to wanting him to solve his cases because he appeared to be so helpless.

The negotiators who let their egos take control of them and come across as a sharp, sophisticated negotiator commit to several things that work against them in a negotiation. These include being the following:
1.    A fast decision-maker who doesn't need time to think things over.
2.    Someone who would not have to check with anyone else before going ahead.
3.    Someone who doesn't have to consult with experts before committing.
4.    Someone who would never stoop to pleading for a concession.
5.    Someone who would never be overridden by a supervisor.
6.    Someone who doesn't have to keep extensive notes about the progress of the negotiation and refer to them frequently.

The Power Negotiator who understands the importance of acting dumb retains these options:
Requesting time to think it over so that he or she can thoroughly think through the dangers of accepting or the opportunities that making additional demands might bring.
1.    Deferring a decision while he or she checks with a committee or board of directors.
2.    Asking for time to let legal or technical experts review the proposal.
3.    Pleading for additional concessions.
4.    Using Good Guy/Bad Guy to put pressure on the other side without confrontation.
5.    Taking time to think under the guise of reviewing notes about the negotiation.

I act dumb by asking for the definitions of words. If the other side says to me, "Roger, there are some ambiguities in this contract," I respond with, "Ambiguities . . .ambiguities . . . hmmm, you know I've heard that word before, but I'm not quite sure what it means. Would you mind explaining it to me?" Or I might say, "Do you mind going over those figures one more time? I know you've done it a couple of times already, but for some reason, I'm not getting it. Do you mind?" This makes them think: What a klutz I've got on my hands this time. In this way, I lay to rest the competitive spirit that could have made a compromise very difficult for me to accomplish. Now the other side stops fighting me and starts trying to help me.

Be careful that you're not acting dumb in your area of expertise. If you're a heart surgeon, don't say, "I'm not sure if you need a triple by-pass or if a double by-pass will do." If you're an architect, don't say, "I don't know if this building will stand up or not." Win-win negotiating depends on the willingness of each side to be truly empathetic to the other side's position. That's not going to happen if both sides continue to compete with each other.

Power Negotiators know that acting dumb diffuses that competitive spirit and opens the door to win-win solutions.

Bad Economy = Good Opportunity for Investors! PDF Print E-mail
Written by Cris Chico   
Monday, 01 March 2010 18:11

Why Real Estate Investing is ALWAYS a good choice

Unless you’ve been living under a rock or in a hole in the ground, you’ve probably watched as the economy crumbled. Let me put it to you quite frankly: it’s bad, it’s likely to get worse, and we’ve never seen this kind of thing before. It’s like we’re lost in the woods and don’t know our way out. The economy is horrible… and when I say “horrible” I mean that we’re being run over by a steamroller and it doesn’t look like it’s going to end soon.

But I’m not really worried. Sure, like you I’ve watched my portfolio of stocks erode until it’s just a mere shadow of what it was. But I actually don’t invest much in stocks. I invest in something else that I find to be much more compelling and profitable.

I invest in homes. Why do I invest in homes instead of stocks? There are a number of reasons but one of the primary reasons is that when I buy a stock I buy one voting share out of many thousands upon thousands of voting shares in a company. I have about as much influence over that company as a small fly influences the direction of my car when I smack into it on the highway.

Imagine that you own a stock and the company suddenly decides to start polluting the environment with toxic chemicals. Did they call you up and ask you? Of course not. Your few tiny shares of the company aren’t even a blip on their radar. So when the company dumps poison into a lake, your investment diminishes without you lifting a finger. And, what options do you have for improving the company? Can you call up and say, “I’m a valued shareholder and I think we should lower prices to capture more marketshare”? No. They won’t listen to you.

I prefer to invest in homes because I am the sole owner (or, in some cases, I might be a co-owner with other investors). The bottom line: more influence! And when you have more influence over an investment, you have more control over whether or not you will come out profitable in the end.

I make the decisions. I choose between the options I’m faced with. I make the choices and I live with the consequences. And since I alone (or me along with a small group of investors) have complete control over the investment, we can influence its success.

Thus, I may not be able to call up a company of which I’m a stakeholder and increase my share price through that phone call, but I can go to the house I’ve invested in and relandscape and earn back 2 or 3 or 10 times my investment into that landscape.

In this economy where our portfolios are being decimated with every passing moment, it is so much more ideal to invest in something that you can influence and profit from.

As the creator of Virtual Wholesaling, Cris Chico is helping investors realize their dreams of financial freedom through his proven & guaranteed method of finding & flipping properties in hot markets (whether you live there or not).

So... You Want To Be a Real Estate Investor PDF Print E-mail
Written by Lou Brown   
Monday, 01 March 2010 17:15

If you have the intention to be successful in Real Estate, you should first take a look at what works for others.  Let’s understand what you want to accomplish.  You want to have your own business in real estate.  Either you want to buy and sell, or buy and hold, or deal in mortgages, or buy and renovate, or build, or subdivide, or some derivation of these.  So we are going to proceed based on what we think we should do next.  Let’s take a look at what other entrepreneurs do to go into business.

The track that follows the traditional process for folks going through the process of earning a living includes predictable paths.  And this is the distinction I want you to know.  Teaching a skill to go into business is what is taught at college… no that is NOT what is taught at college… they teach you how to work for someone else!  Even courses entitled Entrepreneurship, Business Management, and Business Applications don’t teach what you need to know about creating, and more importantly… sustaining, a viable business.  You see, they don’t teach what you need to know about the process of owning and running your own business.  They do teach much of what you need to know about how to work for someone else, but they do not teach how to work for ourselves.

Not only are you not taught how to start or maintain a business for yourself, they also don’t teach how you can get wealthy. That’s the process of how to create assets that work for you, instead of you working for it.

So what can you do to learn this?  You must learn from someone who has done it for themselves. More importantly, you must learn and adopt a process to have that happen
for you without all the expensive and time consuming trial and error that comes with creating a business without a path to follow.

According to Michael Gerber, author of the E Myth, 1,000,000 people go into business in the United States each year.  Within 5 years, 96% of them are out of business.  I don’t know of anyone who has that intent, but that’s what happens.  They, like you, are attracted to create a business in hopes it will provide a good living and retirement income too.  But for 96% that promise or vision does not come true and they lose the chance for freedom from the shackles of working for someone else. 

Gerber goes on to say that those with the dream of entrepreneurship thought business worked one way when in actual fact successful businesses work in quite a different way.  Hence, the title of the book, The E Myth.  He reports that when the entrepreneur follows a different path , 75% are still in business AFTER five years.  What he found that you need to know is that those who enter business with a franchise are able to build and sustain their business because they have a path to follow.  A clear, direct, tested and proven path that leads them right to the money without the risks and pitfalls that so many others fall into. 

I can relate one story.  Some of you have heard me talk about the Holiday Inn we built, funded using private money.  We could have opened that hotel and called it “Lou’s Hotel”.  That would have saved us a ton of expense, but would it have been an uphill battle for us to find customers?  Of course!  Not only that, we would have had to create our own reservations system, housekeeping training, accounting software, resources for supplies, and all the rest.  Instead we opted to go with Holiday Inn.  Now that was expensive.  $35,000 to use their name, $25,000 for their training, $20,000 for their software and 8% of every dollar that comes in for the entire length of the franchise agreement.  Whew!  But we opened the doors to an immediate 80% occupancy, and understanding of the proper way to manage the hotel, staff, marketing and lots of support.  We were able to take their training, tools and support and have an up and running business without having to make it up as we go.  Doesn’t that make more sense? 

Hummmm… Does the Real Estate business have such a path?  You bet it does! And you can actually choose the path to follow.  You can buy a franchise that requires you have a $250,000 net worth and obligates you to invest many thousands of dollars to get in and requires a monthly marketing budget of as much as $50,000 per month!  That may be a good idea for some of you reading this who really intends to have a huge business, staff and lots of ongoing requirements.  But for most of us, that is not the path we want or can afford to follow.  Whether it be that you don’t qualify because of the net worth requirements, or just don’t want to, or want the ability to invest all that to get the support and leads, you know this is not for you.  Most of us just want a business plan to follow; one that allows us to build a business that will generate a good income and a future of dependable cash flow for you and your family.

This business plan needs to cover all the aspects of this confusing real estate business, provide for safety and allow for controlled expansion.  It needs to include all the possible profit centers in Buying, Renovating, Managing, and Selling.  It needs to support all the aspects so profits and risks don’t get overlooked.  It needs to provide a business model that can be easily duplicated regardless of the size or economic condition of the market you are in.  It needs to have a communications component to allow for adjustments as the market changes.

In order for this concept to work in your real estate business your business plans needs to have Tools, Training and Support.  It needs to be a holistic approach rather than a concept here, a form there, a piece of marketing material from someplace else all jumbled together like some untested recipe.  In fact this is the recipe for disaster that so many would be investors follow.  And that is why, as Gerber explained, that 96% of the ones without a plan will be out of business in such a short period of time.  Doesn’t that make sense to you?  Get a true, time tested business plan that works in all locations and takes advantage of the most compelling profit centers in the business complete with support to be sure that occurs.

So I’ve identified the component parts you need to make your business work regardless of your current net worth or monthly marketing investment.  In fact we have developed a system that allows you, regardless of income or background, to build a business that will have all the benefits a franchise offers without nearly the investment.  Tools, Training and Support… all in one place AND with the component no one else teaches.  The aspect and huge profit center of holding property.  Assets that will work for you for the rest of your life.  This is where WEALTH resides.  Assets and equity working for you instead of you working for it.  This allows you to do something today, such as find and negotiate a deal, that you do in a way that allows you to reap profits monthly for as long as you choose.  This hidden profit gift that keeps on giving as long as you choose.

Lou Brown has  invested in single-family homes, apartments, hotels, developed subdivisions and built and renovated homes and apartments.  Each of these experiences has given him a proving ground for the most cutting edge concepts in the real estate investment industry today.  He’s widely known as a creative financing genius with his deal structuring concepts.  Being a teacher at heart he enjoys sharing his discoveries with others.

Why Multi-Tasking Will Kill Your REI Business PDF Print E-mail
Written by Jeff Vacek   
Friday, 26 February 2010 16:15

How to Structure your Day to Maximise Efficiency and Profits in Your Real Estate Business

Do you ever work an entire day and at the end of the day you feel like you didn't accomplish anything?

Do you feel exhausted when this happens?

This happens because you probably multi-task.

Multi-tasking is an addiction just like drinking, smoking, eating or anything else for that matter.

And it will kill your business just like the fore mentioned activities will kill your body.

Why do you multi-task so much?

Somewhere in your life you decided that in order to get more done you had to multi-task.  What has happened is your mind is playing tricks on you.  It SEEMS like you are getting more done because you are DOING a lot.  In reality you're not really ACCOMPLISHING much of anything.

Sure, you're checking emails, looking at the motivated seller sites, watching "how to" videos on YouTube, making phone calls to title companies and motivated sellers, and on and on...like the Energizer bunny.

Yet, at the end of the day you haven't really accomplished much.

Again, it's because you are multi-tasking.

Worse, this leaves you exhausted, resigned and leads to a complete loss of will power.

Here's how to combat this...

Schedule everything you do into 60 minute chunks of time and take breaks.

Work on the important, money-making activities first and do everything else later (emails, paperwork, general calls, etc.).

Take a 10-15 minute break every 2 hours and one long break for lunch (30 minutes to an hour).

And if you must multi-task schedule it.  That's right SCHEDULE your multi-tasking time.  Schedule a couple of times during the day that you are going to BE chaotic on purpose.  Get it out of your system and fulfill on your craving.

Have you ever been on a diet and your dietician told you to NOT resist cravings?  I bet he/she also told you to fulfill your cravings but do it in moderation (i.e. 2 cookies instead of the whole box).

This is how you need to manage your multi-tasking.  Schedule a couple of 30-60 minute chunks every day to multi-task.  Return voicemails, check email, surf the net, answer random phone calls, etc. during this time.

During the other scheduled times you should be focusing on one thing (like contacting motivated sellers or potential buyers) and that one thing only.  No distractions and no interruptions...period!

Structure your day this way and your REI business with thrive and grow.

Jeff Vacek is a Real Estate Investor and  leading expert on personal management and productivity.

Last Updated on Friday, 26 February 2010 18:59
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