Unlike the sale of a Tesla or a Saturn, most transactional and legal problem situations are negotiable. In real estate negotiations, the image or perception of having rote power is not the most important factor for getting what you want. It’s all about using strategies to achieve common ground on the major points. Sure, if you have financial or legal leverage, you have an advantage, but it’s secondary to achieving a true line item agreement on major deal points.
A federal judge once opined, “Pigs get fed – hogs get slaughtered!”
At the end of every negotiation session, the parties receive something of value and give up something of value to achieve a consensus or agreement. There is quid pro quo. The challenge is for David and Goliath to come to common ground on material points, and for both to avoid worst case scenarios.
Actively Prepare for the Negotiation Session
Assess whether the opponent is negotiating in good faith or just posturing and bluffing. Sometimes an opponent may be using a real estate negotiation session to obtain knowledge and specific information, and is not negotiating a true resolution or settlement in “good faith.” If you sense a total lack of good faith, then end the session, and don’t be afraid to leave the room. When good faith negotiation is restored, you may be able to work out a settlement or resolution.
Do your investigation and due diligence. If you don’t believe or trust what the other side is claiming, ask for documentation or legal authorities to back it up, and do your own investigation.
Be detail oriented in your quest for making a deal or agreement happen. Think of everything you want to achieve and list it out in a simple way. The parties want transparency and for you to know the details, ask the right questions, and deal with the questions. If you don’t understand an issue, ask an expert or third party advisor.
Fortify yourself with a briefcase full of experts and their reports to show you are strong in your position. Experts may include appraisers, title officers, surveyors, engineers, licensed contractors, plumbers, other trades professionals, and, God forbid, attorneys!
Understand the concept of “worst case scenario,” and what it will cost to avoid them. Generally speaking, there are three types of worst case scenarios – financial, social, and legal. This is especially the case with real estate contracts that shift attorney’s fees and costs shift to the losing party. If you go to trial and lose the case, you risk being liable for the other side’s attorney’s fees and other litigation costs – such as expert witness fees.
Before you negotiate a major issue, seek out feedback and ideas from experienced and knowledgeable third parties – property managers, a managing real estate broker, experienced real estate agents, asset managers, attorneys, title officers, mediators, retired judges, colleagues and roundtable with colleagues. Ask them as follows – “Given the risk of ending up in a worst case scenario, is my position valid, strong, and credible?” What is my probable real cost or risk to reach a deal and avoid a worst case scenario?
If you use a mediator in a real estate settlement negotiation, please learn everything you can about the mediator’s background. Resumes may be deceiving. Does the mediator have a bias or financial conflict of interest because he or she is hired by the same parties over and over again? This type of mediator may be so biased that he or she will not be fair to your side in the settlement negotiation. Does the mediator understand the subject matter? Is the mediator explaining why each side’s position has merit or does not have merit? Is the mediator taking too much time with your opponent in order to rack up fees?
Think Creatively and Out of the Box
During the Negotiation Session
In a real estate negotiation meeting, listen to the other side carefully and try to achieve some common ground on major points. Many real estate negotiation sessions fall apart because one side has to win on every minor, insignificant point. Egos get in the way. This approach frequently leads to an unsuccessful session. Focus on the big ticket items, and reaching common ground.
Put yourself in your opponent’s shoes to understand the details of what the adversary wants, but don’t believe everything you hear.
Money does talk. Arm yourself with sources of funding to fund a resolution. Having insurance in place or a source of capital or loan funding or a sugar daddy is a great asset. Insurance policies can be a shield and sword to protect your interests, and can fund a resolution or settlement.
Silence can be a powerful tool. Silence has the implied message of “no,” or “you have to wait,” or your position is “ridiculous” and may force the other side to change its course or grant your side some major concessions.
Take a calculated risk, and ask for all and more than you want. Stretch the rubber band to its breaking point and see how the opponent reacts. You might get more benefits and concessions than you anticipated. You can test the limits of the opponent’s concessions in the negotiation session.
If you have to pay money to settle a dispute, don’t offer all that you have on the front end. Make your opponent wait for a reasonable and cost effective offer, and make incremental offers over time to get into a mutually desirable settlement bracket.
Don’t be afraid to call out an opponent’s position as being unfair, unreasonable, unrealistic, or unlawful if you can back up the proposition with concrete reasons. Don’t make it a personal attack. Chip away at the credibility of the position, not the person.
If you are a fiduciary (like a real estate agent, general partner, or have a power of attorney) and a client or principal wants you to keep some information confidential, keep the information confidential, unless the law mandates disclosure. So you may need to zip it, and curb the street and parking lot chatter!
Get it in Writing to Solidify the Deal
By law, all real estate contracts and agreements must be in writing – this is what the law calls the “Statute of Frauds.” Please comply with this law. Legal settlement agreements must also be in writing, and signed by the parties themselves to be enforceable. You should consult with experienced counsel to make sure you understand all of the terms, conditions, worst case scenarios, and fine print. The devil is in the details – don’t make imaginary assumptions you are protected. So the best approach is to try to do the right thing – please obtain all of the terms of a transaction offer/acceptance/counteroffer/settlement agreement in writing, personally signed and dated by the parties. Otherwise the agreement terms may be unclear, and may not be enforceable. Be confident, and do your best!
Nate Bernstein, Esq., is the Managing Counsel of LA Real Estate Law Group, and a member of the State Bar of California and his practice concentrates in the areas of complex real estate litigation, commercial litigation, employment law, and bankruptcy matters. He is a 22 year veteran Los Angeles real estate and business attorney and trial lawyer. Mr. Bernstein also has expertise on bankruptcy law, the federal bankruptcy court system, creditor’s rights and debtor’s bankruptcy options and created www.laquiettitleattorney.com, a leading educational resource on quiet title real estate litigation. For more information, call (818) 383-5759, or email [email protected].