Question: An attorney friend of mine is working with me on an apartment acquisition and suggested that I write this blog. In particular the negotiations have been interesting and offer some life lessons.
Answer: As part of the due diligence process our team inspected every single unit on the apartment community we are purchasing. We determined that there was considerably more deferred maintenance than had been anticipated. The cost to repair all items identified was far more than we had projected and as a result we found it necessary to go back to the seller and ask for a price adjustment. The seller was initially only willing to reduce the price by approximately one-third of the amount we requested. We subsequently told him that he should move forward with a different buyer. However, the next day his broker contacted us and we ended up finalizing a deal that gave us the price reduction we were seeking.
When negotiating something of significant magnitude it is important to remember a key tenet. Always try to avoid any sort of emotional investment in that which is the focus of your negotiation. This not only applies to a business transaction but also to personal matters such as the purchase of a home, a car or even a piece of artwork. Every one of us feels emotion – that’s a fact of life. Smart business people know that playing to a person’s emotions can convince him or her to say “yes” to whatever transaction is being contemplated. The trick is to learn how not to act on our emotions when that is precisely what others want us to do.
So how can we avoid falling victim to making an emotional decision when it comes to a major purchase? When we do our homework and know the value of what we are about to buy, we are in a much better position to avoid being swept up in the emotion of the moment. Of course we wanted to acquire the apartment property but when we did our homework we realized that the value was diminished by the defects we discovered. And then we were willing to say “no” and walk away unless the price adjustment was granted. I maintained the perspective that there were plenty of other apartment properties we could purchase and we did not have to complete this deal for our acquisition program to succeed.
Remember that there is nothing wrong with emotion. But the real test of strength is being able to control emotion when making important decisions. When this happens you will find that you can easily say “no” just as easily as you can say “yes.”
This blog is being written in tandem with my book, “An Entrepreneur’s Words to Live By,” available on Amazon.com in paperback and Kindle (My Book), as well as being available in all of the other major eBook formats.