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Effective negotiating strategies: are you being used in a bidding war?

Posted by admin on April 2, 2009 in Negotiations

I recently had this happen to me. I got the distinct feeling that I was negotiating with someone who he had no intention of actually of selling something to me. They were negotiating to provoke a bidding war. I cannot substantiate why I felt this way and I could be completely wrong. The only thing that tipped me off was that the seller said they had been talking to someone to buy the computer servers for a long time and they wanted to speak to me “out of fairness.”

This occurred frequently during the real estate bubble. The real estate agent would say there’s some other couple who wants the house badly and you better make a bid quickly. Of course, you really did not know whether that other couple actually existed.

For some reason, my experience has been that the people who try to engage you in a phony bidding war talk a lot more than they have to. I remember once negotiating to buy land for a client and the vendor talked so much that he changed his story 3 times in 10 minutes: first it was a school going in next door, then the university expanding then it was a day-care. The school/campus/day-care were all reasons why he had an offer of $X in hand already and why we had to up our offer.

I told him that if he had an offer for $X then he should take it since he clearly got a good deal. I checked a month later and the property was still listed.

A good negotiator can really fool you and subtly convey to you that there is another offer on the table, triggering on some emotional level the need to counter-offer. I have been on the losing end of those a few times in my life. The bad negotiators talk too much about their offer. A litigator friend of mine, a great observer of the human condition, once pointed out to me if someone says something about their offer or themselves unprovoked (“I have a great offer from another person” or “people say I am very honest”), it is probably not true- you are trying too hard to prove or disprove something that was not brought up-why?

On a more practical level, one should plan a walk-away point and stick to it- or bring an enforcer to help you stick to it. In my case, I bring my brother for major purchases- he’s detached, good with numbers and tell me to shut up (the enforcer part). Typically, buyer’s remorse occurs when you budget to buy a new home is $350,000 but you end up paying $375,000 for it because you broke your own walk-away point. In the end,  all good negotiating strategies come down to preparation, self control and not negotiating emotionally. This is probably why good negotiators are also great poker players.