"There are two parts to a deal"- Negotiation101

When negotiating the purchase or sale of a property or a business it is important to remember that there are two parts to a deal: price and terms.   I like to say, "you pick one, and you get the first pick!"    Supposing you are selling a car and you jokingly say, "I pick price and my price is $1 million dollars, LOL".   OK, now it's my turn and I get to pick the terms:  "I will pay you one dollar a year for the next million years!"   That is an exaggerated example that illustrates the two sides of a negotiation.  

I remember one deal that my partners and I negotiated.  Our objective in negotiations was to lock up the property immediately, have a contract that accomplished this at low upfront cost with lots of "outs" (contingencies), and to get the sellers to agree to provide a piece of the financing.  We were confident that given these buyer-favorable terms we would be able to form a partnership and be able to finish the acquisition.  In any event we had mitigated the cost of failing.

We met the sellers at a neutral location (it is important to negotiate on your own turf or at least neutral turf.)   I remember they confidently demanded $1.6 million for the property.  Our counter offer?  We offered them $1.8 million!  At that point we had complete control of the negotiation and we went about getting the terms that we needed in order to finish the deal.   We got the deal signed up immediately with almost no deposit, we got an agreement that had contingencies in place in case we were not able to get the acquisition funds together, and we got them to agree to take a 2nd mortgage for a piece of the $1.8 million purchase price.  

That deal ultimately was funded in a Limited Partnership for $2.8 million and my partners and I split a $1 million note payable to us at the settlement table.  Many years later we sold the property for $8.5 million (and we sold it for cash- no financing provided by the sellers.  We got price AND terms!)  Remember, there is more to a deal than squeezing on the price.   Knowing this can be a useful tool in risk mitigation and allocation which we will blog about soon.  Cheers,


The author, Philip Stephano, is owner of PrimalTweet a social media marketing company in Bucks County,  PA.  He is passionate about helping local and regional business around the country to use social media as an effective tool to find local prospects and customers. To learn more about Stephano go to http://about.me/philipstephano