Negotiations are an essential part of buying and selling real estate. Investors make their profit when they buy houses, so a lot is in the balance when you sit to talk with a motivated seller. Usually, success in negotiations comes as second nature to real estate entrepreneurs with good people skills, however, this is a set of skills that can be adopted by anyone willing to learn. And, of course, as you talk with more homeowners your experience will grow – you can perfect your negotiation skills through practice.
While people generally perceive themselves as rational, when it comes to decision-making, they are influenced by a whole host of cognitive biases. And some of these biases can sway negotiations. The FBI found this out the hard way (basically at the cost of human lives), and Chris Voss, their leading international hostage negotiator (2003-2007), wrote a book about the tactics they use to direct the negotiation process towards a favorable outcome.
The book Never Split the Difference: Negotiating As If Your Life Depended On It is considered by many to be the best book on negotiation. It’s a great resource for real estate entrepreneurs, especially if you look for a way to improve your people skills.
What makes this book so exceptional? Let’s take a closer look at it to find out.
Never Split the Difference is intended to serve as a negotiation playbook, so the chapters roughly follow the natural sequence of interactions that take place in any negotiation process. The gist of the opening chapters is best summarized with this quote:
“Negotiation is not an act of battle; it’s a process of discovery. The goal is to uncover as much information as possible.”
Voss’s first advice to negotiators is to make the other side feel heard. We all need to feel that we are understood and accepted (it’s how psychologists help people to open up in one-on-one sessions). If you manage to satisfy this need in your counterpart, then you’ve set the tone for the negotiations ahead. But don’t be fooled, because this is not an easy task.
During negotiations, people got to practice active listening to pass this milestone. This means: quiet down your internal dialog so that you can really listen to what they are talking about.
Treat the opening stage of negotiations as an exercise in information gathering. The party that has more information rules the exchange, so don’t refrain from asking questions, a lot of questions – let them educate you about their expectations from the negotiation.
Two techniques help you navigate the process of discovery: mirroring and labeling.
People tend to mimic the body language, posture, and speech pattern of those who are in their presence. This is known as mirroring, and is mostly done unconsciously, sometimes (but now always) because the other person inspires respect. It’s typical for parent-child, or mentor-student relationships.
Mirroring is essential for building rapport with your counterpart, but how do you mirror effectively during negotiations? It’s fairly simple: repeat the last three words they said or the most important thing they said.
Suppose a motivated seller says: “…so we decided to sell the house.” If you respond with “Sell the house?” they will feel compelled to volunteer more information about their decision and will bond with you in the process (we will expand on this further down the line).
It’s not just what you say, but also how you say it.
Chris Voss recommends using one of these three tones of voice during negotiation:
So, make sure you use the right tone of voice (the playful voice) when you mirror phrases back to your counterpart. Otherwise, mirroring will cause aggravation instead of forging a bond. Also, add a moment of silence to allow your mirrored phrase to set in.
Mirroring and labeling work hand in hand.
Label the emotions of your counterpart to assess their emotional state. Labeling helps you develop a neural resonance with them (or bridge the gap between your emotional state and their emotional state). The goal of this process is to eliminate barriers that stand in the way of making a connection.
Voss calls this tactical empathy, and it’s to be used to influence your counterpart (to level with them). The idea is that if you address the underlying emotions of the other person in a neutral manner (by withholding judgment), you can defuse (or diffuse) negative emotions. At the same time, labeling reinforces positive emotions.
Labeling is similar to mirroring, and it’s done by starting your response with the following phrases:
So, you act as if you are an observer, and not a participant in the exchange – the focus is on what the other person is feeling.
Imagine a motivated seller saying “…houses in this neighborhood are sold at $120,000 or more, but the other investors offered me $100,000.” If you want to assess their emotional state, you can use a label like “It sounds like you feel that your house is undervalued.” That’s it, nothing more, nothing less. Add a short silence, so that their mind can process the label you’ve used. Most likely, they’ll further elaborate their feelings, and you diffuse the negative association.
Also, labels have a certain element of plausible deniability attached to them. For instance, if the home-owner (in the exchange above) is offended by your label, you can backtrack by stating “I just said that it sounds like you feel that your house is undervalued. I don’t think that you feel that way.”
Ok, so you’ve made your counterpart feel heard, as you’ve mirrored and labeled their statements to establish a bond between you two. Where do you take it from there?
Usually, negotiators are eager to hear a “yes” or a “no” to the offer that’s on the table. However, Chris Voss warns that pushing for a premature “yes” is counterproductive. There are three types of “yes” (counterfeit, confirmation, and commitment) and if you put too much pressure on the other side, you can get an insincere (or counterfeit) “yes” as a response.
You should aim to get a “that’s right,” instead. Voss singles out the moment when you get a “that’s right” as the pivotal moment in negotiations. It marks the best opportunity for making a breakthrough, because it signals that your counterpart is open to suggestions. The solution to the negotiation hinges on these three words.
But what if you get neither a “that’s right” nor “yes” or “no”?
If your non-judgmental approach, framed by mirrors and labels, doesn’t bear any fruit, you’ll need to give your counterpart an opportunity to own the solution. There is no point in pushing back by adopting a combative attitude. Give them the helm, so they themselves can find a solution.
Calibrated questions are the best recourse when you want to make it look like you are handing over control to the other side. These are open-ended questions starting with “how” and “what.” They serve to make your counterpart aware of the reason behind the standoff, without causing confrontation. Here’s a list of calibrated questions:
It might sound counter-intuitive, but it works. Don’t hesitate to hand over the talking stick to the other side. If you use your calibrated questions strategically, you’ll remain in control over the negotiation process. In the words of Chris Voss:
“We learned that negotiation was coaxing, not overcoming; co-opting, not defeating. Most importantly, we learned that successful negotiation involved getting your counterpart to do the work for you and suggest your solution himself. It involved giving him the illusion of control while you, in fact, were the one defining the conversation.”
Speaking of co-opting, let’s take a look at other tools that are also at your disposal to ensure a favorable outcome.
Here is where cognitive biases and similar techniques come into play. Cognitive biases, in and of themselves, aren’t good or bad. In fact, some of them help us learn faster and connect with others in a social setting. However, they can also help you twist the reality of your counterpart. We’ve selected three cognitive biases to illustrate this point:
The facts remain facts, what changes is what they mean to your counterpart. Chris Voss offers a handful of other negotiation techniques, including pivoting to non-monetary terms, offering a surprise gift, and establishing price range and using odd numbers (12 674 instead of 12 700).
When you put all these elements in their rightful place, they come together to make a master negotiator out of you.
What’s the real crux of Never Split the Difference? To reduce interactions between negotiation parties to the underlying motives in human behavior. Chris Voss reveals the syntax of the negotiation process to everyone who takes the time to study the book.
I guess no one thought about negotiation in terms of interpersonal grammar before him. But give this concept the benefit of the doubt.
In elementary school, we studied the grammar of the English language and our task was to identify parts of speech (subject, verb, object, etc.). Once you learn the different parts of speech, you know how to create a sentence.
Never Split The Difference teaches you how to identify the distinctive “parts of speech” in negotiations. You learn to view the exchange through the lens of tactical empathy, mirrors, labels, calibrated questions, and reality-bending gimmicks. These are all tactics and techniques in your arsenal. Before you know it, you have an understanding of the syntax of the negotiation process. And with a little bit of practice, you’ll master negotiations.
We are aware that there was a lot to take in. We won’t leave you hanging: join us in the next section, as we put the lessons from Never Split the Difference into practical real estate investing context.
This knowledge is relevant for all aspects of your life. It will not only help you close more deals from motivated seller leads, but it will also improve your relationship with friends and family (everyone has at least one belligerent uncle). And, of course, advanced negotiation skills will allow you to achieve more when networking with venture partners, contractors, private lenders, colleagues, and realtors.
We will cover building rapport, delivering a combination of negotiation techniques (negotiation syntax), and touch on other aspects relevant for real estate investors.
You are in a business in which people skills are crucial, so you are probably familiar with techniques for building rapport. And you use these techniques on a daily basis. Coaches out there teach how to purposefully sync up breathing patterns, perform vocal matching, or copy someone else’s gestures methodically – all of this with the intent to influence the behavior of your counterpart. It concerns the physical and it’s fairly easy to follow – they move, you move.
However, when people are exposed to mirroring words and labeling emotions for the first time, sometimes they find it difficult to choose the response that will help establish rapport. I mean, you utter some words, but are you using a mirror?
Let’s do a short thought exercise.
If you are the father of a 6-year-old daughter and she comes home crying and holding her bruised arm, how would you find out what happened to her?
When she says “I hit the pavement” you’ll ask “You hit the pavement?” When she says “Yes, I fell” you’ll ask her “You fell? How did that occur?” When she says “I was riding Hana’s bike and I hit the ground. I hate that stupid bike” you note “Ok, honey, it seems like you are upset. Let me get you a glass of water and you can tell me all about it.”
In this exchange, the father is using only mirrors and labels to gather information. So, when you are in a crisis and you have to quickly find out what happened, you’ll use mirrors and labels without even noticing. You have it in you, but, most of the time, when you talk, you are not focused on information gathering. You just need to start using it consciously and in a business setting instead of during an emergency. As Chris Voss would say – treat the exchange as a process of discovery.
It’s amazing how much information you can uncover by using mirrors and labels exclusively. You aren’t convinced? Then check out this recording of a training session organized by Chris Voss’s Black Swan Group. The exchange starts with the statement “I love basketball” – check it out to see where a group of trainees got after more than a dozen mirrors and labels.
It’s a skill and you need to practice to learn it.
When you meet a property owner you should be able to get from – “I like to ride motorbikes” to the ultimate reason they want to sell the house within 20 mirrors and labels. Roleplay mirroring with colleagues or family. Do what it takes to practice. It takes time to master it but once you do, you’ll enter negotiations with a completely different level of understanding about the whole process.
Let’s turn to negotiation syntax now.
We touched upon using negotiation tactics and techniques as if they are “parts of speech,” but we didn’t actually explain what that means. We will do that in this section.
The influence of these tactics and techniques over the negotiation comes in full force when they are combined to create a “sentence.“ Let’s explain.
You can break down the responses that were exchanged in the negotiation as if they are elements of a “big interpersonal sentence.” You look at what was said and you note: ok, this was a label, followed by tactical empathy, after that the negotiator used framing (cognitive bias), and closed off with a calibrated question.
So we get something like: label + tactical empathy + framing + calibrated question.
If you analyze the things that people say during negotiations long enough (don’t worry people like Chris Voss have done this for you), patterns will start to emerge. And as you note these patterns, you can identify which negotiation techniques are successful at counteracting specific chokepoints within the negotiation process.
Soon, you can determine a preset sequence of negotiation tactics, which, when delivered properly, diffuse the chokepoint without encountering resistance from your counterpart. Prime example of this, when it comes to real estate investing, is handling homeowner objections as a part of the selling process. “When a home seller says this you say that” type of scenario. Let’s consider one scenario to illustrate this.
House seller: “I’ve paid mortgage for this house for 20 years now. I built a house annex at the back. I won’t accept any offer below $120,000.”
Real estate investor: “It seems like you are proud of everything you did to keep this house over the years.”
House seller: “Of course I am. My wife and I drove a beat up Corvette for years so that we can afford to pay the mortgage.”
Real estate investor: “I get that. You should be proud, because it’s not easy to give your best, day in and day out, when you operate on a tight budget. But tell me, how did you come up with the price?
House seller: “It’s the original price at which I bought the house, plus the amount I invested to build the annex.”
Real estate investor: “I understand. However, before I came over here, I looked at other houses that have been sold in the last three months – houses with the same number of rooms that are located on your street – and the highest price, for that house around the corner, was $92,345. So the price of your house has to be in the same ballpark as these other houses.”
The investor used the following combination to bring the price in this negotiation to a reasonable range: label + tactical empathy + calibrated question + anchoring. Look back at the exchange and you’ll note it.
Of course, the exact combination will depend on the scenario and the objection you are trying to overcome. Each scenario calls for using different negotiation tactics. If the counterpart tries to derail the negotiations, you can throw in a series of calibrated questions followed by mirrors, labels, and tactical empathy, and in most cases, after several exchanges, you’ll bring them back on track.
Once you master the negotiation syntax it will come as second nature to you. You’ll be like a boxer who launches a combination of punches to open up the guard of their opponent in order to deliver a decisive punch. Or a chess player who envisions a combination of moves that lead their counterpart straight into zugzwang.
However, you also need to pay attention to your own behavior.
Chris Voss shares a number of other recommendations for improving your negotiation skills. We will close off by singling out two of them: nonverbal communication and strategic silence.
In Never Split the Difference, you can find a lot of references to the 7-38-55 rule of nonverbal communication. This is a rule that was outlined in Albert Mehrabian’s communications theory. In a nutshell, it posits that when two people talk, only 7% of the message is contained in what was said (the meaning of the actual words that are used). The tone of voice accounts for 38% of the message, and the rest (55%) is expressed through body language.
Keep this in mind when you try to deliver a combination of negotiation tactics or you try to build rapport. For instance, ending the sentence on a high note instead of keeping a flat tone throughout, allows you to assume the position of authority and to control the exchange. Jordan Belfort did this to sell stocks to people and it works. It’s what kindergarten teachers do when they need to control a room full of toddlers.
But what is not said, carries a lot of meaning during the exchange.
When you deliver a label or a mirror, you need to add a short silence – we already mentioned this in the summary. This is a crucial part of the exchange, because you need to let your counterpart process what you just said and wait for the effect to set in. It’s like adding a 5 seconds delay to what you say.
Often, real estate investors talk fast during negotiations. Maybe they want to get it over with as soon as possible, maybe their family is waiting for them to come home for supper, maybe they are in a hurry to process another seller’s lead. That’s all ok, but it doesn’t mean that you should blurt out a combination of negotiation tactics like you have to be elsewhere. Be present and give your counterpart the time they need to process your message.
A lot more can be said about the strategic use of silence, especially when it comes to naming a price, but that would be a whole different tangent.
Let’s wrap things up.
You, and every real estate investor for that matter, can significantly improve your negotiation skills if you:
It’s what allows you to master the interpersonal syntax of negotiations.
All that being said, you should be aware of one big drawback of using Never Split the Difference when it comes to excelling as a real estate investor. Let’s check it out.
Chris Voss spent decades in the FBI where he was involved in high-stake negotiations – the outcome of the exchange determined whether someone would live or not. So, in essence, he mastered hostage negotiation techniques and that’s what he shared in the book. While these are great because they save lives, they aren’t always applicable to business settings, as much as he can try to make it appear so.
This has to do with the interpersonal dynamics that is typical for interactions between law enforcement agents and kidnappers or terrorists. It all revolves around hostage and ransom. Both parties have a vested interest to keep the conversation going until they resolve the situation. The role of the hostage negotiator is to diffuse the situation without making any substantial concession, while the kidnapper has their own agenda (to collect ransom, to free someone from prison, etc.).
Both parties are fully vested and want to resolve the stand off to their benefit.
Your leads are not connected with you in this manner. Nothing binds them to continue talking to you – they can stop the interaction and sell their house to another investor. You don’t owe them anything either.
Same goes for negotiations with venture partners, contractors, and anyone else – you are free to say – if you don’t like my pitch, I’ll take my business elsewhere. It’s a legitimate option in real estate investing (and entrepreneurship in general), and it happens in personal relations every day, too. They simply shut down the communication channel.
It’s a move that limits your options – there is nothing you can do about it if the other side made the decision to go: no negotiation technique will get you out of that.
So, be aware that sometimes it’s not up to you. When you process house seller leads, you will also face rejection. They can (and sometimes will) walk away rendering your negotiation mastery useless.
And that’s ok. Recognize it for what it is, and continue to negotiate with someone who wants to do business with you.
Never Split the Difference offers great insights for real estate investors (and everyone else) who want to become better at negotiating. And it’s effective on so many levels. It works for those who’ve never bought anything other than groceries in their life and it works for real estate entrepreneurs who’ve been flipping houses for decades.
It allows you to learn a lot about negotiation, and you are likely to return to it more than once.
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