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If you have ever read the book Getting To Yes by Roger Fisher and William Ury, or a number of other books on negotiations, you would know that BATNA stands for Best Alternative to a Negotiated Agreement. Developing your BATNA, or knowing your BATNA, before going into negotiations will greatly increase you chance of achieving favorable terms in a negotiation. So, what is your BATNA?

Whether you know it or not you have a BATNA. Your BATNA may not be that attractive. It could be as little as going back to the way life was prior to you receiving an offer or starting negotiations. Again, not very attractive, but it is an alternative. On the other hand, your BATNA could be very attractive, such as multiple offers with similar terms. In this situation you feel confident that if the offer you are negotiating does not work out you at least have another one that may.

Consider this example:

You are a home seller and your house is listed for $165,000. After spending 100 days on the market a buyer decides to do you a favor and make an offer of $135,000. Now clearly there is a price difference there that may not be conducive to a "Meeting of the Minds." The buyer, assuming your desperation do the the number of days on the market, feels that this is a reasonable offer. You, on the other hand, may feel differently. But what is your alternative?

Lets say you owe $135,000 on the home so, if the buyer is unwilling to come up on his offer and you accept, that would leave you at break even, minus the closing cost you may have to pay which might put you in the negative a bit. That doesn't sound like a very good deal to me. So what are your options?

Lets say these are options that you have already considered:

1. Rent to your sister for a year for $1000/mo, which basically covers the PITI, in hopes that the market will be more favorable to you after that year.
2. Keep it on the market in hopes of a better offer.
3. Let the home go into foreclosure and walk away.

Obviously numbers 1 & 2 are better than #3, but these are all alternatives. And these alternatives my be what influences your opinion of how good the offer of $135,000 is on you home.

You can see how these alternatives to the above example may put power in the buyers driver seat. But lets say we have a fourth option, which is, you stay in the house and take it off the market. You decide that you really don't have to move, you were only wanting to sell if you got the full asking price. Now we have just shifted all of the negotiating power to you. Feels good doesn't it.

You can see how having a good BATNA can help increase your chances of getting what you want in a negotiation. But be aware that the buyer will have a BATNA as well. You should always prepare before going into negotiations. Knowing what you want as well as your options if an agreement is not reached will greatly strengthen your position and help you reach favorable terms.

“Or suppose a king is about to go to war against another king. Will he not first sit down and consider whether he is able with ten thousand men to oppose the one coming against him with twenty thousand?" Luke 14:31-32

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Comment by Brian Kurlychek on April 2, 2009 at 3:31pm
Good post. I might add that another alternative might be to explain the situation that you can't get out of it for less than break even, or try to negotiate a short sale. These would be two options that would at least help to avoid foreclosure. As you said, the buyer is going to have his own BATNA and the risks must be assessed against losing the offer.

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