Dr. Klatt was a strapping San Diego City lifeguard, excellent athlete, competitive surfer, ambidextrous tennis player, and drag racing champion before an accident robbed him of his sight. That was an event that could have broken the spirit of lesser men. Instead, Dr. Klatt turned his physical short-coming into a vector for professional excellence.
He went on to sell a portfolio of property that has a present collective value that is easily worth hundreds of millions of dollars, and he did it all without ever laying sight upon one single inch of the property that he sold.
This book is his method.
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Deal MakerLessons From the Blind Master Negotiator
By Joseph Dean Klatt Michael M. Forbes
AuthorHouseCopyright © 2009 Joseph Dean Klatt, PhD & Michael M. Forbes, MBA
All right reserved.
Chapter OneWhat follows below is a blend of mediation and real world negotiation. The kernel of it was originally published on Mediate.com under the title "Slice and Dice - A Real Estate Broker Shares His Technique." That piece of writing was noticed and included in publications and courses across the country by professional mediation groups and by real estate schools. Its second iteration, "A Sharper Slice and Dice - A Broker Shares His Technique," was expanded and published on KlattRealty.com. This is the third iteration of the "Slice and Dice" technique and we begin the book with it in order to launch the reader directly into something novel and of great utility. As the reader will soon see, the concepts contained herein are used again and again. We invite you to read on with a willingness to incorporate new information and the desire to stretch your thinking.
Razor Slice & Dice - A Negotiator Shares His Technique
Reflecting upon the disputes I have mediated, certain commonalities are present through the array of cases. In all of them, whether private commercial mediations or court mediations, I utilized the Commercial Mediation Model with its Four Functional stages:
The Caucuses (as many as it took)
In each case the power of the Mediation Model operated as a dynamic force. I searched for other commonalities and spotted something unique to my own particular style. I was using a real estate negotiation technique I had developed many years ago to identify areas of agreement, non-disagreement, non-agreement, and disagreement between the parties.
These concepts of agreement, non-disagreement, non-agreement and disagreement constitute four distinct categories. Whereas most books of this nature limit responses to a point of negotiation to agreement, disagreement, or rejection, my method is a more finely articulated way of disseminating points of negotiation and responding to them. I humbly offer my "Slice and Dice" to the negotiation and the mediation communities. It's a technique that cuts across a broad range of negotiations and has particular application to mediation. I find it becomes a powerful tool when used skillfully.
Slice & Dice Terms Defined
To slice and dice is to break a body of information down into smaller parts and to examine it from different viewpoints so that it is more easily understood. In data analysis, the term means that a body of data has been systematically reduced into smaller parts or views that yield more information. In everyday language, "slice and dice" means the presentation of information in a variety of different and useful ways.
Agreement: the conscious acceptance of a specific provision contained in an offer.
Non-Disagreement: the conscious withholding of disapproval of a specific provision contained in an offer.
Non-Agreement: the conscious withholding of approval of a specific provision contained in an offer.
Disagreement: the conscious rejection of a specific provision contained in an offer.
The Slice & Dice Process
Generally speaking, negotiations for the sale and purchase of real estate follow this sequence:
1. A property is listed for sale with a broker specifying the price and terms.
2. An offer is submitted on behalf of a potential buyer.
3. The offer is presented to the seller.
4. The offer is accepted, rejected, counter-offered, or the seller may not respond at all, effectively "pocket vetoing" the offer. (There can be and often are multiple counter offers made between the seller and buyer.)
5. An agreement is reached which is acceptable to both seller and buyer, or no agreement is reached and negotiations cease.
The slicing and dicing begins when a written offer is received and a "good faith presentation" is made to the seller. In California, the most frequently used standard offer to purchase form has 32 sections and most sections contain subsections; the explanation of which I will spare the reader, as an understanding of the form is not necessary for these purposes. Suffice it that, a good faith presentation occurs when an offer is presented to a seller by an agent who intends to honestly and accurately portray the merits of the bid.
When I present an offer, I systematically discuss each section with the seller. As I discuss the offer item by item, I listen very carefully to the seller's responses. Take note that I use the word "listen." The socialization process teaches people to disguise their facial expressions in negotiations. It is very difficult to disguise one's voice. I carefully listen to tone of voice, rate of speech, and nervous tendencies such as clearing the throat, word choice, tempo, timbre and timing. I take careful note of silences. There are silences due to hesitation, silences due to reflection, silences due to an effort to control anger, elation, frustration, joy, nervousness, and rage. Filled pauses, instances in which a person will fill what would otherwise be silence with slang sounds, knee-jerk phrases, or words such as "uh," "um," "you know," or "well, er," indicate that a person lacks certainty and the strength of conviction in their negotiating position. Non-verbal sounds such as shuffling feet often indicate nervousness. These auditory observations allow me to mentally evaluate the level of response and thereby assist me to move the negotiations forward more precisely than I would be otherwise.
Page one of the standard offer to purchase form deals with many things, foremost of which are:
The Buyer's Deposit
The Amount of Financing required
The Cash Balance of Purchase Price to be placed into escrow prior to close
Escrow Closing Date
Disclosures required by law
Time frames for delivery to buyer, approval, or disapproval and return to seller
Transfer of Possession
Pest Control Operator
Allocation of costs (These items include escrow, title, pest control, inspection, and minimum government retrofit charges.)
The process of categorizing each item in the offer is the "slice." For each item I ask, "Is that acceptable?" If the seller agrees, I confirm that fact and mentally note page one as agreement or, if the seller is not in agreement with the offer, I mentally note the seller's response as non-disagreement, non-agreement, or disagreement. My goal is to identify for the seller the key areas of disagreement or non-agreement so that we can focus on those specific areas. Careful attention to the level of response is very helpful in moving the negotiation process forward.
Price is nearly always the foremost concern of a seller. Imagine a seller says, "The price is too low! What do they think; we're crazy?" I would interpret that as a point of disagreement. I'd calmly say, "Let's move on and come back to that one." I'd treat a response where the seller did not indicate his or her opinion as either non-disagreement or non-agreement. If the price being offered were acceptable to the seller, I would actively confirm that fact with the seller until I attained a response such as, "The purchase price is acceptable. Let's go through the rest of the offer."
A potential buyer will often want a purchase completed by a certain date; while a seller may indicate other dates are preferable. A buyer may propose a 50/50 normal escrow by any reliable buyer's choice to be closed in 60 days. (Use of shorthand codes is common in the real estate profession. A few common terms of art used in Southern California include "50/50 normal escrow," "any reliable," "any reliable seller's choice," and "any reliable buyer's choice.") Such terms may not be to the seller's liking. I would note the discrepancy when it happens and then say, "We will counter that point."
The entire offer is presented in this systematic way. I tick through each item and categorize the responses in my mind. (The reader, of course, will most likely want to take notes.) For instance, with transfer of possession, I will tell the seller which date would be preferred by a potential buyer and then wait for a response. If one is forthcoming, I place it into one of the four categories. I generally know that if there is no response there is either non-disagreement or non-agreement.
We all know what agreement sounds like. Disagreement is not difficult to detect, either. You may be wondering at this point, however, how to know the difference between non-disagreement and non-agreement. Non- disagreement can be characterized as a "Whatever Attitude." A buyer may want a 60-day escrow; which could produce a response by the seller like, "That's fine." That's non-disagreement. Other non-disagreement sounds include words like "sure" or "uh-huh." Conversely, non-agreement may elicit phrases such as "Well, we'll see about that," or, "I don't think so." You may hear "um," or "uh," or "unh-uh," when dealing with non- agreement.
Page two of the standard offer to purchase contains more entries made by the offeror (party making the offer) or his agent. If the second page is completed as I would complete it, I make a mental note to simplify the presentation. If there are any variations, I point them out as I review the second page with the seller. This is usually a very brief process.
After the good faith presentation is made, I review the points of agreement, non-disagreement, non-agreement, and disagreement with the seller. It is important for the agent, negotiator, or mediator to be cognizant of when a clause falls into the categories of non-disagreement and non-agreement. Why? It's important because in negotiations, as in the larger business world, decisions are made at the margins. The non-disagreement and non- agreement categories drive much of the strategy for how to respond to an offer in the "dice" portion of my slice and dice technique.
The analysis following the good faith presentation of an offer is the dice. Analysis is a word that is often used when someone is interpreting a body of information. For instance, The Wall Street Journal or The New York Times will offer "News Analysis" when an editorialist is giving an opinion. My use of the word analysis in this context, however, means to strategize as well as to interpret.
In the "dice":
Areas of agreement are confirmed with the seller, and areas of "Other Than Agreement" are discussed further to establish what the seller's negotiating position is or should be.
Items classified as areas of non-disagreement are further refined until the proper strategic response is formulated.
It may be that the seller has no firm conception of how to respond to items of non-agreement, in which case I will help examine them until a position is established.
Items of disagreement are left for later discussion.
Items in "Other Than Agreement" drive the holistic strategy that determines how to respond to an offer. They are the margins for negotiation. It is upon these pivot points that the successful agreement is reached. Each item in the "Other Than Agreement" category is a chip that can be hoarded or given away.
For example, a potential buyer may suggest a certain pest control operator and ask that the seller pay the cost of the service. The seller may at first find this objectionable in a way categorized as "Non-Agreement." Experienced real estate brokers like myself are able to procure such inspections for free. This is an example of a chip that can be given away at essentially no cost, but such things should never be given away freely. Never give away something for nothing when negotiating.
Another example: A potential buyer may wish to close escrow in 60 days in order to have enough time to arrange for the financing. This may impress upon the seller an attitude of non-disagreement. Sellers who are not pressed for time usually don't care too terribly much about 30, 45, or 60 days for escrow; so long as the escrow closes. Again, here is a chip that can be traded.
A seller may still have issues in the "Other Than Agreement" category even after discussing each point a second time. Most times there are fewer items in the "Non-Disagreement" category. Why fewer items in this category? This is because many times the seller will be indifferent about the selection of a particular company to perform services like escrow, title, pest control, or building inspection. Still, each item represents a chip that can be held longer or given away in the interests of the bigger picture.
Making a deal come together requires an overall sense of what is worth making particular and what can be sloughed off in the interest of reaching an agreement. I devote sufficient time and care to each issue in the slice until, like a dealer at a poker table, I know where to stack the chips. More than this, though, I don't simply rake chips to one side of a negotiation or to the other. I am helping my client perceive value and navigate a path to reach the desired outcome. I am not just the dealer spreading chips. I am the dealmaker who helps my client or customer know when to toss a chip in the pot and when to hold one in reserve. Overall strategy prompts these decisions and, in this way, a fifth category is generated.
The fifth category is "Items to be Counter Offered." If the process results in very little to counter, I point that fact out to the seller. For example, "What we are really looking at here is the home warranty and whether the escrow period will be 45 days, which is your preference, or 60 days which is the buyer's preference. As close as you are to an agreement here, is it worth fussing over a $400 home warranty and whether the escrow is 45 or 60 days?" I wait for the reply. Stated objectively, the seller's choices are simplified. As their agent, I must allow them to make the final decision. If they still wish to make a counter offer, I write it with them.
Thus endeth the lesson.
Chapter TwoHow Not to Negotiate
The following story is about how not to conduct one's affairs when trying to put a deal together; though all the actions taken by both sides may seem perfectly legitimate. We tell it now to serve as an example of what not to do in a negotiation. The story that follows can act as a yardstick by which to measure the amount you have learned by the end of this book. You may want to come back and read this story again (and we hope you do) to see if you can spot opportunities lost, mistakes made, and time squandered. Nothing you are about to read involves anything illegal. There is not even any outright deception. Everyone in this story is just trying to make a buck, get along as best they can, and live to see another day. There are no miscreants or monsters involved. There are no thieves or rogues. You will find, instead, an average buyer and a seller represented by run-of-the-mill agents who can't get out of their own ways.
"Negotiation Train Wreck"
Winter never truly visits San Diego. The dog days of August give way to Indian summer and then a six-month temperate season relieved at intervals by hot, dry Santa Ana winds. The Santa Ana begin as a rumor: a single gust that stirs a high tree branch late at night and then relinquishes it to stillness for an hour or more. When they exert themselves in earnest, the winds ebb and gust as low pressure at the coast invites hot air down from the high Sonora. Insomniacs and night owls are lulled to sleep by wind chimes in the dark. Residents wake on Santa Ana mornings to unlimited visibility and the debris of a sub-tropical paradise littering their path to work: palm fronds on sidewalks, overturned potted plants, and lawn clippings blown to the seaward side of streets. In this way the Southern Californian revisits summer a half dozen times between fall and the onset of the marine layer that heralds again the approach of sustained heat.
It is better to say that we have no winter in Southern California. Residents in other parts of the country say that because of this we are soft. It may be so. Historians and philosophers often posit that colder temperatures make tougher men; and the Mediterranean aspect of the Golden State's climes ask little of us. We may be soft when it comes to the weather, but real estate is a game played for keeps where we come from; and it is a game that nearly everyone plays. Cabbies in New York are conversant with stock prices. The counter person at a liquor store in Silicon Valley can tell you where to find venture capital. In San Diego, though, everybody has a real estate license. It's toothy smiles, sharp elbows, and long knives in this arena. Real estate professionals need wisdom, patience, and preparation in negotiations to put food on the table.
Excerpted from Deal Maker by Joseph Dean Klatt Michael M. Forbes Copyright © 2009 by Joseph Dean Klatt, PhD & Michael M. Forbes, MBA. Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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Table of Contents
Chapter 1: Razor Slice & Dice - A Negotiator Shares His Technique....................1
Chapter 2: How Not to Negotiate - "Negotiation Train Wreck"....................9
Chapter 3: Interview With the Blind Master....................33
Chapter 4: Keeping Track....................51
Chapter 5: BATNA, WLATNA, WATNA, MLATNA - "The Lookout Point Negotiation"....................57
Chapter 6: Anchors - Find Them & Move Them....................99
Chapter 7: The Power Based Approach - "Wilson & Graffy Negotiation"....................105
Chapter 8: The Rights Based Approach - "The Klatt Realty Sign"....................123
Chapter 9: The Interest Based Approach - "The Peaceful Valley Story"....................133
Chapter 10: The Combination Approach - "Pistol Packin' Paperboy"....................149
Chapter 11: The Stick-it-to-Them-Gently Approach....................157
"The X Gold Card Story"....................158
"The Assassination Suit"....................160
Chapter 12: Going Dark....................171
Chapter 13: Integrative Bargaining - "The Scooter Bunny Story"....................187
Chapter 14: Negotiating Over the Difference....................193
Chapter 15: The Master's Tools....................213
The Power of Calm....................215
The Power of Silence....................217
Good News/Bad News....................220
Good Cop, BadCop....................221
Say What You Mean & Mean What You Say....................222
Pumping Them Oxygen....................223
The Power of Nice....................231
Chapter 16: The Personality Trap....................235
Chapter 17: Negotiation Fatigue....................251
Chapter 18: Speed Bump Words in Negotiation....................261
Chapter 19: California Judicial Proceedings - Code Blue....................265
Chapter 20: Drilldown - A Mediator's Technique....................269
Chapter 21: Science & Mediation....................275
Chapter 22: You Have to A-S-K for an Offer to G-E-T a Settlement....................285
Chapter 23: L.U.C.K.Y (Listen, Understand, Confirm, Knowledge & You Will Be the Lucky Person to Negotiate an Agreement)....................289
Chapter 24: "The Cat's on the Roof"....................295
Chapter 25: Leave Strong - "The Fishing Story"....................305
Chapter 26: "Yeah, Dad, You Treated Them Like Human Beings"....................309
Chapter 27: Scotching....................323
Chapter 28: "You Can Write an Offer on the Back of a Safeway Shopping Bag"....................333
Chapter 29: Aikido Affirmatives....................339
Chapter 30: "The Aloha Kid & The Puma Motor Coach Story"....................345
Appendix A: Negotiation Quotes....................361
Appendix B: Answers to Chapter 5....................367
Appendix C: Answer to Chapter 21....................371
Appendix D: Lorane Abstract....................373
About the Author....................389
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