We're now ready to look at the next element in planning your negotiation strategy which relates to how you should analyse a negotiation. This lies with the heart of any negotiation. This negotiation or any other deal making or dispute resolution negotiation. So let's start with just a reminder of what the confidential interest of the parties are. Here are the seller's confidential information and here are the elements of the buyer's confidential information that we reviewed earlier. So let's start with the analysis from the seller's side. Now, if you're the seller, if you're Tracy preparing for this negotiation, the very first question you always ask and always focus on, is what is my BATNA? Because BATNA is what gives you leverage. BATNA is what gives you power. So in preparing for this negotiation, you should have asked that as your initial question. And how did you answer that question? If you're the seller, if you're Tracy, what is your best alternative to a negotiated agreement? Think about that for a second. You might want to press pause. Write down your answer. Again that's the most important question. And then you would add the other elements of an analysis as we discussed. What's your reservation price? Looking at these facts. What is your reservation price and then what is your most likely price and what's your stretch goal, most likely isn't quite as obvious from these facts. Although you could construct a, most likely based on sales price on the other house, based on tax assessment, and stretch goal is even more fuzzier. Remember you want a stretch goal that is large, but not so large that you lose credibility. So you might want to try to draw out this analysis showing your BATNA, reservation price, most likely, and stretch goal and this is what it would look like. Your reservation price is 150, I've picked a random most likely of 160 and a stretch goal of 190. Your BATNA here is that the uncle, the elderly uncle who has health problems, would be stuck in a house, an old house that needs maintenance. And that's your banda. Because you have no other buyers. So if this deal does not go through, Then your badness is a bad one. That's why if you are Tracy and if you can even get $150,00 you can grab it. Because that enables you to put the uncle in a senior apartment. So, that's the analysis from the Seller side, now what about the analysis from the buyer side. Again look at these facts, and if you're the buyer what is your BATNA, what is your reservation price, your most likely, and your stretch goal? And here you can see your reservation price is $250,000, you're willing to pay up to that amount to buy the property. Your BATNA is buying another house on Main Street, a well maintained house in a better location for $265,000. And the you'd have to come up with some figures representing your most likely and your stretch goal. And so as the buyer, this is a depiction of your analysis and then the final question, very important question, what is the zopa? What is the zone of potential agreement? Looking at these two analyses, what's your conclusion? The deal can take place between what price and what price, and Remember from our earlier discussion it can take place between the reservation price of the seller, that's the lowest amount the seller will take, and the reservation price of the buyer, which is the highest price that the buyer is willing to pay. And so this would be the Zone of Potential Agreement. We have an especially large zone of potential agreement here. The two parties should be able to reach an agreement at least on price because of this large ZOPA. Okay next question in your preparation for a negotiation is, is this a cross cultural negotiation? I don't know the answer to that because it depends who you selected as your negotiation counterpart. If you selected somebody from another part of the world, then this becomes a relevant question. And as we discussed earlier, you'll want to use the assessment that we talked about and. What you want to do is to complete the assessment yourself. And then try to predict what the other side falls on each of these ten dimensions. And then do a gap analysis. Look at where there's a gap between your style and the other side style. And be prepared to address that gap during your negotiations. Next question, how should I handle ethical issues? Now think about this one for a second, if you were Tracy, are there any ethical issues that concerned you, from your side? And same question for Pat. Any ethical issues in this negotiation that concern you. So here are a couple of examples. Tracy, you think that the basement in the house might have a leak. Would you tell the buyer about this potential problem? Also You've heard rumors that a fast food restaurant or a convenience store might move in next door to the house. You think the buyer's buying the house for his family and that the value of the property might be reduced if it's next to a fast food restaurant. Do you tell the buyer about these rumors? From the buyer's perspective there's a big ethical question and that is you are acting as a secret agent. Tracy has no idea that you're representing a large company. You want to keep that secret so that you can increase the price of the price of the property. How do you feel about that? Would you disclose that to the seller? What standards would you use in making that decision? Well, we talked about the standards earlier in the course. And we said there are two categories of standards. One category is the list of law-based standards, and we looked at three of these. One is fraud. Did either side commit fraud by failing to disclose the information? Well, when you look at the definition of fraud, it is a false representation and neither side made a false representation, in other words Tracy didn't say to Pat well there's no problems with the basement. That might be considered fraud. And Pat didn't say to Tracy, by the way I don't represent a company, I don't represent a principle in these negotiations. I'm not a secret agent. That would be fraud. That would be false representation. So that didn't appear here. However, this would be the result in the United States, not necessarily true around the world, in some countries there might be a duty to disclose, let's say, a leaky basement. And even in the United States, there are often specific statutes that require disclosure in a real estate contract when you know that there's a problem, but under the general definition of fraud here, no fraud. There is no fiduciary duty, Pat and Tracy are dealing at arms length. There's no special relationship between. The seller and buyer that we create this high duty of trust and loyalty. and also, no evidence of unconscionability. Remember, unconscionability rises when there's an absence of choice. One party is a lot more powerful than the other. That's absent here and no evidence that the contract or the agreement that they might reach contains unreasonable terms. So probably when you do the, when you look at the legal standards. There are no problems. But you still have to decide beyond the law. whether you're going to make disclosure to the other side, and here's where the general ethical standards come into play. As I recommended earlier in the course, you might want to select one or more of these standards to use in guiding you through your future negotiations. It's probably better to select the standards now rather than waiting until you're in the middle of a negotiation when it becomes tougher to select an independent objective standard. Okay, so next question and the last question that relates to preparing for a negotiation, should I use an agent to negotiate for me? Well This question has already been answered. We know that the uncle is negotiating through agent Tracy and the company is negotiating through agent Pat and we also know that in this case Pat is a secret agent and the company wants to work through a secret agent because if the other side, if Tracy knows that the agent is representing a large multinational company, then the price of the real estate is going to sky rocket. So there are business considerations for using a secret agent. There's one key issue that arises in any contract involving agents. And as we discussed earlier this is the way business is conducted, through agents. So let me ask that questions, if you are, this goes back to one of our earlier slides, if you are Pat here representing the company, what's the very first question you ask in any negotiation before you go further? The very first question? This is a review question. And did you do this during your negotiation? The answer, as you may recall, is does the other side have authority? Now, if you look closely at Tracy's role. The answer to that question is probably, no. Tracy probably has authority to discuss the purchase with Pat, but not to actually sign a contract. And so, Because of that lack of authority then you technically do not have a contract. If you're unhappy with the results from your negotiation, you can continue negotiation for as long as you'd like because legally you would not have a deal given the lack of authority. So that concludes our look at the issues relating to preparing and planning your negotiation strategy, in this particular case. Let's now move on to the tactics that you can use during the face to face negotiations.
