Teaching Real Estate Negotiation: How to Identify and Create Value

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Negotiation examples

How do you teach your students to identify and create value in real estate negotiations? 

Real estate negotiation can be difficult for both the buyer and the seller. Teaching real estate negotiation can involve value creation, distributive bargaining, as well as issue linkages. It is important for both buyers, sellers, and agents to identify ways to make an offer in a negotiation a win-win. That is, what can be offered that is easy for one party to give, but very valuable for the other party to receive? Teaching students to identify and create value in real estate negotiations can make a valuable difference in getting a win-win agreement.

The Teaching Negotiation Resource Center (TNRC) has developed a wide variety of negotiation simulations designed to teach real estate negotiation. Three of the TNRC’s best simulations for negotiating real estate are 67 Fishpond Lane, Bullard Houses, Bradford Development, and Hong Kong Property Deal. You can also discover step-by-step techniques for avoiding common business negotiation pitfalls when you download a copy of the FREE special report, Business Negotiation Strategies: How to Negotiate Better Business Deals, from the Program on Negotiation at Harvard Law School.

67 Fishpond Lane – Featured Simulation

This two-party, two hour, distributive and potentially integrative negotiation is between principals over the sale of a house. 67 Fish Pond Lane in Cambridge, MA was purchased five years ago for $95,000 by two lawyers. Since then, its value has at least doubled. The owners, expecting to stay for some time, kept the house in excellent condition and added several unique features, including an elegant high-tech aviary for exotic birds. The owners recently moved to California, however, and the house has been on the market for a month. Two graduating business school students are interested in purchasing the house. One or both of them plan to meet with one or both of the owners while the latter are in town for a few days to see if a sale can be arranged. Major lessons include:

  • The tendency to haggle is strong, and a variety of bargaining tactics can be used. Review can explore which tactics are effective under what circumstances, and why.
  • Many important concerns and legitimate criteria in the case are intangible and/or difficult to measure. This raises the question of how arguments can persuasively be turned into numbers.
  • Comparison of results also raises questions about what techniques, attitudes and tactics produce more competition and/or animosity? How does amicability correlate with pareto optimality of results?
  • A variety of questions are raised concerning the concept of BATNA. How does a party’s perception of its BATNA affect conduct in the negotiation? How should it? How can BATNAs be improved? When is it ethical to try to change the other side’s BATNA for the worse? When not? What are some ways of doing that?

Download a Teacher’s Package today.

Bullard Houses – Featured Simulation

This two hour, two-party, multi-issue real estate negotiation is between representatives of Downtown Realty, Inc. and Absentia, Ltd. Downtown Realty, Inc. owns the historic Bullard Houses, a set of 51 attached brownstones in the city of Gotham. The Houses, occupied for decades by the city’s wealthy elite, have fallen into disrepair and are currently occupied only by a few low-income families. Downtown Realty is eager to sell this property, and Absentia is confident it has an appealing offer. Watch this free video of the simulation in action:

Major lessons include:

  • Appraising your BATNA.
  • Confidentiality: under what circumstances, if any, can the attorney reveal information, and what other ways are there to avoid suspicion?
  • Information assessment: during the negotiations, while much information cannot be revealed, what can has important, probably unforeseen, but not obvious implications for the other side.

Download a Teacher’s Package today.

Bradford Development – Featured Simulation

This two hour, two-party, single-issue distributive negotiation is over a linkage payment that a developer must make to a city government. Bradford, an old New England industrial city, is experiencing an economic boom. The city has recently adopted a ‘linkage agreement’ policy, requiring developers to make once-off payments to the city to offset infrastructure and housing costs. Curry Corporation (‘Curry’) is the first developer to propose a major project under the new administration. After meeting with all the appropriate municipal agencies and citizen groups, the only major issue left unresolved in the proposed project is the appropriate size of the linkage payment that Curry should make to the city. Major lessons include:

  • Pre-negotiation analysis should include a realistic appraisal of one’s BATNA.
  • Distributive bargaining divides up a fixed pie, and is therefore inherently constant-sum. One party’s gain is another party’s loss.
  • Each party should explore the interests of the other side before making an offer. Making an offer before exploring the other side’s interests could anchor the bidding too high or too low, thereby minimizing one’s own potential gains.
  • When the negotiating parties are involved in an ongoing relationship, it is rarely (if ever) prudent to lie or misrepresent one’s interests.

Download a Teacher’s Package today.

Hong Kong Property Deal – Featured Simulation

This one hour, two-party, integrative negotiation is between a property owner and a neighboring business over the sale of two real estate parcels. The simulation is set in Hong Kong in 1996, just before the British returned Hong Kong to the People’s Republic of China. The Hong Kong Property Deal is a simple two-party negotiation that appears to have a single distributive issue (price), but contains several hidden issues that offer integrative opportunities. Major lessons include:

  • Bargaining range (both positive and negative bargaining range); (ZOPA).
  • First offers in a distributive negotiation: how and when to present a first offer.
  • Gathering information to determine the other party’s intentions and goals.
  • Managing information about our own intentions and goals.
  • Introduction to integrative strategy.

Download a Teacher’s Package today.

Take your training to the next level with the TNRC

The Teaching Negotiation Resource Center (TNRC) offers a wide range of effective teaching materials, including

Most TNRC materials are designed for educational purposes— for use in college classrooms or corporate training settings. TNRC cases and exercises help mediators and facilitators introduce their clients to a process or issue and help individuals who want to enhance their negotiation skills and knowledge.

Role-play simulations introduce participants to new negotiation and dispute resolution tools, techniques and strategies. Videos are also a helpful way of introducing viewers to key concepts, and TNRC books, case studies, and periodicals address the theory and practice of negotiation and conflict management.

Check out all that the TNRC has in store >> 

The Program on Negotiation at Harvard Law School
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