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 slide is at the heart of any negotiation this negotiation or any. Other dealmaking or dispute resolution negotiation. So let's start with just a reminder of what the confidential interests of the parties are. Here are the sellers confidential information and here are the elements of the buyers confidential information that we reviewed earlier. So let's start with the analysis for the sellers 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 you're answer. And 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 them, most likely, best on, based on sales price of the other house, based on tax assessment and stretch goal is even more fuzzier. Remember, you want to stretch goal, it is large but not so large that you lose credibility. So, you might want to try, 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 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 bad [INAUDIBLE] because you have no other, other buyers. So if this deal does no go through, then you're batting is a, is a bad one. That's why if you are Tracy, and if you can even get a $150,000, you can grab it. Because that enables you to put the uncle in a senior apartment. So that's the analysis from the seller's side. Now, what about the analysis from the buyer's side? Again, look at these facts, and if you're the buyer, what is your what is your reservation price, your most like, and your stretch goal? And here you can see your reservation price is $250,000. Your willing to pay up to that amount to buy the property. Your BATNA is buying another house on Main Street a well maintained house at a better location for $265,000. And then you would 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 SOPA? 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 this a cross cultural negotiation? I don't know the answer to that because it depends who you selected as your negotiation counterpart if 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 where the other side falls on each of these 10 dimensions, and then do a gap analysis. Look at where there's a gap between your style and the other side's 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, were there any ethical issues that concerned you from your side? And same question for Pat. Any ethical issues in this negotiation the concerned you. Well 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 convenience store might move in next door to the house. You think the buyer is buying the house for his family and 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 property. How do you feel about that? Would you disclose that to the seller? What standards would you use in making that decision? But we talked about the standards earlier in the course. 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 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 at principle in these negotiations, I'm not a secret agen. That would, that would be fraud, that would be a false representation. So that didn't appear here. However this, this would be the result in the, 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 often are specific statutes that require disclosure in a real estate contract when you know that there's a problem. But, 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 would create this high duty of trust and loyalty. And also, no evidence of unconscionability. Remember, unconscionability arises 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 the 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. And, it's probably better to select the standards now rather than waiting till 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 negotiation. Should I use an agent to negotiate for me? Well, this, 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 secret, 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 skyrocket. 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 we ask that question. 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, 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.
