We're now ready to begin the last part of the course. Very important part of the course, because this is a chance for you to apply what you've learned in the course. And as we debrief the negotiation that you've just concluded The House on Elm Street. We'll review the concepts covered throughout the course. So before you proceed further, make sure that you have completed the negotiation. I prepped this at the end of unit four. As I mentioned then you should limit your negotiation to 30 minutes, you should pick a negotiation partner, and if you're negotiating with somebody who has not taken the course, please give them a quick review. Of the kinds of things they should focus on in preparing for negotiation and the tactics that they should use during a negotiation. This will not only help them do better in the negotiation, but it will help you internalize the material. After our debrief. You will have a chance to assess your performance, but please do not complete the assessment until we're finished with the debrief that will have a basis for the assessment. So assuming that you have completed the negotiation, again do not proceed further unless you completed the negotiations otherwise you'll miss a lot of valuable learning from this session. So let's start with the common information, in the negotiation roles. And here again, as mentioned in unit four, the common information to both Tracy and Pat is that they are negotiating for the sale of a beautiful old Victorian house on a large lot in a residential neighborhood. The house needs expensive repairs. The seller who happens to be the uncle of Tracy and the neighbors have a strong interest in preserving both the house and the neighborhood. The last sale in the neighborhood took place six years ago when a similar house was sold for 135,000. That house, however, was well maintained. Since that time, property values have appreciated considerably. And the property has a tax assessment of 140,000, but tax assessments are usually well below market value. So that's the information that both, both of you had, whether you were in the Tracy role or the Pat role. However, each of you also had some confidential information. So let's review the confidential information. Here is the seller's con, confidential information, Tracy's information. The seller is elderly and has health problems. The seller needs at least 150,000. So that he can buy a senior apartment. Tracy wants the house, but can't afford it. The seller, the uncle, wants to keep possession of the house for three months in order to clean out the house. There are no other purchasers and the seller wants at least a 15% down payment. Wants a piece of tile artwork from the kitchen and a promise not to install plastic siding in the house. The seller feels strongly about preserving the character of the house. 'Kay here's the buyer's confidential information. The buyer is an Indian based company, which is building its US headquarters. The buyer will pay up to 250,000 and can pay cash. Pat is representing the buyer as a secret agent. Pat works for a local bank, doesn't make a lot of money and would love a job offer from this company, so Pat has a lot of incentive to do a good job. The company needs possession in one month. If the company is unsuccessful, it will buy another house on Main Street for 265,000. Now note that this is more than what it's willing to pay for the uncle's house, but this house is on Main Street, it's in a better location, and it's also well maintained. The company needs at least one third for a parking lot, so its plans are tear down the house, build a parking lot, and add attractive landscaping. And, the company by the way is in the business of building senior apartments, but, sales are slow right now. Now, I, I, after I wrote this negotiation initially and used it a few times in my classes, the World Bank asked for permission to use it in some of their training. And here are the results when the world bank used this exercise in Vienna. The range of results was a price of a low range of 158,00 to a high range of 220,000. So very significant spread. The median price was 165,000 and the average price was 182,000. So these results from the world bank generally parallel the results in my negotiations, courses when I teach in Ann Harbour or in other parts of the world. Sometimes when I tried in Italy, a few of the participants in my course come back and they say, well, we were successful. This seller received $140,000 for the house. And I say, well, wait a minute the sellers role says you have to obtain 150,000. And the participants say, well yes, we did obtain 150,000. I said, well, but you just told me you got 140,000 for the house. Yes, that's true. Well, I go back and forth and finally I discovered that the official sales price was 140 thousand and the rest was paid under the table. And this is something that's done not only in Italy, it's done around the world, where, people try to sell property for close to the tax assessment, so that it doesn't increase taxes, and figure out other ways to pay, pay the rest. I'm not saying that this is an ethical practice. I'm just saying that it is done around the world. So with that background on the facts, let's now go through the elements that we've talked about in the course and apply them to this negotiation. So, element number one is planning your negotiation strategy. And you'll remember, we looked at various questions you should ask when planning your negotiation strategy. Very important preliminary question is should I negotiate at all? And in this case we have an obvious answer. You don't have a choice, because that's part of the exercise. But if you did have a choice, as we discussed earlier. Then you'd have to consider your feelings about the negotiation as well as the potential risks and rewards, and we looked at some case examples of how that works. Your next question is a very important one. To always ask near the beginning of any preparation for a negotiation. Is this a position-based negotiation or an interest-based negotiation? What do you think in this case? In this case, we basically have a buyer who's bringing a large bag of money into the negotiation. The bag of money contains 250,000, and fundamentally the question is how much of that money goes to the seller and how much does the buyer get to keep? So we talked about the fundamental differences between the two basic types of negotiation. We have the dividing the pizza negotiation and enlarging the pizza. We looked at all the words associated with them. Buying the pizza is called, by academics, distributive versus integrative, cooperative versus competitive, win/lose versus win/win, zero sum, non-zero sum. Adversarial problem-solving position-based interest-based and claiming value versus creating value. We're not going to go through those again in detail but the fundamental question here is when you did your preparation for negotiation, what was your bottom line conclusion? Is this basically a dividing the pizza type negotiation, or wh, where the emphasis is a little more on positional bargaining, or is it in building a larger pizza type negotiation where the interests of the parties are more important? If you have, if you didn't answer that question during your preparation, please answer it now. Does this basically fall on the left hand side, or the right hand side? So write down your answer and we'll return to this later in our debrief of this negotiation, but also remember that. Even where it appears to be a position-based negotiation, you should always search for underlying interests in an attempt to build a larger pie. Where as true positional negotiation you're probably not going to spend as much time searching for interests because it might be futile. But at least try to find those interests. And also remember that even with an interest based negotiation, after you build the larger pie, you're still going to return to positional bargaining. 'Kay, next question, are you trying to resolve a dispute with this negotiation, or make a deal? We distinguished the two by looking at the janis like quality of negotiations dispute resolution type negotiations tend to be more position based deal making more interest based and there are other difference as well. We don't have to worry about that too much here because clearly this is a deal making negotiation they're not trying to resolve a dispute. So, that covers several key questions that you should ask in preparing for a negotiation. And in the next segment we'll look at the remaining questions.
