Final Paper
Consider a real life bargaining and negotiation situation that involves two parties and the multiple issues to be negotiated that has already occurred, currently in progress, or will occur in the near future in your personal life or at work. Be sure to address the following:
- Describe the situation and negotiation environment.
- Identify the parties (e.g., yourself, the persons on your side, and/or the opposing parties) including the bargaining positions.
- Present the type of third party intervention and procedures if required, (e.g., arbitration or mediation).
- Explain how the Best Alternative to a Negotiated Agreement (BATNA) is derived.
- Evaluate the theoretical models, methods, sources of power, and analytical procedures required to be utilized in the negotiation process.
- Examine the mechanics of the procedures in terms of framing, packaging, use of questions, and types of proposals.
- Assess the strategies utilized and the results achieved and/or anticipated in the settlement.
Negotiation, Bargaining and Conflict Management
Introduction
Negotiation, bargaining and conflict management are inseparable processes involved in buying and selling of homes in the real estate sector. Conflicts are inevitable facts of life. When conflicts occur, the parties involved must find creative ways to find solutions. The negotiation process provides conflicting parties with an avenue to resolve disputes. Nonetheless, the negotiation process is an intricate and complex process. Negotiations may involve two individuals, while others may involve groups of individuals with varied interests. At other times, negotiation may involve organizations. When negotiation involves many individuals, the negotiation process becomes more complex, and hence the high likelihood that the parties may be unable to reach solutions. The negotiation process may benefit either one party or both. This depends on the theoretical models utilized by the negotiators during the process. This paper examines the negotiation, bargaining, and conflict management in residential home purchasing situation that results to a dispute.
The Situation and Negotiation Environment
The situation involves the purchase of a single-family housing unit with the help of a real estate broker. The single-family unit is under sale by the present owner who is scheduled to relocate overseas in two months’ time. The role of the real estate broker is to fill the knowledge gap that one has pertaining to real estate market. It is worth noting that a number of complexities characterize the real estate market specifically in relation to residential houses. For instance, buyers face high transaction costs, lack of key information, heterogeneous product, and infrequent market transactions (Mats, 2008). All these complexities make it difficult for a consumer to make the right purchase decision. Real estate brokers are able to gain economies of scale in information gathering and transaction costs due to the high volume of transactions they make.
The negotiation environment will mostly involve the single-family unit available for sale. This will help in learning more about the neighborhood where the house is located. It is important to establish a number of characteristics regarding the neighborhood. Safety is one of the greatest considerations while purchasing a residential unit. By visiting the area a number of times, it is possible to establish the general safety level of the area. Another important consideration is the quality of social amenities in the area, for instance, schools, churches, and hospitals within the area (Mats, 2008). Holding negotiation within the area can enable the buyer to know more about the area in terms of demand for housing units in the area, and whether residents are moving out in larger number than usual. This could provide useful insights on the general attractiveness of the area.
Identify the Parties including the Bargaining Positions
There are a number of key parties involved in the bargaining process. These include the current homeowner, thee real estate broker, home inspector, Title Company and I. Although it is not mandatory to use a real agent broker in the process, I have opted to use one since he will be useful in helping with the transactions and in making the right decision. A real estate broker can provide an array of services that are critical in the home buying process. A real estate broker may be able to provide information about the neighborhood such as the kind of schools available and the security level. The broker can provide valuable information on the house values, insurance details, municipal services, utility costs, and taxes that apply (Kasich & Porter, 2014). The home inspector is on my side. The role of the home inspector is to provide a professional opinion concerning the physical condition of the house and the physical components.
The Title Company will be on my side. The role of the Title Company is to scrutinize public documents and ensure that the property is legally transferrable (Kasich & Porter, 2014). The Title Company does this by establishing the legal owner of the house and determining whether there are any legal constraints to selling the house. The opposing party is the current homeowner who has considered selling the house. The homeowner seeks to sell the property at the highest possible price. The homeowner has not contracted any real estate agent. There are a number of bargaining positions to consider while purchasing a home. The bargaining positions under consideration include size of the property, price, location, social amenities, and property design. A homebuyer should weigh these basic considerations before making a purchase decision.
Type of Third Party Intervention and Procedures
Disputes may arise during the purchasing process. When disputes arise, it is important to involve mediation and arbitration in order to resolve them. When a disagreement arises, mediation is often the first procedure that attempt to resolve the dispute. Mediation involves the effort to have the parties to come to an agreement mutually (Arizona Association of Realtors, n.d). Mediation generally involves an effort to reach a settlement without going to court or going through the arbitration process. If the mediation process fails, any of the parties involved in the agreement (owner, buyer, or real estate broker) may file for arbitration. Arbitration involves presenting the dispute or disagreement to a neutral party, which holds the power to make a binding solution. Arbitration is a private arrangement that ensures settling of disputes outside the court system. The major benefits of arbitration are less bureaucratic procedures and reduced costs of dispute settlement.
Parties having disagreements may result to arbitration when mediation fails. As such, arbitration is used as last resort when other measures to resolve a dispute fail. Parties involved in the dispute must agree to an arbitrator. The American Arbitration Association moderates the arbitration process for various parties involved in disagreements in the U.S. (Arizona Association of Realtors, n.d). The last type of third party intervention is legal litigation. This is only applicable when all other means to resolve the disputes arising from the purchase of the property fail. Litigation involves filing a dispute with the public court system. This option may be lengthy and expensive. As such, the dispute resolution will only be applicable when all other measures fail. The public court system is a tedious process that may take years before the court issues a verdict. In case of a dispute, the parties involved will avoid the method through all means necessary.
Best Alternative to a Negotiated Agreement
The Best Alternative to a Negotiated Agreement (BATNA) refers to the best alternative solution that a negotiator may opt for in case the ongoing negotiation process fails. The BATNA does not take into consideration the negotiation parameters previously applied during the negotiation. In addition, a BATNA solution must be realistic to the dispute in question. The parties under negotiation should determine the BATNA prior to the onset of the negotiation (Berlin & Lexa, 2007). The negotiator should determine the value of each alternative from both sides. In order to achieve an effective negotiation, the parties involved must thoroughly prepare by examining the reservation points, target and suitable alternatives to the BATNA. There are two key elements present in a Best Alternative to a Negotiated Agreement. These include target value and the reservation point.
The target value represents the most favorable outcome that any of the parties have during a negotiation. Reservation point refers to the minimum a negotiator may receive or accept or else quit the negotiation (Berlin & Lexa, 2007). Individuals may follow various steps in establishing a BATNA. The first step is preparation for a negotiation. In the preparation stage, an individual should establish a favorable BATNA prior to reaching the negotiation stage. The negotiation team should conduct some research or gather data in order to determine the values of the various alternatives (Berlin & Lexa, 2007). For instance, from the case scenario, the negotiators should establish the average rental price of a similar house. The negotiators should also be aware of the financial situation of the buyer in order to establish the maximum amount they may allocate on renting if the deal goes wrong. An important aspect of good negotiators is the ability to evaluate the different parameters involving the opposing side.
The second step involves prioritizing issues. In this step, the negotiators identify the pertinent issues and the ones that are of little significance (Berlin, 2008). The third step involves analyzing the power one yields in the negotiation table. Power refers to the influence that one party yields over another during a negotiation. An individual may draw power from various sources. For instance if there are few buyers expressing their interest on the property, the buyer may have power over the seller. Conversely, not all willing buyers may afford the price of the unit. The pricing may be high thus locking out a great number of potential buyers. The fourth step is to focus on the interests of the negotiators. Interests represent the key goals of the entire negotiation (Berlin & Lexa, 2007). The negotiators should focus on interests as opposed to positions. Positions refer to the various stances a negotiating party may take before reaching a conclusion. The last step is anchoring, which entails making the first offer during the negotiation (Berlin, 2008). The first offer greatly determines the outcome.
Theoretical models, methods, sources of power, & analytical procedures required
Negotiation is a complex process, which may involve two individuals or even organizational entities. The negotiation process utilizes a number of theoretical models. Common theoretical models include the distributive models, integrative models, and interest-based negotiation models. The distributive model is also known as the competitive model or the hard negotiation model. Three assumptions characterized the distributive model. In the first assumption, the parties in a negotiation process take adversarial positions to each other (Carrell & Heavrin, 2008). The second assumption is that there exists a “fixed pie” of resources, which is shared among the parties in the negotiation. The third assumption is that the parties involved in the negotiation have no past and no promise of future relationship. As such, each party tries to maximize its outcomes out of the negotiation process. In negotiations characterized by distributive bargaining, the major focus is of the parties is on taking the largest share of the “pie”.
The second theoretical model is integrative model. In the integrative model, the goal of the negotiators is to develop solutions that benefit both parties (Carrell & Heavrin, 2008). The negotiators in this case draw a number of options that seem satisfactory to all the parties involved. The integrative approach seeks to benefit mutually all the parties involved in the negotiation. This approach involves applying logical trade-offs thus ensuring each party benefits. The third theoretical model is interest-based negotiation or the principled negotiation. This approach borrows some aspects from the integrative model. In this approach, parties involved in the negotiation acts jointly to finding a solution (Battad, 2011). The principled approach utilizes four critical elements, which include criteria, interests, options, and people.
Various sources of power exist in a negotiation process. The first source of power is a strong BATNA Developing a strong Best Alternative to a Negotiated Agreement can enable a buyer to gain more power and thus decline an unattractive deal. For instance, by developing a strong BATNA, one can request the real estate broker to look for alternative houses that are of better quality and in a prime location just as the one currently under negotiation. The second source of power is psychological power. Psychological power entails appealing to the emotions of the other party in a particular way. For instance, one may develop a higher sense of power and command while negotiating with a powerful individual. This may reduce the ability of the other party to influence decisions. Another source of power relates to one’s role in the society. For instance, holding a higher rank, title, role or position may give one more power, which could be helpful in the bargaining process. Other forms of power include coercive power, legitimate power, and reward power. The analytical procedures include preparation and planning, laying the ground rules, justification stage, bargaining, and lastly closure.
Examining the Mechanics of the Procedures
The first procedure involves preparation and planning. Three key elements define this stage, which include identification of all issues, setting priorities, and developing the support arguments (Dorochoff, 2007). In the preparation and planning stage, one must identify his/her BATNA. All issues affecting the negotiation, whether tangible or intangible, are listed. In setting of priorities, an individual establishes the weight and ranking to assign upon each issue. Developing the support arguments involves establishing the information, logic and facts surrounding a situation. The parties involved may ask several questions at this stage. For instance, what are the goals of the conflict? What are the parties involved and how do they perceive the conflict? A BATNA may be a good proposal to use. The second procedure entails defining the ground rules. This stage involves developing the procedures and rules to guide the negotiation process. Several questions are key in this stage. For instance, who will be responsible for conducting the negotiation? What time will the negotiations take place? The proposals here include the initial offers presented by ether party.
Most parties involved in negotiation use POTE (Partial, Open, Truthful, & Exchange) approach. This is due to lack of trust. The third procedure involves clarification and justification. This stage involves clarifying the original demands highlighted during the initial stages (Dorochoff, 2007). This stage enables the parties involved in the negotiation to educate each other concerning the various contentious issues. In this stage, the parties may produce documentation as a way of supporting their position. A critical question may arise. For example, are the documents authentic? The fourth procedure involves bargaining and problem solving. This stage entails trying to make concessions (Dorochoff, 2007). Parties involved may use various bargaining tactics such as emotional outburst, extreme opening offers, resisting deadlines, and others. When there are multiple issues under scrutiny, concession may involve all or some of the issues. The last procedure is closure and agreement implementation. In this procedure, the parties closes the negotiation begin the process of implementing what was agreed upon.
Assessing the strategies utilized and the results achieved
The negotiation utilizes a number of strategies in order to ensure that the parties involved come to an amicable solution. Since there are few parties involved in the negotiation, principled negotiation strategy will work best to solve the problems that exist. Principled negotiation involves working together to develop mutually benefiting solutions (Carneiro et al., 2013). The major aim of a principled negotiation is to leave both parties happy and satisfied with the decisions made. A collaborative environment enables the parties involved in the negotiation to work together to develop mutually beneficial outcomes. Parties in a principled negotiation develop mutual trust and evaluate alternative and creative ways of solving the problem. The parties evaluate the problems at hand along the line of their interests and problems. In a principled negotiation, no party is left worse off comparing to the way the party was prior to the start of the negotiation.
A collaborating style is best applicable with the principled strategy. In applying the collaborating style, parties ensure that there is fulfillment of the opponent’s needs (Aarons et al., 2014). In collaborating, the parties may brainstorm ideas and potential solutions to the problems they are facing. The collaborating style seeks to create value and benefit all parties involved in the negotiation. Negotiators using the collaborating style seek to expand the pie and to maximum the returns for all parties (Aarons et al., 2014). While using the collaborating style, it is important for each party to avoid giving too much information as the other party may take advantage of the information given. This may give the party a higher bargaining power when too much information is on hand.
Conclusion
To conclude, negotiation is a complex process in solving conflicts. This paper has examined three key theoretical models of the negotiation process. The integrative model was identified as the best model since it is mutually benefiting. In a conflict situation involving residential home purchasing, the integrative model may help both parties in finding mutually beneficial solutions. Nonetheless, the parties involved must be cautious about the information they give. An individual may yield higher bargaining power especially when one has access to all information relating to the other party. For instance, buyers who are aware of the relative market price for single-family units may bargaining more especially when they feel that the price is exaggerated. The existence of bargaining and negotiation implies that there are some inefficiencies in the market. This means that there is a possibility that the buyer or seller may take advantage of the other, and thus the need for bargaining and negotiation.
References
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