Business Finance
Negotiations with Pat a Simulation Example in How to Negotiate Discussion

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Create a two-four pages negotiation simulation exercise ( see example attached) AND write a two-three page paper (double

spaced) explaining which negotiation skills the exercise teaches and how it does so. (see other example)

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The House on Elm Street: Instructions and Confidential Information for Tracy Instructions 1. Read the confidential information for your role. 2. Do not discuss your role with anyone before completing the negotiation. 3. Read your role carefully so that you understand the facts before you begin negotiating. 4. Act out your role. Do not say that "The role says that I am supposed to do this." Just do it! 5. You can add facts, but only if they do not change any facts in your role. 6. There is a 30-minute time limit for the negotiation. Stop negotiating after 30 minutes, even if you are not successful in reaching an agreement. 7. If there is time remaining after you reach agreement, disclose the confidential information from your roles to each other. Given this information, try to improve the results in a way that benefits both sides. Common Information • This is a negotiation between Tracy and Pat for the sale of a beautiful, old Victorian house with wood siding on a large lot in a residential neighborhood. • The house needs expensive repairs. • The seller and neighbors have a strong interest in preserving the house and the neighborhood. • The last sale in the neighborhood was 6 years ago when a similar house (but well-maintained) sold for 135,000. Property values have increased considerably since then. • The property has a tax assessment of 140,000, but tax assessments are usually well below actual market value. Confidential Information for Tracy You (Tracy) have an 87-year-old uncle who lives in a beautiful, old Victorian house with a wooden exterior (called “siding”). The house sits on a large lot that is very long—almost 150 feet (46 meters) deep. The back yard alone is almost 75 feet (23 meters) deep. He purchased the house and lot in 1964 and has lived there ever since. Your uncle has no other relatives. Your uncle has decided to sell the house for two reasons: (1) The house has been poorly maintained over the years and needs expensive work that he cannot afford. There are also signs that the basement might have a leak. (2) Your uncle has health problems and has decided to purchase an apartment in a building designed for the elderly. Your uncle has asked you to help him find a buyer. The house is located on Elm Street, which is west of Main Street. See Lot A on the attached diagram, which is not drawn to scale. The law allows areas east and west of Main Street to be used for both business and residential purposes. But the area west of Main Street is entirely residential, with no businesses. Several years ago, your uncle formed a homeowners' association that has fought to keep businesses out of the residential area west of Main Street. Your uncle must sell the house for at least 150,000 to buy an apartment in the building for the elderly. Several weeks ago, a young couple was interested in buying the house for 150,000, but they bought another house instead after they discovered that your uncle’s house needs major repairs. Before today, no one else has been interested in the house. Your uncle recently learned that the owner of Lot B signed a contract to sell his house. This house is almost identical in size to your uncle’s house. Because the transfer has not yet been finalized, no public information is available. When you attempted to obtain further information, the owner of Lot B refused to discuss the sale. You wonder whether he is selling to a business. You also heard rumors that the owner of Lot C is considering selling her house. These rumors concern you because a fast food restaurant or a convenience store on Lot B or Lot C would greatly reduce the value of your uncle's house. Despite these rumors, you would love to buy the house. You fondly remember attending family parties in the house and playing in the large backyard when you were young. But you have many debts and cannot afford to buy the house. Your uncle just told you that a person named Pat called today to ask whether the house might be for sale. You remember Pat from high school. Pat is two years older than you and married one of your classmates. You have heard that Pat has a growing family (with the recent addition of a fourth child) and works at a local bank. Pat currently lives in a small house in another part of town. You immediately schedule a meeting with Pat to discuss the possible sale of uncle’s house. Your uncle asked you to discuss with Pat a few issues in addition to price: 1. The possession date. Your uncle prefers to transfer possession three months after the contract is signed. This would give him time to sort through his possessions in the house. You don’t think this will be a problem because Pat will probably need at least three months to sell the small house where the family currently lives. 2. The exterior siding. Because he loves the house and the neighborhood, your uncle wants the contract to include a clause stating that Pat promises never to cover the wood exterior (“siding”) with plastic or metal siding. 3. Down payment. When contracts are signed in this area, buyers give sellers a down payment. Your uncle wants a large down payment (sometimes called “earnest money”). Down payments in your area are normally 10% of the purchase price and buyers who fail to perform the contract forfeit this amount. Your uncle wants Pat to agree to a payment of at least 15% (and hopefully much higher) of the purchase price. 4. Tile artwork. Your uncle’s wife, who died several years ago, installed a beautiful piece of glazed tile artwork (twelve inches by twelve inches) in the plaster of the kitchen wall. Your uncle wants to remove this tile artwork and take it with himwhen he leaves the house. Your uncle will not compromise on issues 2, 3, and 4. If you do not get what your uncle wants, you have no deal. He is flexible on issue 1. The neighborhood is very stable. Apart from the upcoming transfer of Lot B, the most recent sale was six years ago, when Lot D (across the street from Lot A) sold for 135,000. Lot D is very similar to your uncle's property except that the house is in much better condition than your uncle’s house. Property values in this area have increased considerably since the sale of Lot D. Your uncle’s property is assessed for tax purposes at 140,000, but tax assessments are well below market value. Prepare for your negotiation with Pat. Given your uncle’s poor health, you hope that a contract will be signed as soon as possible. Copyright by George J. Siedel. All rights reserved. After the negotiation we answer these questions: They can help you with the second part of the assignment. o How did you prepare for the negotiation? Did you consider your best alternative to a negotiated agreement (BATNA)? Did you consider your opponent’s BATNA? What were each side’s strongest points? My BATNA: My BATNA was asking for much more than I was ready to accept My strongest point: My strongest point was that the opera has already worked with Sally and still wanted to hire her but as a lead this time. It means that they really liked her already. Opponent’s BATNA: My opponent BATNA used the same strategy as me by proposing to pay a lesser amount than they were ready to pay. Opponent’s strongest point: They knew that Sally had not performed in years. So she was not in high demand and probably needed that money. o What were potential solutions to meeting your goals? Did you consider creative solutions? I emphasized the part that even though Sally has not performed in years, she still gave singing lessons and improved her voice since. o What type of negotiating style did you decide to adopt for the exercise? Why? What style did you expect your opponent to adopt? It was more of a more cooperative style just like I was expecting it to be. This is because it was a relationship that we both wanted to stay ongoing. o Who made the first offer and why? My opponents made the first offer because they were ready to pay the least I was going to accept on behalf of Sally. o Did the negotiation go as expected? What could you have done better to Prepare? I wish I had more time to prepare, and had more questions to ask. I accepted their first offer which was probably a stupid thing to do. o Who controlled the negotiation? Did your negotiation plan work? The other team controlled it because they were much more prepared for it. o What style and model of negotiation did each participant use? Did your style work? Did the styles complement one another? We both used a cooperative style and came to a close fast. o Was the outcome better than your BATNA? Yes, my BATNA was $22000 and I accepted the offer for $24000. o Would you like to work with the opponent again? Sure, why not, they were challenging but they were also respectful and nice. o How did you do compared with your opponent? Poorly, because I did not have time to prepare in advance. o What would you do differently in the future? What would you do again? Prepare in advance and negotiate on their first offer to try to get more money from them. ...
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Final Answer

Attached.

Negotiation Assignment – Outline
I.
II.

Negotiations With Pat
Personal Reflections


Running head: NEGOTIATION ASSIGNMENT

Negotiation Assignment
Name
Institution

1

NEGOTIATION ASSIGNMENT

2
Negotiation Assignment
Negotiations With Pat

Me: I have learned that you have an interest in purchasing a house in Elm Street? Don’t you?
Pat: Yes, I do.
Me: Are you aware of what kind of a house it is?
Pat: Just an overview. I don’t have specific details of the house. Nonetheless, I have an interest in
buying it if it meets my expectations and desired specifications.
Me: Okay, my uncle has a house, and he is offering it for sale to any interested buyers. So far, a
number of customers have expressed their interests, but we have decided to consider you first.
Pat: Thank you. I appreciate your consideration. Can you please give me a few details of the
house?
Me: Well, the house that we are selling is a Victorian house that has wood siding. This house is
located in Elm Street that is east of Main street. The neighborhood in which this house is located
is primarily residential. Hence, there are no businesses in the area. In this regard, the house is
located in a very stable neighborhood. This place is good for settling family. Indeed, this is one
of the reasons why many people are competing to buy houses in this area. With a house in this
neighborhood, you are assured of having the least disturbance.
In regard to the house, the house under sale was constructed on a large lot that is about 150 feet
deep. Besides, it has a large backyard approximately 75 feet deep. The owner of this house
purchased the house together with a lot a long time ago. Therefore, the house is quite old, but it
is still in good condition.

NEGOTIATION ASSIGNMENT

3

Pat: Oh. You mean it’s such a wonderful place and house? I have been looking for such a place
Me: So, you want a neighborhood that is exclusive for residence?
Pat: Absolutely
Me: Then, this is your golden chan...

henryprofessor (73074)
University of Virginia

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