Episode Transcript
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(00:01):
Welcome to the Real Estate Express, a podcast, your morning
shot of what's new in the world of real estate investing.
I'm your host, Victor Monash. This is the WEEKEND edition.
We have a very special show for you today.
We have a great guest. He's a repeat guest.
He's none other than Mr. George Ross.
George is famous for having taught at the law school at NYU
for over 20 years. He was executive vice president
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within the Trump Organization and worked for Donald for close
to 47 years. He built a major law firm
focused on real estate in New York City and he's the author of
a book called Trump Style Negotiation that was published
by John Wiley and Sons. That book was based on his
course syllabus from when he taught at the law school at NYU
for over 20 years. On today's show, I'm having a
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conversation with George about some of the principles in his
book. Listen to my conversation with
George Ross. Hello.
Good evening, George. Hi, Victor, How are you?
I'm all yourself good. Good.
Don't comply? Good.
You were able to get the e-mail.Yeah.
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OK, perfect. Well, why don't we?
Why don't we dive right in? Good.
So, George, one of the things that you wrote about in your
book Trump Style Negotiation wasthe need to prepare meticulously
and really know your objective going into a negotiation.
And you really emphasized the necessity of exhaustive
preparation, understanding all the details of the subject and
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you know, the market, the financials, all of the the other
party, their needs, their strengths and weaknesses and so
on. And I'm wondering if you can
maybe break that down a little bit further.
Can you give a real world example of what you did in
practice going into a negotiation?
I don't know if this would be a bill second or for, you know,
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some negotiation that comes to mind that would be a good
example of the type of preparation you undertook.
Well, it's, it's, it's very broad, a very broad subject
matter, but the easy thing to doreally is to talk to the other
side and, and finally say, what are you looking for?
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I'm looking for income. I'm looking for return.
What's what's asking? What's the time frame that's
involved? If you can understand what
they're looking for, you can react to it.
But usually people don't want todo want to delve that deep in
the other side, in the other side transaction and that's the
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way you make the deal. Then what are you looking for
here? I'm looking for return.
I'm looking to sell it. I'm looking whatever, whatever
I'm looking for. And then the key really is to
follow up on the response that they give you to the question
you're facing. Say Joe, you say, So what are
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you looking for the other guy? Well, I'm looking to retire.
Why are you looking to retire? That's the next question.
You understand why what, how long are you?
How many years have you been involved?
And what? So if you can find out from the
other side to the negotiation what they really have in mind by
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asking them, you know, so they say why?
Why do you want to retire? Why do you want to do this?
Why? Why?
So you, you become part of the negotiation and part of their
discussion and they have to tellyou what they have in mind.
You can get it directly from them.
You're not fabricating anything.Right.
So it's a question of detail, but don't overwork it.
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In other words, say why do you want to sell the property?
Why are you, what are you, what are you looking for?
I'm looking for return on my money.
I'm looking to subdivide what? Whatever it is that they are
looking for, you are getting theresponse directly from them.
You don't have to have to add anything to find out what
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they've got in mind. You ask them why do you want to
sell the property now? Why are you doing?
How much, how much are you looking to make?
Why? What's going on that makes you
do? Why do it now?
So you can get all this information from the other side.
You're just asking to get information.
In order for us to make a good agood deal for both of us, I have
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to give ask some information or get some information from him.
Why do you want to sell it? Why do you want to do this?
What whatever question you want,you ask and it's fine because
you're not probing to make the D.
You're probing to see whether a deal is there to be made,
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whether you're both doing, whether you're both on the same
line. And it's, it's an information
game, but you can do it nicely. And that's the key to develop a
a relationship with the other side that they feel comfortable
talking to you. Now that takes presumably a
discussion principle to principle.
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What if there's a broker in the way?
So get rid of the broker. OK, good.
Say say I appreciate your help again.
You I assume you're going to getI guess you're in here, you're
going to get paid, but you you can't talk directly for the
billet for the other side because you're into you're
you're there for the purpose of making a fee.
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I understand that and making a deal of both parties if I
understand that and you're entitled to it, but don't act as
if you are the principal. You are not.
You are a broker, you're a middle man.
So if they find out what it is, a broker, basically what they're
looking for is money along the way.
Good. What do you want?
How much do you want? When do you want it and and and
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why? So don't get hung up dealing
with the broker as if the brokerwere the principal.
They are not. They are there solely to to help
make a make a deal, if in fact they do help, but they're
looking to make a make a buck, simple as that.
They have no direct financial interest.
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They don't own the property, they don't pay the taxes.
All they get is to get a fee. That's fine.
And you can set that concept up pretty early.
Look, you're the broker. You anticipate, well, we make a
deal. You want to get paid, that's
fine. That's your function.
But don't be the principal. You don't own the property, you
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don't. You're not renovating, whatever.
So put the broker into their respective role rather than let
them make the deal. You're only a middleman, and
that's fine. It could be a good middleman.
OK. And what about the situations
where there are multiple offers and it's almost being run as an
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auction? What about it?
Does that change the way you approach the negotiation?
Let them put it in writing, makean offer, put something in
writing or have here's give thema form that they can fill out
which will give you the information that you need in
order to force to make a deal. Purchase price, terms, time,
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that time element involved, whatever it is you get them to
answer questions which they're willing to do because they're
looking to make a deal. Why not?
One of the things that is we're seeing very much in the current
market environment is there's often a mismatch in speed
between what the buyer requires to complete their due diligence
and what the seller would like to see in terms of completing A
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transaction. So we often hear, I want 30 days
due diligence, 30 day close. Well, I can't even get my lender
to crawl out of bed in 30 days, let alone get something done
right. How do you negotiate you?
Got the key. The key is the other side.
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What do they have to? What can they do?
What do you want? I'd like to close in 30 days.
Why? Why we got to close in 30 days
or 60 days or whatever it is youfind out.
Ask the other side, whoever theyare, what's going on, what they
want. Now I'm looking to sell the
property in 30 days. Why 30 days?
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How did you fix the fix the price?
What is? They'll give you all that
information and you may have to work through it to find out how
much of is true and how much is fiction.
But nevertheless, you're gettingit directly from the other side.
You're not making it up. You said you're in a hurry.
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You want to sell the property before the end of the year.
Why? What happens if we did it next
year? Would it work if I made it part?
So if I if I gave you 50% now and 50% in six months, can you
live with that? I can't.
Whatever you get, get the other the other side to give you the
answers, but you got to ask the questions.
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In your experience, I've heard you say in numerous times, and
it's in your book very clearly, that you don't want to get to a
deal too quickly, because if youdo, then someone has left a lot
on the table. Maybe it depends on the nature
of the deal. Some deals can be done quickly,
other deals going to take a longperiod of time.
So you and and there are some areas of transactions which
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those areas will take time or the areas can move quickly.
So you have to separate them out.
No, we say good, can we agree onthe price?
So you say, yes, what's the price, the probe that how did
you get to that price? It's, it's whatever it is, the
price you have is too high. It's not the market.
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Now it may be the market, but you're saying it's not.
So what usually they will not say, but how do you know it's
not the market you got A good negotiator has the ability to
get answers to questions that the other side didn't didn't
want to answer or didn't understand the answer because
they're not that skilled in negotiation.
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They prefer to keep it quiet or what have why or explain why and
still make a deal and still keepit friendly.
In order to mean for me to make a deal with you, I have to work
and keep you happy. Make a deal that that's the only
way we make. We make the deal.
So let's let's start at the ground and come up with the
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items that we have to talk about.
First thing is price. How did you arrive at price?
That's that's gutsy, but it's, it's there.
How did you give me your own price?
You said 5 million. Why 5 million?
How did you arrive at 5 million?Why not 4 million?
Why, you know, so it's probing the other side to get the
information they are willing to give you or will give you if you
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look for it. Many times I've gone through a
transaction and say, hey, I wantyou to be happy in a
transaction. What do you need?
I want to hear what they say. And what they say may have
nothing very little to do with the transaction.
It could be money, it could be prestige, it can be lack of
embarrassment. Whatever it is, you're
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responding to what they come up with, but they're giving you
information. That's information they are
willing to part with because youasked them to part with it.
How did you get to the number? How did you get to how much cash
and how did you get to the per the how much we're going to do
with paper instead of just getting from them the
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information they're willing to give you the way they're willing
to process it. Now, what about at the other end
of the spectrum? Have you encountered situations
where the dance of negotiation is taking too long?
And the other side says, you know, I'm tired of this back and
forth, like, do you want to makea deal or not?
That's yeah, but that's unusual.OK, Because you, when I say
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that's unusual, who controls thetime frame?
You can control the time frame. If you control the time frame,
then you have the problem, but there's a big difference of who
controls the transaction going forward.
Who's got a time? The time frame is 30 days.
How did you get to 30 days at this?
Well, it's 20 days or it's this.I'm going to California at that
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point, so I'll be gone for two weeks.
OK, well, what are we doing the two week period?
So answering questions with questions.
Can we get the information? But when you get that
information, you can rely upon it because that's what the other
side is telling you. So you're not saying you don't
say. I assume you're selling the
property to make a substantial profit.
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Why did you school it, though? It's, it's a question
questioning, questioning the negotiation.
And the other side, don't take what they say as being absolute
gospel. Right?
I must get 5 million for this piece of property.
Why? How did you arrive at 5 million?
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Can you live with 4,000,005? No, why not?
The negotiation process is question and answer, but who is
asking the questions? You're asking the questions
based upon what you have alreadyheard you're getting, you're
eliminating it. I agreed to give you $4 million.
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Are you giving the all Quiche Park quiche pay apart cash, 10
million, whatever it is? How are you doing?
So you're finding out what the other side wants because they're
willing to tell you. Now you have to water, water it
down because they're not going to give you the information,
just the way they want it or, orgive it the way you want it.
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But if you ask the appropriate confirmation information and go
down the right path, you'll get what you need.
And, and it's friendly. That's the key.
It's a friendly negotiation. We're both trying to make a
deal. OK, all right.
But it's our my concept of what type of a deal should be made
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and yours that we didn't start out agreeing on what we're
doing, but we did. And we did check things that are
going up and see how much of what we really need.
We're going to be able to get time frame money down,
publicity, whatever it is, you got to find out what the other
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side deems important. And often it could be an
incidental item, which really has nothing to do with the basic
transaction, but has to do with the personalities involved.
I need good publicity in in this.
I don't want to show up, but I'mI'm making a substantial profit
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or I'm taking a substantial loss, but I want to look good.
Whatever it is, that's what that's it's careful discussion,
but you didn't start off discussing the items that are
now on the table. You found out what the other
side feels about the transactionor what they have in mind.
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I want to close in 30 days. Why 30 days You got to answer
the question. They answer the question and you
can rely on that. Well, you know, so now it's,
it's the the trick is to do it in the manner that the it's not
controversial. It's asking for information
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which they're willing to give you and utilizing that
information to your benefit. Don't let them turn it over to
the other side. Turn it around so that they're
discussing what they want to discuss their way.
They turn it so that you're discussing it.
You're forcing them to discuss it your way.
So I can do it. You, you, you want to close the
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transaction, you and you want 30days.
Why 30 days? So it and what happens if I
don't close in 30 days? How about it can, how about at
this point, can I give you a deposit and I'll see you in a in
six months? Whatever you find out what's on
the other side, that's that's really a, a, a key of to a good
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transaction. I'm giving the other side what
they're asking for, but it's notwhat I'm willing to give them
really. But if we want to talk time
frame, I talk time frame. You want to talk money, I'll
talk money. You want to talk politics, we'll
talk politics, whatever it is doing a relationship.
We're we're getting nice, warm and fuzzy.
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So I'm you're happy to do business with me, but you really
don't know what my what I'm looking for in detail.