How to Negotiate Anything
Seven rules for getting what you want on your own terms
By Michael Kaplan

(MONEY Magazine) – Any time you possess something that someone else wants, or vice versa, you have a golden opportunity. Whether you're buying a car or helping your neighbor see that it's his job to have overhanging trees trimmed, each party has a chance to strategically challenge the other--to make a counteroffer, to hem and haw, to get the other to give a little.

Probably, though, these scenarios make you think pain in the neck, not golden opportunity. After all, waving to your neighbor over the picket fence is far more pleasant than dickering with him. As for car salesmen, they have the same conversation 15 times a week. You have it every five years.

But if you know what you're doing, you might actually begin to relish the occasional parry and thrust. It's not only satisfying, it can save you money. And while shopping is always a prime time to conjure your inner Steinbrenner, negotiating skills also come in handy at work and even around the house (ever haggle with a teenager about using the car?).

To help you through your next transaction, here are seven principles for successful negotiating. They won't tell you what you're going to pay for the car--that's what negotiating is for. But they will put you on an equal footing with the person on the other side of the table. Or picket fence.

1. Don't look at a deal as an either/or proposition.

Good negotiating isn't about making a hardball counteroffer and then clinging to it. It's about compromise, and that takes creativity. Ralph Roberts, one of the country's top real estate brokers and the author of Walk Like a Giant, Sell Like a Madman, estimates that only a little more than half of his clients try to negotiate his highest sales fee of 7%. That's too bad, because like most good brokers--and most good businessmen--Roberts is more willing to agree to a creative solution than people think. He offers this example: Recently he listed a house for $425,000. The deal he made with the client was that the fee would range from 3% to 6% depending on who found the buyer, giving Roberts a bigger incentive to find a buyer himself. If Roberts' client had initially countered with an offer of, say, 4% or nothing, a stalemate would have resulted. It was only by coming up with something new (in this case, the innovative sliding scale) that the two sides were able to agree.

Say you're negotiating with a wedding caterer who charges $4 a plate to cut the cake and won't budge. Time to get creative: Offer to write a brief testimonial for her website, including your e-mail address in case prospective clients want a reference--invaluable to any small business--in exchange for a $2 plating fee. You'll have taken the focus off the number and put the fee in the context of the deal.

2. Know what you can part with--then part with it hard.

Make a list that separates the things you require from those you can live without. That's what super-agent Leigh Steinberg does when brokering deals for clients including NFL stars Troy Aikman and Ben Roethlisberger. Let's say you're negotiating with a prospective employer. "What's most important to you?" Steinberg asks. "A signing bonus? Vacation? Job title? Figure that out and you'll know what you can yield on." You don't tell the other side which points are less important, of course. If the job title isn't important to you, act like it is--and then pretend to grudgingly accept a lesser title. The employer will count it as a victory and might yield on something that matters more to you, like vacation days.

3. Figure out the other side's timetable. Then use it.

If the person you're negotiating with--department store salesperson, mortgage broker, credit-card company rep, whomever--has an incentive to proceed speedily, use that. World-famous divorce attorney Raoul Felder, who counts Rudolph Giuliani and David Gest (the former Mr. Liza Minnelli) among his past clients, always takes into consideration his opponent's deadline. "If a client's soon-to-be ex-spouse wants to move on with his life"--or a homeowner wants to sell fast because she already closed on another house--"that person will pay to get things resolved quickly," Felder says. In that case, you can afford to make a tougher offer because time is on your side. If a bakery offers half-price bread after 3 p.m., wait until just before closing time, when they risk having to throw it all away, and offer 25%.

4. Show people that you understand their position.

Parties to negotiations arrive with differing viewpoints, but that doesn't mean they have to be enemies. Jack Cambria, commanding officer of the New York Police Department's hostage negotiating team, always tries to convince even the most violent criminals that he's on their side. "You have to build a rapport when you negotiate with a hostile person," he says, explaining that the same approach applies when you're having it out with a neighbor whose flowers your dog just ate. The key is to make sure the person views you as an ally. "You mirror their emotions," he says. "If someone appears angry, let him know that you recognize he's upset. Then the guy says, 'You're damned right I'm upset!' And all of a sudden you've got him agreeing with you." In the case of the destructive dog, you might say, "Look, I would be angry too. In fact, you're handling it better than I would. I want to make it up to you in a way that works for both of us." By empathizing with him, you will (one hopes) reduce any vituperative tendencies on his part. Once he's not out to get you, you stand a better chance of preserving an amicable atmosphere--although you should probably shell out for some new flowers.

5. Stifle your emotions.

Negotiations are so fraught with tension that they can easily escalate into shouting matches. Problems that have nothing to do with personalities--a collapsed fence between two neighbors' yards, for example, or the price of a piece of furniture--have a way of stirring emotions to the point where a productive conversation escalates into a heated argument. "People start screaming at each other, and it becomes a fiasco. Suddenly you're arguing about personalities rather than issues," says Felder. The solution, according to literary agent Lynn Nesbit, who has brokered major deals for superstars such as Michael Crichton and Tom Wolfe, is constantly to remind yourself of your goal. "Force yourself to maintain a certain level of detachment. You don't want to become so emotionally involved in a deal that it hurts your ability to see it clearly. When I sense that feeling coming on, I [briefly] disengage." How, exactly? Felder's suggestion: "You literally have to say, 'We need to take a couple of deep breaths before getting back to this.'"

6. Don't believe everything, but don't call anyone a liar.

Mike Caro, known in the gambling world as the Mad Genius of Poker, and author of Caro's Book of Poker Tells, knows that in any negotiation both sides need to recognize that they are, in fact, playing each other. Playing involves strategy, and sometimes a little acting. If you don't recognize that, you could be tripped up when your adversary tells a white lie--which, let's face it, he probably will. "Just like in poker, opponents tend to act strongest when they are weakest," says Caro. "When someone says, 'I can't go higher than...' early in the conversation, it's probably not true. Meet that statement by asking the person to figure out a magic way to get around it." You're not calling him a liar; you're simply telling him that you recognize he is playing the same game you are--and you're not going to accept "no" without pushing back a little. If a housepainter quotes a high price and says it's the best he can do, say something like "Maybe we should take one more walk around to make sure we're not overestimating how long the job will take." You'll be gently sending the message that you want a lower price without accusing him of trying to overcharge.

7. Devise a backup plan that you could live with.

You ought to enter a negotiation with optimism, believing a deal will be struck. But what happens if you can't convince someone to accept your terms? Devise what Bruce Patton calls your "best alternative to a negotiated agreement." Patton is co-founder and deputy director of the Harvard Negotiation Project, which works to improve the theories and practices of negotiation and dispute resolution. The "best alternative" is essentially a backup plan that allows you at least to give the impression that you have other options. If an art dealer won't relent on the price of a painting, look for another piece that you'll consider buying if the first choice falls through. "Most people figure they'll cross that bridge when they come to it, and they wind up screwing themselves," says Patton. "If you haven't thought through your best alternative to an agreement, you'll give the impression that you're unhappy with a bad offer [on your first choice] but not so unhappy that you'll walk away." Let the other side know you're prepared to proceed with your backup plan, but stop short of actually giving up on your preferred choice. That should get your opponent back to the table, and then you can go back to Principle No. 1.