The Hamlet Method of Borrowing Money: To be or not to be the first offerer

Portrait of Sarah Bernhardt as Hamlet.

Image via Wikipedia

To reveal your position first or not to reveal; that is the borrower’s big question.

WSJ had an interesting article by Mike Michalowicz who argued that the shrewd negotiator offers first and reveals their bargaining position.  In other words, be the first to show where you want to end up.

He contends that divergence, or the distance between the two parties, is a huge time waster.  Get to the final bargaining point quickly, he says.

I’ve held to the traditional bargaining strategy where you wait for the other person to make the first proposal and bargain from there.  There’s an old saying in negotiation that he who wants it more gets least.

What if your proposal is way below what the other person is willing to pay? By offering first, you give up potential reward.

In borrowing, the lender usually provides a quote and the borrower reacts.  It would be silly to ask your lender for a loan application and then tell him the highest interest rate that you’ll pay.  That’s just plain stupid.

The best strategy for borrowers is to get multiple loan quotes and let the market determine the right loan amount, rate and terms.  You may be able to bargain further from there.

Borrowers, have you ever told a lender that you want a loan and you’ll pay a certain interest rate and no more?


About Michael Shelton

Your Business Coach Facilitating Delegation and Work Group Engagement Michael Shelton has over twenty-five years of business and military accomplishments, including extensive experience with one of the largest, publicly traded real estate investment trusts (REIT). He is a qualified business coach with assignments in cross-functional work group management, strategic planning, unit leadership, joint venture acquisitions, executive education, mentoring, training and merger integration. Michael has accumulated best practices for building committed work groups from more than $4 billion of capital markets transactions and commercial property development. He served as a commissioned officer and helicopter pilot in the U.S. Army, and earned his MBA from The University of Arizona. Michael has served as a major conference panelist and is the author of Cash Flow Rich, Winning Ways to Evaluate and Finance Real Estate. Today, he helps business owners get more work group engagement as President and CEO of Shelton Business Services, LLC in Scottsdale, Arizona. Disclaimer: I don't offer investment, legal or tax advice. Talk to your broker, accountant or lawyer for investment, tax and legal help. I might own stock in the companies I mention on-line. My posts, tweets and other on-line activity are my personal thoughts and don't represent my employer or company.
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