In the negotiation of a mortgage refinance, you can run into many different types of situations that you have to be prepared for. How we interact during a negotiation can make or break an agreement. Successful use of communication tools and preparing yourself to handle personalities will contribute to the outcome.
Analyzing the Roles of Communication
In this situation the initial state of the negotiation was not moving forward in a positive direction. The bank was dealing with many customers with mortgages that were months behind due to the economic crash at the time. We were one of those affected; the construction boom took a turn for the worse and work slowed down. Although we kept in contact with our bank regarding our situation, they were not willing to negotiate new terms to our agreement. As a home owner you never want to get behind on your payments, so we continued to make partial payments. The bank continued to accept the partial payments, yet didn’t want to work with us to reassess our situation. “Discussion does not mean fighting and shouting, instead it is simply the exchange of one’s ideas, thoughts and opinions with each other. One needs to have excellent communication skills for a healthy and an effective discussion. (Role of Communication in Negotiation, 2012)” The bank acted with diplomacy and tactfulness.
After speaking with realtors and obtaining consultations from acquaintances, we realized for the bank to take action, we had no choice but to stop paying the mortgage. We knew at that moment that it became a game of the bank vs. the homeowners. The way you communicate varies according the formality of the situation. (Key Aspects of Communication in Negotiation) By making partial payments, the bank was content with us. We were getting further behind, and incurring penalties towards our mortgage. Taking action did get the attention of the other party. The impact of the communication, made the bank realize they needed to have more meaningful conversations with us. We finally were able to alter their perceptions and expectations concerning the situation, relationship and outcome.
Through many discussions with the bank, we came to an agreement to attempt to sell the house this way to avoid foreclosure and or a short-sale. The mortgage payments were frozen during this period. We knew we were treading water, since the housing market was at a virtual standstill. After exhausting conversations with the bank, we were at the point where we were going to have to walk away from the house. Our emotions at this point, were wearing thin.
This process was taking months, and also taking its toll on our patience with the bank. We wanted to be responsible for our decisions, but we were being forced to make a decision that would hurt our credibility for the future. Our sincerity was our most important personality traits exhibited in this negotiation. We had to show our sincerity for an effective negotiation. We never took the situation casually. In the eleventh hour of negotiations, the bank was willing to refinance with a co-signer. Luckily, our relatives were willing to assist, and were kind enough to co-sign. The bank was very cooperative and we were moving forward in a positive way.
Failures and distortions in perception, cognition, and communication are the paramount contributors to breakdowns and failures in negotiation (Lewicki−Saunders−Barry, 2005). Negotiators use information to challenge the other party’s position or desired outcomes or to undermine the effectiveness of the other’s negotiating arguments. Even in the simplest negotiation, the parties take a position and then present arguments and facts to support that position. As the homeowners, we argued to gain terms that were within our reach to be able to afford the home and avoid a foreclosure. The bank had a different set of terms, that would stretch our ability to make ends meet, and we had to stand firm with our decision to adhere to our end goal. For us, our personality in this situation varied.
At times we were very cooperative, as was the bank. But at times, the bank exhibited an aggressive behavior, and made us think we only had one option to explore. The bank exhibited a power position, to intimidate and instill fear. As homeowners, we were emotionally attached to the home. We knew that we had to remove our emotions, and treat this as a business deal. That was difficult. We were able to neutralize our emotions, and handle the situation in the most professional way. Personalities in such a high-stake situation can get intense. We viewed the bank as goliath and us as David. The bank was responsive, but we found when we got upset and put them under pressure, the bank became uncomfortable and worried about damaging the relationship with us as the customer.
Contributions of those Roles to the Outcome
Our ability to stand our ground and be vigilant with our information upfront, aided our ability to work with the bank to come to an agreement. To reach this agreement a third party did have to enter the discussions. This third party assisted both sides in reaching a final agreement. The process was a roller coaster; it was also a learning experience for both sides. In the end, we were happy with the final terms. The bank did make some small mistakes throughout the whole process, and due to their mistakes being presenting in writing, had to honor those terms in the paperwork. We were able to avoid a 5-year ARM agreement, and were able to secure a 30 year fixed mortgage at a very low rate, due to their mismanagement of information.
The point is to never quit with a bank. As long as they keep coming back with counter offers, you do the same. At some point, you’ll make a deal, and it might be better than you ever expected. Looking back, it is very important to remove your personal emotions from the negotiations. Emotions need to be under control on both sides to achieve a successful end. If you have ever felt like you were stuck in a burning high rise with only one way out at times, we know that if you work with the right people, your chances of success increase with every option you have.
Key Aspects of Communication in Negotiation. (n.d.). Retrieved from http://oregonstate.edu/instruct/comm440-540/commfactors.htm (2005). How to Improve Communication in Negotiation. In Lewicki−Saunders−Barry, Negotiation, Fifth Edition (p. 175). The McGraw−Hill. Role of Communication in Negotiation. (2012). Retrieved January 19, 2013, from Management Study Guide: Pave your way to Success: http://www.managementstudyguide.com/role-of-communication-in-negotiation.htm
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