Greetings, everyone! Happy Thanksgiving week! I’m excited to bring you Episode 3 of “Grant Teach Me Something.” In the spirit of the holidays, let’s dive into an incredibly useful negotiation technique called the Hairy Arm Principle.
The Hairy Arm Principle
What Is the Hairy Arm Principle?
The Hairy Arm Principle is a clever negotiation tactic. It originates from a story about a photographer who worked with a particularly picky boss. This boss had to change something about every project to feel involved. To handle this, the photographer would add a deliberate flaw—a hairy arm holding a drink—on the edge of the photograph. The boss would spot it, demand the flaw be fixed, and feel satisfied once the arm was removed. This tactic let the photographer get his desired outcome without unwanted alterations.
Applying the Hairy Arm Principle to Real Estate
Owner Financing
One effective way to use the Hairy Arm Principle is in owner financing. Let’s say you’re negotiating to buy a house. You want to pay the seller’s equity over time with interest.
The “hairy arm” here is offering a very long payment term, say 30 years. You focus the pitch on the appealing interest rate, which sounds fantastic to the seller. However, most sellers don’t want to wait 30 years to get paid. They will likely object to the long term.
As a strategic response, you can then adjust the term to a more acceptable range, like 10-12 years. This trade-off helps you secure a 0% interest loan over a reasonable period, making both sides happy.
Whiteboarding Exercise
To effectively use the Hairy Arm Principle, you need to prepare. Grab a whiteboard and list out:
- Your dream scenario for each contract item.
- The seller’s likely dream scenario for each item.
- Identify immovable items and potential hairy arms.
By visualizing these factors, you can find opportunities for win-win situations.
Cash Transactions
In cash transactions, the Hairy Arm Principle can be applied to the option period. For instance, if you’re making a cash offer on a property, the “hairy arm” could be a short timeline or going hard on the offer (no option period).
When the seller objects to your initial offer, you can negotiate for a longer option period in exchange for a better price or terms. This strategy allows you to protect yourself while still sweetening the deal for the seller.
Honesty in Wholesaling
When wholesaling, transparency is key. If a seller feels your offer is too low, you can explain that you have investors willing to take on more risk. Offering a longer option period helps you find a buyer at a higher price, making the seller more comfortable.
Be upfront about your intent—this honesty helps build trust and can smooth over negotiations.
Other Negotiation Scenarios
Buying a Car
Negotiation principles extend beyond real estate. When buying a car, you can use the Hairy Arm Principle by asking for extra features you don’t necessarily need. The dealer focuses on these extras, and when you “reluctantly” agree to drop them, you might secure a better price on the car itself.
Creativity and Preparation
Successful negotiation requires preparation and creativity. Use a whiteboard to brainstorm and plan. Identify potential hairy arms and win-win scenarios.
- Outline your goals.
- Predict the seller’s goals.
- Find areas where you can give and take.
Real-Life Examples and Q&A
Some viewers shared excellent examples and questions. For instance, Larry Higgins mentioned that “no down payment” could be another hairy arm. Absolutely—think of all the elements you can tweak in a negotiation to create tradeable value.
Plan for Charitable Giving
As we approach the holiday season, let’s remember the importance of giving back. Organizations like Trusted World support nonprofits by providing essential resources efficiently. Consider donating or volunteering with such organizations to make a difference.
Book Giveaway Winner
We’re excited to announce that Jamie Woolley has won our book giveaway for “The Richest Man in Babylon.” Congratulations, Jamie!
Final Thoughts
The Hairy Arm Principle is a powerful tool in the negotiator’s toolkit, allowing you to strategically maneuver through discussions to achieve favorable outcomes. By understanding and applying this technique, you can create scenarios where both parties feel satisfied with the deal. Whether you’re negotiating real estate transactions, buying a car, or engaging in other negotiations, preparation and creativity are key. As you practice this principle, remember to balance your strategies with honesty and transparency to build lasting trust.
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