President Donald Trump in his almost 50-year business career has negotiated some great deals and some not-so-great deals. We can learn from all of them, as I describe in detail in my new book, The Real Trump Deal: An Eye-Opening Look at How He Really Negotiates.
Last month, in the first of a series of columns based on my new book, I described how Trump’s:
- Extremely aggressive goals and expectations paid off; and
- Early strategic preparation and homework led to excellent negotiations – but his later failure to do so really cost him.
Here, we address President Trump’s deep appreciation of leverage – perhaps the most impactful strategy in the negotiation world. Interestingly, his knowledge of leverage led him to use it positively to achieve some great deals. We will focus on those here.
Next month, we will focus on how Trump used his leverage negatively, as a business bully.
Donald Trump bought his beautiful Florida estate Mar-a-Lago – originally listed at $28 million – for $5 million plus $3 million for its antiques and valuable furnishings. And he received a $10 million non-recorded mortgage from Chase Manhattan Bank to buy it. He only paid $2,800 down. Wow!
How did he get such a great deal from the seller, the Marjorie Merriweather Post Foundation (Mar-a-Lago was built by Post, one of the world’s richest women in 1927)?
Three strategies were instrumental.
1. Patience Pays
According to Trump in his blockbuster autobiography The Art of the Deal, he initially offered to purchase Mar-a-Lago for $15 million in 1982. But he bought it in late 1985.
Why wait three years? Because he wanted a better deal and felt his leverage might strengthen with the passage of time. He was right. So he kept in touch and waited. And waited. And the longer he waited, the more desperate the seller became.
In fact, several other buyers signed contracts with the Post Foundation for more than Trump offered. But their deals fell through prior to closing. Each time this occurred, Trump’s leverage strengthened – and Trump knew it. He could wait, and he did.
Smart moves. His patience paid off.
2. Trump Actively Strengthened his Leverage
But Trump didn’t just wait. He monitored the area and pounced when an opportunity arose to strengthen his leverage. What did he do?
Bought the beachfront property in front of Mar-a-Lago through a third party – thus controlling the ocean view from Mar-a-Lago – and threatened to build a hideous home on it. This move substantially strengthened his leverage, as he could now destroy a new Mar-a-Lago owner’s view.
As Trump indicated when asked about this, “That drove everyone nuts. They couldn’t sell the big house because I owned the beach, so the price kept going down and down.”
Leverage-wise, Trump made the Post Foundation’s Plan B – selling to someone else – much weaker. Another smart leverage move.
3. Extremely Aggressive Offer-Concession Strategy
Trump said he initially offered $15 million for Mar-a-Lago but ultimately paid only $8 million. How did this happen, as sellers – in the offer-concession stage of negotiations – almost always decrease their prices while buyers increase their offers?
Trump recognized his strengthening leverage and moved down from his original bid.
This was typical Trump, as I describe in detail in Chapter 9 “Outrageous Moves and Countermoves.” of my new book (My first ten chapters comprise “Trump’s Top Ten Business Negotiation Strategies”). How good was this deal? Trump said that “I’ve been told that the furnishings in Mar-a-Lago alone are worth more than what I paid for the house.”
Up next – how Trump used his deep understanding of leverage to consistently stiff hundreds of subcontractors on his deals. This article is from my monthly column. To sign up, visit www.latznegotiation.com and click the “free monthly tips” button in the top navigation.
Latz’s Lesson: Patience. Creative steps to strengthen leverage. And an aggressive offer-concession strategy reflecting changed leverage. Powerful leverage-related moves.