Improve Your Negotiations With The 5 Golden Rules.   LEARN THEM

A Monet painting recently sold at auction for $80.4 million, a record for a Monet. Interestingly, experts had pegged its value and expected sale price at $36 million to $47 million.

What happened? And how can you, as a possible auction participant and buyer, keep from overpaying?

Auctions present several challenges for negotiators, especially buyers. Some of these challenges were likely present in the Monet auction.

First, many auction buyers do not have full information about the auction item. In most cases, the seller has more information about the item on the block than the potential buyers. In fact, many buyers may be participating last-minute, especially at charity auctions.

This information discrepancy almost always gives the seller an advantage. Remember my First Golden Rule: Information is Power – So Get It!

Second, most auction dynamics are designed to feed the competitive buyer’s ego and need to win. I suspect that a part of the $80.4 million paid for the Monet had to do with the buyer’s ego and need to “win.”

What is my advice for avoiding these pitfalls and achieving your goals in an auction?

1. Write down your goals beforehand

Do your strategic homework before you start bidding and before your ego gets engaged. Focus on the item’s independently determined market value, its subjective value to you and what experts assess as its value.

Then write down your goal and commit to yourself – and perhaps to a colleague – not to bid much over that goal. For if you bid a lot more and “win,” you may regret it later. As I note in my book Gain the Edge! Negotiating To Get What You Want (St. Martin’s Press 2004), “[e]gos have led to successful bidders’ feelings of regret so often that many call it “The Winner’s Curse.”

2. Beware of bidding more based on others’ behavior

It’s easy to get caught up in the moment and bid more when seeing other presumably sophisticated buyers willing to pay more than your written goal for the item.

This natural tendency is fueled in part by our perception that other bidders may know something we don’t, or that they are similarly financially situated. Neither may be accurate. At the Christie’s auction, at least six serious potential buyers helped bid the Monet price to its record level.

I can imagine one of those six saying before bidding well over their goal, “if these other five extremely wealthy individuals all believe this painting is worth around this much, it must be. It’s then a safe bid, right?”

Not necessarily. Each of the other bidders may have independently determined its worth to them – which may or may not affect its value for you. For example, if one of those bidders owns two Monets and this third completes their set (something you may not know) – thus increasing the value of all three – the value to that individual will be higher than to you.

The solution? Consider the item’s value to you independent of how the other bidders evaluate it.

3. Take a breath before you bid

There’s a reason auctioneers talk fast and promote a game-like atmosphere – they don’t want rational, reasonable bidding. It’s their job to get your ego, competitive spirit and emotions involved and get you to lose track of your purely fact-based evaluation.

Counteract this by taking a breath or two before bidding, and referring back to your written goal. Also consider how you will feel if you win.

Hopefully, the purchaser of the Monet painting felt excited and happy at the conclusion of the auction – and continues to feel that way today.

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