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We recently sold our house to buyers who were eager to move in. No problem; we scheduled a quick closing date and began making arrangements. We called the bank to request a payoff statement, something that's usually accomplished in a matter of minutes.
"Sure," they said. "It will be there in three days."
That seemed a little weird to us, but we had four days until the closing. We called the next day and were told it would be there in 24 hours. "Even better," we thought. We were so naive.
The night before the closing was scheduled, the title company let us know they still hadn't received the payoff statement. By this time, the bank's service center was closed. The next morning — the day of the closing — we were on the phone once again.
"It's in the queue," they said this time. "It will be sent soon, but it's impossible to know when, exactly."
The bank rep told us there was no possible way to send the statement immediately. We were polite but insistent. Finally, after over 30 minutes of being told it was impossible, they transferred us to a manager.
"What do you need? Your payoff statement? Sent immediately?" she asked. "Sure, no problem. I can do that right away."
The title company had the statement in less than five minutes.
Why we're bad at negotiating
I share this little story with you because people are often intimidated by financial institutions. There's complicated terminology — legalese, corporate jargon, and specific "money terms" that sound like you need a doctorate to understand them. Plus, people often feel out of the loop when it comes to particular money matters, which can lead to hesitation and uncertainty. If you're not sure of your own financial footing, how are you supposed negotiate with the pros?
But it's important that you learn. If you don't negotiate, chances are every agreement you enter with a financial institution will favor that institution far more than it favors you. Insecurity about your poor credit, past financial mistakes, or a current bad hair day can make you feel like you don't have the right to ask questions or stand up for yourself.
The consequences of not negotiating can be dire. In our little story, if we hadn't pushed until we got what we wanted, we might have lost the sale of our house. So let's learn how to negotiate. (See also: 8 Negotiating Skills Everyone Should Master)
Get to the right person
Negotiating with a financial institution is a lot different from negotiating with an individual — like, say, your landlord. Individuals make decisions based on many factors. They could be influenced by something as simple as how good — or bad — of a mood they're in. It all comes down to the person.
Institutions operate, presumably, on a set of rules. The individuals within the institution are motivated to adhere to the rules because it's safer for them. The less secure they are in their role, the less willing (and sometimes able) they are to negotiate.
The workaround is to go as far up the chain of authority as you can when negotiating. Generally, the more authority an individual has within a business, the more job security they have and more freedom to make decisions. You want to work with someone who doesn't feel threatened by your request. If you feel that the person you're working with is unable or unwilling to meet your terms, keep asking for the next person up the ladder.
Find the real rules
There are rules, and then there are the real rules.
Generally, the first people you talk to are working with the rules. There are lots of these rules, and most of them sound like "No." They are designed to protect the institution from loss. They are written into the scripts used to train the people who work there.
To negotiate effectively, you'll need to keep asking questions until you push past the script and find the real rules. For example, you might be told, "There's no way we can offer that kind of discount to you; it's against our policy." This is your cue to ask for a supervisor; someone who can override the policy.
When you get to that someone, you find out the real rules, which might be quite different: "Well, we don't usually offer discounts like that. The only way I could do that is if you sign a two-year contract with us." Now you know the real rule, which is, "Only offer deep discounts to get long-term contracts."
Once you know the real rules, you can use them in your negotiating: "I understand you need to get a long-term agreement in order to give me the discount I want. But that's a big commitment for me. I'm interested, but I'll need a lower interest rate in addition to the discount." (See also: 10 Negotiation Mistakes That Will Destroy Your Deal)
Be excruciatingly courteous
Bad manners really won't get you very far. Good manners alone will not win your negotiation, of course. But they can open the door. They can help you get to the right person. They can help you extend the conversation so you're able to see your options.
Good manners can also keep you from having to start the negotiation process over again. If you are kind and courteous when you speak with someone, they're more likely to do what they can to help you. They may not be the person with the authority to make the ultimate decision, but all help is valuable.
Being courteous can get you a direct phone number to call rather than the catchall service line, information on general policies that will help you negotiate better, and notes left in your account which get passed up the line with you. These little things will all nudge you forward toward your goal.
Prepare to repeat yourself
You will have to repeat yourself. Over, and over, and over.
Really, negotiating with a financial institution is a test of patience and how many times you can say the same exact thing without snapping. Parents of young children have a real advantage here.
If you want to talk to a person with more authority, you may have to ask five times. That's because of the value at stake in any individual's time. Entry-level people get paid less. Their job is to maximize the gain for the institution and minimize the (potential) loss. It's well worth it for an hourly worker to sit on the phone with you all day long if they can get you to agree to their preferred terms by the end of the call.
And most people will give up — either on getting to the right person, or on getting to an agreement that benefits them — far too soon. Be clear about what you're asking, and be prepared to ask for it over and over.
Remember that you're in charge
There are many scenarios that can involve a negotiation. Maybe you need a business loan, or you're looking for a better interest rate on an existing one. Maybe you're looking to buy or sell a property. Maybe you need to negotiate payment or contract terms. In all of these cases, the institution will make more money by doing business with you than by refusing you. Some interest is better than no interest; any payment is better than no payment. You hold the power here, even if you feel like you are in the subordinate position.
If they won't meet your terms, go elsewhere. Be prepared to do so, rather than just making empty threats. Knowing that you have options is important. When you know you have other avenues, you can feel more confident. And that will make you a better negotiator.
