After negotiating hundreds of real estate deals, this is the most practical rule I've learned:

The strength of your negotiating position is equal to the strength of your alternative.

I call it the Central Negotiating Principle, and it governs all negotiations, from multi-million-dollar business transactions to deciding what to eat for dinner.

Think about it like a tool that tells you how far you can push before losing the deal.

Here's how it works:

Imagine you find the home of your dreams listed for sale. It just hit the market, and after seeing it with your spouse, both of you know this is the house you have to make your home.

But...bad news...there are four other offers.

How strong is your negotiating position?

Very weak. Why? Your alternative is to go back into the market and find another home you love equally as much.

How strong is the seller's negotiating position?

Very strong. Why? They have four alternatives to your offer. In this situation, most listing agents will ask all buyers to bring their "highest and best" offer, which will guarantee that the seller gets the best possible deal.

Now imagine you find the home of your dreams listed for sale. But it has been on the market for a couple of months. No offers.

How strong is your negotiating position?

Very strong. Why? Your alternative is to go back into the market and find another home you love equally as much.

How could your position be strong when it's the same as it was in the prior scenario?

Your position is always determined in relation to the position of the other party.

In the latter scenario, the seller is in a super weak position because their alternative to negotiating with you is to continue sitting on the market. For that reason, you are driving the negotiations.

The Central Negotiating principle determines negotiating dynamics in all situations everywhere.