In many neighborhoods across the country, it’s still a buyer’s market. You’d think that would make life easier for both the buyer and the Realtor. Not necessarily. Buyers may be operating from a place of overconfidence in their own situation, combined with the belief that every home in the neighborhood is underwater. This is both unrealistic and counterproductive. A little coaching on your part should help get even the most misinformed buyer back on track. Here are some strategies you can share:
- Don’t be ridiculous
- Know your seller
- Know your numbers
- Timing is everything
- Make reasonable requests
- Remember the big picture
1. Don’t be ridiculous. The fact that it is a buyer’s market may go straight to your client’s head. This can cause all kinds of problems, leading the buyer to make a ridiculously low offer right out of the starting gate. Remember, no matter how bad the market, the seller still has some degree of emotional attachment to the home. If your first move is one that insults their intelligence or hurts their feelings, they may end the negotiation process before it ever gets started.
2. Know your seller. It helps to understand the seller’s motivation when you put your offer on the table. What degree of urgency does the seller feel? Is there a negative circumstance involved, such as a divorce or illness? Or perhaps the situation is more positive but no less urgent—a new job out of the area, a new baby demanding a need for more space. Whatever the situation, the more you know, the more you can tailor an offer that acknowledges the seller’s feelings and meets their needs.
3. Know your numbers. The first number you need to know is the balance on the seller’s mortgage, and whether there are any seconds or liens in the deal. Of course if it is a foreclosure or short sale, you need to know who the lender is—some lenders are definitely easier to work with than others, and short sales are notoriously slow processes in many cases. Be sure your clients are prepared to make multiple offers and wait it out, if it’s a property they really want.
4. Timing is everything. If the home has been on the market for a month or two, chances are the seller is pretty sick of keeping the kitchen spotless, the lawn trimmed, and the kids’ Hot Wheels out of sight. Also, a history of one or more price reductions can be a good indicator of a seller’s rising anxiety level. If you can check the history, it’s also useful to know if the house has been on and off the market, or has changed listing agents during the selling process.
5. Make realistic requests. There is always some give and take in the negotiating process. However, you don’t want to hit the sellers with a huge laundry list of “wants” and have them get frustrated trying to sort through them all and make some kind of counteroffer. For example, asking the seller to pay closing costs or share closing costs is a fairly standard negotiating tactic. Depending on the condition of the property and its amenities, you might request an allowance for new appliances or repairs that obviously need to be done (but check with the lender first on how they will handle any repair credit). An allowance is preferable to asking the owner to complete the work themselves. Your buyer needs to control the purchasing and repair process, so that the work is done to his or her satisfaction.
6. Remember the big picture. We recently had a buyer who walked away from a deal over $800 worth of appliances. Sure, it was probably a matter of pride and ego at that point, but in this situation it’s useful to remind the client of the ROI that’s involved. If the average homeowner lives in a property for five years, which is what statistics show, we’re talking about a difference of $160 a year! And for that, you’d lose a good home? Don’t let this happen to you—or your clients.
Of course you need to adapt and adjust all these suggestions to your own specific market situation. For example, if employment is rising in your area, people are moving in to take new jobs, then the market may not be as favorable to buyers. However, if you’re in a stagnant or declining employment situation, or if the inventory of unsold properties is growing, you may be able to make some very good deals, especially while interest rates are still low.
It all comes down to client education and training. Be the good coach and go for the win!