Negotiating and handling offers
AT EVERY property that’s open for inspection, agents will meet a range of buyers who will be in different stages of preparation to buy a home.
Some are researching the neighbourhood, the street, the house and the price and trying to see what type of home they can get for their money.
Even if they fall in love with a house today, it may be too soon in their research phase to buy a home; they may feel they need to see more homes to understand the area and to see what value looks like.
When an agent meets a buyer, it’s important for a real estate agent to qualify where they are in the buying cycle.
The buying cycle includes:
- The research phase: This is where buyers are looking at both the area and the types of home and lifestyle choices available to them.
- The ﬁnance phase: This is where buyers have qualiﬁed for a loan and know what they can spend and are now trying to ﬁnd the best value home for their money.
- The decision phase: Where buyers are short-listing homes and making offers to try and buy one.
By understanding their emotional position, the agent can provide buyers with background and educational information that will help them move to the next step in securing a home which is making an offer.
Every real estate agent knows that a buyer’s ﬁrst offer is probably not their last offer.
By making an offer, buyers are initiating a negotiation; they expect the agent to come back to them with questions or even a counter-offer.
Some agents simply come back to them with a yes.
The agent who is an order-taker rather than a negotiator will rarely challenge the buyer over price, particularly when they themselves feel that the offer has merit.
Many agents behave like the price police and protect the buyer and the seller from the negotiation process.
The agent who is working for the seller has an obligation to set their own thoughts on price aside and discuss the offer with the buyer to ﬁnd out why they offered the ﬁgure they did and what would happen if the owner said no.
It’s a simple conversation that many agents shy away from.
Some are so excited to actually have any offer at all for a home that they suddenly change sides and defend the buyer’s price to the seller as being their best and ﬁnal price, when in fact they haven’t challenged the buyer at all.
The real estate agent can inﬂuence the sale price by simple negotiation between a willing seller and a willing buyer.
Equally, a poor agent will leave thousands of dollars on the table by not asking the right questions.
Which agent do you want representing your sale: the order-taker or the negotiator?
Some buyers have a range of conditions that they wish to impose on the seller in order to place their offer.
A conditional offer may not be in the seller’s best interests, so the agent needs to discuss and negotiate with the buyer to see if they can remove the conditions.
A non-conditional offer has a much better chance of moving forward to completion than an offer which has strings attached.
It should also be said that the standard contract of sale has contractual conditions which are at the request of the seller and some buyers want to vary these conditions to meet their own circumstances.
Requesting to change a special condition can form part of an offer, along with the dollar amount.
For instance, a buyer who offers an above-market price on a home but needs more time to ﬁnalise the deal may be less attractive than a buyer who is $5,000 short but can ﬁnalise the deal quicker.
Each offer needs to be considered on the seller’s terms to appreciate what is most important to them.
The highest price with strings may be less attractive than a lower offer without strings.
Responding to objections
Much of an agent’s discussion with buyers is around the home they’ve seen and whether it’s a good ﬁt or not.
When a buyer has a checklist and the home ticks seven out of ten boxes, the agent needs to impress on the buyer that the home is actually 70% right for them, not 30% wrong for them.
Some buyers get caught up trying to ﬁnd the perfect home and can’t see that a home that meets more than half of their intended criteria could, in fact, with a few tweaks, be their ideal home; it’s just not perfect, right now.
Every buyer wants to put their mark or stamp on a home to make it their own.
They will start with a list of the things they don’t like about the home; often, this is a list of cosmetic changes that they believe will make the home more liveable for them.
They also attach a price estimate to these changes and then want to deduct the associated costs from their offer.
A good agent will know how to respond to this tactic and keep the buyer interested despite their apparent dislikes.
Buyers will often inspect a home and ask, “What is the lowest price the owners will take?”
And a good agent will respond with, “Let me ask you, what’s the highest price you’ll pay?”
You can see that you need an agent who is working for you at every turn, not an agent who is desperate for a sale.
Your agent should only accept a written offer from a buyer because a verbal offer will often just cloud the negotiation, especially if the buyer is not prepared to put it in writing.
There are many myths about making an offer on a home; the most common myth is that if a buyer makes an offer, they have to honour it.
In reality, both the buyer and the seller can change their minds at any time right up until the offer in writing is accepted and signed off unconditionally.
The only binding offer is when contracts are exchanged unconditionally; up until then, either side can change their mind and change their offer or acceptance.
While your agent is working hard to extract every last cent from the buyer, bear in mind that the buyer has on-costs as well, and if the agent pushes them too far then they may feel that they cannot afford the property and change their mind.
In addition to the agreed price, the buyer will pay local taxes, stamp duty, legal fees, re-location and moving charges and may have some immediate remodeling to do, depending on the condition of your home.
When a buyer is stretched to the limit, they enter the buyer’s remorse phase and could easily feel that they cannot afford the home and pull out of the deal.
While we all want top dollar, buying a home is a person-to-person transaction and we’re all different, so it’s wise to negotiate with an understanding of what the other person is experiencing to avoid buyer’s remorse and maintain the excitement of a new beginning.
Every home for sale will attract its share of bargain hunters –buyers who are prepared to buy any house as long as the price is low.
They have little emotional commitment; they are only interested if they can buy the house below market.
They may plan to ﬂip or resell the home with minimal input, so the only interest they have is in getting it cheap enough to make a proﬁt with little effort.
Unfortunately, some agents do sell bargains and will befriend these buyers to get a sale, believing that any sale is better than no sale.
At least they’ll get paid, and the buyer might give them the house back to sell again, once they’re ready to ﬂip it.
Anyone can sell a house; only a great agent will achieve a premium price above market.
A bird in the hand
You put your house on the market and seven buyers express interest.
One buyer makes an offer that’s at an acceptable level but it’s just not an exceptional price.
You have a bird in the hand.
Many of the other buyers are looking and talking but none are making offers.
What do you do?
The buyer who made the offer wants to move forward and is getting anxious because you won’t give them the go ahead but you’re hoping that one of the other buyers with interest will jump in with a better offer.
What if you lose the bird in the hand while waiting for another offer?
This is a good example of where you want a great agent representing you who’s an experienced negotiator, not just an order-taker.
As you know, the agent you choose will inﬂuence your ﬁnal sale price
ABOUT THE AUTHOR: GEOFF GRIST
Geoff is a licensed real estate agent working with motivated vendors in the Mosman Neutral Bay area who engage him to implement his six step methodology to have their property SOLD for an above market result.
Get the book here Sold Above Market
Originally published at https://propertyupdate.com.au on November 5, 2017.