We have been in a phenomenal market these last 4 years with buyer’s fighting over properties and sellers selling their homes for top dollar pitching buyers against each other to get way more than asking price.
But what happens if the market shifts? With the latest world conditions and economic impact it could change quickly and become a buyer’s market just like what happened in 2008. You always need to be prepared for a market shift and here are some tips to put in your tool belt to be ready.
In a buyer’s market, buyers are king (or so they think) and low ball offers will be common place. You will need to know how to handle them effectively for your buyers as his/her advisor and for your sellers as they will need the latest information on market conditions and advice as to how to handle lower priced offers.
So the co-op agent brings you an absolutely ridiculous offer, what do you do? First, be courteous and respectful. I have discovered the old saying “you get a lot more bees with honey than vinegar” is true for Realtor’s too. Plus you set the buyer’s agent up for getting a lot more useful information on how to negotiate with them later.
Here is one way I have handled a low ball offer. First, I respectfully ask the buyer’s agent how they arrived at that offer price. I ask if they have used comparables (comps) to support their offer. If the answer is “No, we do not have comps,” then I ask why they made this offer. I also say, “In order for me to present this offer to my sellers, I would like to give them a reason why your buyer only thought this home was worth _____ amount.”
Here are some interesting responses from my fellow co-ops I received after asking these questions, and the answers put me in a wonderful negotiating position. I hear statements like:
-“Well, the buyer just wanted to see how desperate your seller is.”
-“I know it is low…I am sorry… please just present it”
-“My buyer is a pain, but …He really wants this house”
-“Please just counter us.”
I want to impress on you, dear reader, that in no way am I suggesting you ever use these sort of responses. If you do, you just compromised your buyers’ negotiating position and played your hand for everyone to see.
For my part as the seller’s agent, however with these kinds of responses, I now know that the buyer is playing games. And even though my motto has always been, “I will never let the deal die with me,” I have found that rejecting an offer that is just downright ridiculous can be the best course of action. I call it the take- away technique. When doing this you must be respectful to the coop agent and say something like this:
“We appreciate the offer, but at this point we are just too far apart to make it work. I welcome you to bring back something more reasonable.”
By refusing the buyer’s offer we are really determining their real motivation and how much they want the property. Holding tight on our terms will definitely make them “show their cards” so to speak. This sends a message to the buyers that we do want to work with them, but the deal has to work for both parties and not just the buyers. In a deep buyer’s market I have heard buyers say things like “sellers must sell to me at any price I desire to pay because I know the market it is bad”. This is not true for every seller.
And of course, the other option to rejecting the offer is the seller can choose to respond/counter with something the they feel they can live with as far as price and terms and stick to their guns at that point.
But what if the coop agent has given you valid reasons for the low offer such as the buyers feel the home needs too much work or this home just does not compare price-wise with the other homes they viewed that are comparable. You now have supporting evidence to present to the seller with valid reasons for a lower offer and a way to encourage them if needed, to concede on price and terms if they have been stubborn and need a reality check.
It is interesting to discover that many times the buyers just want to low ball because they think all sellers are desperate and want to test them to see how much they will come down. That is why it is so critical to ask the coop agent the right questions, as you learned before, so you can discover the real truth about the buyers’ motives.
Understand that in a buyer’s market, there are a lot of properties for Buyers to choose from and unfortunately, the news media may portray every seller as desperate and every property value in the nation as being down 50% which again, may or may not be true in different parts of the country. Even during the last recession there were areas in California and Florida for instance, that still commanded top prices for properties because the demand was still great for that location.
Naturally, however since they are getting their information from national news, the buyers will think that they just have to try to low ball a seller for that reason. If Agents just sat around watching the news, sellers will definitely be in trouble! That is why it is so important to stay up with the current economic market conditions in your area and advise your clients accordingly.
I will say this about that….in my experience —no matter what the economy or the current market is, if a buyer loves a property, they will move heaven and earth to get it. They will negotiate to give the sellers what they need and make a reasonable deal. So it is not always about beating up a seller in a down market.
And Yes even in a down market, Buyers have been known to pay more than asking price if they are bidding against another buyer, and they want a property badly enough. Right there is proof that if you have a ready, willing and “in love with the home” buyer, you got a deal.
No matter what the market is, if you are working for on seller side of the table, you need to present all offers to your client and advise them based on their personal situation. Continue to work to get the sellers their best deal. Always use good judgment and always be evaluating the market statistics no matter what.
I touched on this lightly earlier in this article but I want to impress this further that in a declining market with a lot of low ball offers coming, sellers can develop remorse, resentment and disillusion. Sellers often become distressed and discouraged, adversarial and difficult to deal with.
In this case it will probably be in their best interest to present low offers in person. Here is why. Home selling is very emotional for some. Many sellers are in love with their home and feel it is worth more than the same house down the street that sold for less or anyone else on the block for that matter.
Many people have raised their children in this home, continue to have family gatherings there, invested thousands of dollars maintaining and updating, all the while loving every minute of it. Many folks think they will die in their home, but come to the realization things have changed and they must sell. These are all emotional events that impact a home seller that you need to be aware of, especially if they are selling in a down market and the seller is losing money.
Think about what the best way to present an offer is in a market that is not fast-paced and difficult based on your seller’s current situation and their feelings about the home. If you are conveying the terms of a very low offer to sellers over the phone, it will be too easy for them to simply reject it.
If you go face-to-face, you will be able to read body language, lend a sympathetic ear to the problem, handle objections with confidence and most times get a counter or, hopefully, an accepted as written. The market is the market, and this may be the best they can get and you need to be there to best advise them and empathize.
No one wants a repeat of the Great Recession, but as outstanding Realtor professionals you should always be honing your skills to handle all situations with the market and advice your clients accordingly.
I hope you enjoyed this!