I was on a mastermind call with a good broker friend of mine in LA a few weeks ago and was reminded of the shift in today’s market and how the majority of the country is experiencing what we call a Sellers Market, where the inventory levels are low and the buyer demands are higher than normal.
So many real estate agents are now struggling with the challenge of how to compete in this “Seller’s Market” so this week we look at some of the ways in which we are able to adapt to the current market trend.
Let’s start with what I feel is the biggest challenge we are facing when market conditions shift and that is the challenge of managing the buyer’s expectations and doing this right up front in your buyer interview process. It is critical we advise with our buyer what is happening to the inventory levels and what is happening with the buyer’s market demands.
What is the #1 thing a buyer hires us to ensure for them?
I would say making sure they don’t pay too much or more than they should for the home they are buying.
So why do we allow so many of our buyer’s to just write any old offer at any old price?
On the other hand if we upset the listing agent and the seller where they now don’t care how much you and your buyer will pay, they just don’t want you to have the home now or you’re paying way more than you should for offending them all.
Solution… I am a firm believer in the buyer strategy of “show and sell me” and “don’t just tell me”, the buyer has been in the driver seat in some of our markets for many years so you just telling them what is happening with supply and demand is not enough.
Take the time to show the numbers and statistics and even better the graphs and visuals for the buyer to see and feel what is happening with the inventory levels, average days on market, absorption rates, average listing to sale price percentages, full price and above asking price sales and in some cases multiple offer scenarios.
Pull off some listings that are excellent examples to demonstrate the facts showing they are in a seller’s market and what does that mean for them. They need to understand the days of low balling offers and taking your time to make a decision have come and gone and they need to be strategic and quicker than they were before.
I always loved saying to a buyer without being pushy but explaining what we call “Murphy’s Law” that “Mr. and Mrs. Buyer this home you see today and go home to think about tonight may be the same home that another buyer saw yesterday and will buy today.”
Another great strategy in this type of a market is to have all the financing in place before you even begin looking, never mind begin writing offers on homes. I made it a rule with myself that a buyer would take the time to meet with my preferred lender in advance to ensure we had no surprises and no disappointments; we all know the highest cause for collapsed sales is always because of financing.
I encourage us all to take the time to sit with the buyer and determine whether we are buying a “home” or a “deal”?
“You know what Mr. and Mrs. Buyer? There is a difference in what we are paying and what we are getting when buying a “home” or buying a ”deal”. It is our job to determine if they want a home or a deal, Right?!
In some of our market areas and some of the price ranges we may be experiencing extreme competition for the better homes and the possibility of multiple offers arise and taking the time to educate the buyer on some of the strategies to winning with these offers.
Present all offers in person face to face with the seller and the listing agent when in multiple offers whenever possible.
Ensure the buyer attends the offer presentation and show the seller they are there, serious and ready to act.
Make the deposit on the offer as large and enticing to the seller as possible.
Be flexible with your dates, offer to have seller rent back or take time to find another suitable property.
Be sure to leave your acceptance time on your offers fairly quick as to not allow the seller to play the competing bids against each other or to allow more time for other offers to come into play.
If possible do all your due diligence including the property inspection prior to writing and presenting the offer.
You may even offer to pay the sellers closing costs or (if applicable) have the buyer offer to throw in the use of their recreation property or time share property to the seller to add incentive to your offer as well.
This may sound corny but stats say your odds increase 9% by writing a letter to the seller for your agent or their agent to present to them about how owning their house would affect your buyers lives, maybe even attach a photo of your buyers and work at tugging on the seller’s heart strings.
Gone are the days where we would take the time without breaching our fiduciary duty and ask the fellow listing agent a few excellent questions to prepare a cleaner and better offer for our buyer.
Questions like… what comparable did they use to determine their asking price and why not exchange the listing agents comps and your comps for your buyer in advance of writing and presenting an offer?
How many showings?
How many offers?
Advise you of another offer?
Inclusions and exclusions?
Have they found another home?
What is more important to the seller? Terms? Price? Both?
Keep the offer and conditions as clean as possible.
The final and most important tip in a Seller’s Market is not making offers with a buyer who has a property to sell first. Get the buyer’s home under contract before you even attempt to compete in a market where there is competing buyers and low inventory levels.
I trust some of these strategies will allow you to compete at a higher level in seller markets.