Guest Post – Being a Seller in a Buyer’s Market
by Tom on April 28, 2009
in Guest Posts, Market Musings
Once again, I’m turning to my friend, Jeff Brown, for today’s guest post. Jeff has an uncommon ability to generate the type of “Straight Talk” that is needed in today’s markets.
I hope you enjoy this!
Tom
Selling Real Estate In A Buyers’ Market? Here’s How To Turn The Tables · BawldGuy Talking
Disclosure: In order to avoid hurt feelings I’ve taken some liberty with some of the facts of the example used. These changes are insignificant as they relate to the main theme. They’re required, in my judgment so as to protect the privacy of others. You’re free to continue reading now.This example recently took place in a smallish northern California city.
First of all let’s face something that may be our currently reality — it’s entirely possible real estate in general is beginning its painful U-Turn as we speak. It’s also entirely possible it ain’t. From my vantage point, which allows me to see more than a few markets up close and personal, there’re too many signs for me not to think something might be afoot. But I digress, and besides, we’ll not know for sure until our rearview mirror tells us, right?
Buyers in markets so heavily tilted in their favor tend to behave accordingly — Duh. They make sometimes insultingly low-ball offers. Insist sellers pay a large part if not all their closing costs. Want price adjustments at every turn, mostly from the leverage they perceive available to them during the inspection period. They do it until they sense the seller is about bleed out, then smile, back off, and wait for the escrow to close.
So the million dollar question is, just how does a seller successfully shift the balance of power? Can it even be done? You bet your bloodsucking vampire-buyer it can. It’s so simple, yet so many sellers are afraid to implement the approach. I’ve never understood why.
A recent example comes from our own files. Our seller, as we warned him from Day 1, had to swallow pretty much everything the buyer wanted. Still, the final price was a record high in that neighborhood since about August of last year. Not bad. The buyer had made his offer literally hours after it had hit the market. He wanted it. And why not? The property itself was nearly perfection personified — a factor which shouldn’t be lost on you.
Every time we yielded to the buyer’s agent (on one point after another) it was quietly mentioned by us how this was a buyers’ market and we really had little choice. Once we arrived at the bottom line, which was, according to our seller, written in his own blood, we made one itty bitty request of the buyer’s agent.
We’d like the deposit, which was nearly $10,000 on a sales price under $500,000 — to become permanently/irrevocably non-refundable on the last day of the inspection period — passed by escrow through to the seller at the end of business that day. We’d been so reasonable throughout, he felt he couldn’t/shouldn’t refuse this one small request.
Then the appraisal came in low. The agent said that was ‘unexpected’ but the seller would need to ‘adjust’. We politely demurred, instead saying the buyer would need to be paying for more of his own closing costs than previously agreed. “He doesn’t have it” replied the agent. “Then I guess we have a problem, ‘cuz the seller just ain’t in the mood” said the ‘other’ Brown. Continuing politely, he said, “You’ll need to figure a way to make it far more palatable for the seller. He’ll adjust to this farce of an appraisal, but your client will hafta come up with a lot more than he has so far. This is a two way street.”
One wonders what the conversations must’ve been like between the buyer and his agent at this point. There was simply no way, no how the buyer was gonna walk away from his nearly $10,000 deposit — and everyone knew it. The best part? That deposit was like the 10 ton elephant in the room nobody (needed, wanted to) talk about — especially the buyer’s agent.
We may hear from various buyers and/or agents saying they’d surely not ever allow a deposit to ‘go hard’ as it’s called. Fair enough. But I’ve been able to make it happen over half the time in every buyers’ market in which I’ve participated, with the exception of ‘74-75. Why not then? Gimme a break, as I was 23 at the time and hadn’t yet had the full advantage of all the mentoring I’d eventually receive.
If you’re a seller in a buyers’ market, please put this strategy into play. Buyers and their agents tend to become more than a tad cocky, and will often let their guard down. I call it IBS — Invincible Buyer Syndrome. It’s often exacerbated by a much worse malady — IBAS — Invincible Buyer’s Agent Syndrome. The really pivotal players more times than not in this approach are the buyers’ agents themselves.
Anywho, give it a try. In this example it generated about a 7% increase in our seller’s ultimate net proceeds — not a bad result, all things considered.
Wanna talk? Call me at 619 889-7100 or email me through the Contact BawldGuy widget up top. Have a good one.
Much thanks, Tom. I hope this helps some MI sellers.