Real Estate Negotiations: A Zero Sum Game?

Real estate negotiations don’t need to be zero sum games – where one side’s gains equal the other side’s losses. In other words, negotiations don’t need to be win / lose or lose / win or lose / lose scenarios. The outcome should truly be win /win. ( Stephen R Covey’s fourth habit of highly effective people).

Add Value If It’s There

I’ve been involved in way too many negotiations in Durham County, Orange County, and Alamance County where I’ve had to stop and ask myself, “does the other realtor really want this deal to go through?”. In one such negotiation where I was representing the seller, the buyer’s agent flat-out told me their client had no interest in the detached studio in the back of the property. In fact, she said, her client will probably just use it as a spare room. As a result, the agent significantly downplayed the value of the building and consequently, offered a much lower price than the market value for the property.

Little did the buyer’s agent know, her client became a little too friendly with the neighbors during a second visit to the property and told them she and her husband were so excited to find this home as the detached studio in the backyard would allow the husband to continue his passionate pursuit of an old hobby that was placed on hold for a few years.

Many agents out there will give kudos to the buyer’s agent for not disclosing personal information about their client. I wholeheartedly agree. However, whether the buyer will make use of the detached building immediately or in the long term, or potentially never, there’s value in the building so let’s assign a dollar amount to it.

Agents Can Be Unreasonable

I’ve also come across negotiations where the seller on the other side was just so unreasonable. On one such occasion, I was representing an out-of-state buyer. After I formulated a detailed comparative market analysis, my numbers told us the seller was at least $30,000 overpriced. I freely shared my complete analysis with the agent in support of the accompanying offer and guess what? She refused to budge one dollar! I asked her if this all made sense to her and she was adamant in her belief she was going to fetch the asking price. Eventually, the home left the market unsold (aka expired).

Buyers, of course, can be unreasonable too. I’ve had buyers fishing for the deal of the century! They’d make lowball offers on multiple properties, including one of ours, in an attempt to pit the sellers against each other. There are measures a seller can take to counteract such behavior and if you’re interested, please feel free to reach out to me.

It’s All Wrong, But We’ll Take It!

I’ve also had a buyer’s agent, during the negotiation, tell me everything that was wrong with my listing: no garage, no bathtub in the owner’s suite, and too small of a kitchen. The only response I could think of at the time was, “I think you put an offer on the wrong home”.

Hot Market Is Not Win / Lose

Let me just clarify something here. Just because there’s a “feeding frenzy” in certain hot market neighborhoods where multiple offers come in at above list price, that does not necessarily mean the chosen buyer loses and the seller wins. It’s still a win /win since this is an example of market dynamics at work. If the buyer wants to “win” the property in this market, he’s going to have to bring the highest and best offer.

Other Agent Not Ready To Play

What happens way too many times than I care to admit, is the agent on the other side of the negotiation doesn’t actually know if the listing price is too high or too low. Truly, I’m ok with that – at least they’re honest and willing to learn. Either they ask me for my comparative market analysis or I will fully explain why the house is priced the way it is. Once we are all on the same sheet of music, the rest of the negotiation runs smoothly.

Here’s the bottom line, let the facts speak for themselves, let’s play honestly and fairly together, so we can mutually bring the buyer and seller towards the end goal of allowing them to move on to their next home: all in the spirit of a win / win outcome.

Photo by Michał Parzuchowski on Unsplash

What Agents Have That Homeowners Don’t!

Agents have their fingers on the pulse of the market. Since we sleep, eat, and drink real estate, day in and day out, we have a feel for the market.

There’s no other way to explain it. The data can remain consistent from week to week and month to month, but agents with “boots on the ground” have a sense when the beat is slightly off.

Over the past 6 weeks, the Triangle Multiple Listing Service (TMLS) data has been consistent regarding the number of active listings, months of supply, and days on market on a week to week basis.

But something’s not right. The number of price reductions or as many agents will say, price improvements, has been escalating. And unfortunately, I don’t have the numbers for price reductions but that goes back to my point, good agents have their fingers on the pulse of the market and can sense when the beat is off.

It’s also helpful that I work in an office (a big shout out to West and Woodall Real Estate) with some top notch / top gun agents. They’re truly some of the best you’ll find in the Triangle. And when we all start sharing this feeling, it’s not a coincidence.

Along with the higher than usual number of price adjustments, the number of buyers has appeared to diminish too. So, is there data to back up our feelings? Of course there is. You really didn’t expect me to say “no” there, did you?

Let’s look at homes priced between $100,000 – $400,000. I chose this range because more than 73% of all showings are for homes in this price range.

Over the last 90 days, homes in this price range averaged almost 9 showings per listing. Now, if we just take the last 30 days, the number of showings per listing was only 5.66. That’s more than a 36% drop in the number of showings per listing! So our feeling that the buying pool is starting to dry up was correct.

Fewer showings means more days on the market before a home sells. Sellers put their homes on the market anticipating it to sell in X number of days because that’s what the data was telling them. Sellers need to be in their new home by such and such a date so what do they do? Reduce the price to make that date. And maybe several price improvements.

Also, as we enter the “slow time of the year”, sellers need to understand the odds may be stacked against them. Now please, I’m not by any means suggesting sellers do not put their house on the market at this time, that’s not what I’m saying. In fact, there are many reasons why a seller would put their home on the market now but I’ll leave that as a topic for a later post.

All I am saying is the odds of selling your home has slightly decreased over the last four weeks. A month ago, a seller had a 73% chance of selling their home whereas today, they have a 69% chance of selling.

So what does this all mean? It means you, as a seller, need to hire a knowledgeable, professional, full-time agent that has their fingers on the pulse of the market.

That agent could have advised you on the price reductions taking place in the market along with the decreased traffic and lower odds of selling your home so together you could agree to price your home ahead of the market. Your home would be priced correctly to increase foot traffic and therefore, increase the odds of selling your home so you could meet the deadline of being in your new one.

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