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Tough Lessons for Buyers and Agents

As a buyer's agent, I preview and/or show property all the time. And I'm constantly checking out which listings sell, take price reductions, go under contract. I make it my business to know the market, and I take it seriously.

But this market knowledge doesn't do anyone any good when buyer won't listen! Charts and graphs, selling statistics, personal anecdotes... these are all great tools when trying to develop an offer. However, I've been running into buyers who somehow manage to ignore or explain away these things and make low-ball offers.

So the tool I've started using is the market itself. Allow me to explain.

When a buyer makes a lowball offer, and gets rejected, it's easy for them to say it must just be that bank or seller or whoever. The second time, it can be a little harder for them but often they will still be able to brush past it. By the third offer, the properties they liked enough to make the first two offers are under contract.

They are starting to see that the really great deals are already priced well, and moving quickly. So the market has showed the buyer that lowball offers don't work, even in a buyer's market. Now they are ready to move!

It takes a little more time and effort on my part, but now that I understand the process, I'm prepared. I can calmly show them the market statistics, and then resignedly submit an offer 30% below asking price. I have figured out that as long as I do whatever I can to help them, and am honest with them upfront so I don't raise their hopes too high, I still look like I'm on their side.

Then they make a realistic offer, close on a house and are happy. They feel like I stuck by them through all the obstacles "the market" presented, and refer me to all their friends. It's a hard lesson for buyers to learn, but they eventually get it.

Posted by Liz Landry on 07/07/2009 01:20 PM

Comments (15)

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15 Comments on Tough Lessons for Buyers and Agents

JUL

I know exactly what your experiencing! It's frustrating for sure, and my resolution has been to allow buyers to 'sink their own ship'.

When a buyer falls in love with a house (yikes) and doesn't get it because they low-balled or didn't act quickly enough, you can bet that on home #2 they are likely to remember what matters most to them and a lot of times, its value not price!

Liz I feel your pain- some buyers however will never get it. They are stuck in a mindset which is doomed to fail. And when there are no homes left that will fit into their meager budgets, they blame the same market they tried to control, the banks that refused to yield and the Reators who failed them...when it is really they who failed themselves but not seeing what was clearly in front of them the entire time...the truth.

It's getting to be an overused chant Buyer's Market" By the now the sellers have started to wise up and realize that if they do not price it right then they can expect it to just sit there. No matter how much promotion it may get overpriced just doesn't sell. With the buyer's, if given relative comps, they should see the light because in some markets, most of the bargains are going quick.

Geez, you must have my clients! I have to tell them to LISTEN to me if they want a particular house to call home! Otherwise, if we do what they want to do (low ball, ask for unreasonable concessions) they will lose the home OR make the other offer (that will come in) look good!

Thanks for this post. I know I'm not the only one.

JUL

Hello Liz, we are getting the same thing our way -- we show more homes, do more educating on what the current market value is for each of these homes -- then the home buyer wants to write an offer 20%+ below what our opinion of current value is! Thank goodness for electronic purchase and sale forms that allow us to get the buyer on track after we've written offers and lost on a home or two. Thanks! John

Hi Liz,

We can counsel our buyers with graphs and statistics and pie charts and the like re the current pricing of a market, but we do not have any control over what our buyer decides to offer.

We provide counsel....but they ultimately make the decision re how much they want to offer.

I don't know how the market is where you are, but here in Gainesville values are still sliding. Just like sellers should price ahead of the market so that they are competitive and stand the best chance to receive offers, buyers should offer a price ahead of the market as well.

The value of a home is what the buyer and seller agree upon.....and if a seller doesn't want to take a "crappy" offer, that's their right....as long as their agent makes them aware of the housing inventory and absorption rate at their price point in their particular area, and as long as they are informed that a ready/willing/able buyer is just that....ready, willing, and able....and if the seller and the buyer cannot reach a meeting of the minds re price & terms, the buyer will go find something else.

Sellers are going to take a bath in this market, no matter how you slice it.....and buyers are definitely in the drivers seat.....

Considering that we haven't seen the worst of things yet with Alt-A loans due to reset and a flood of bank-owned properties ready to hit the market.....I think it makes a heck of a lot more sense to counsel sellers to be more reasonable than to get frustrated with buyers who are pouncing on this golden opportunity.

I have just experienced something new. I have a buyer who is nervous about purchasing a home because it is at the high end of what she is pre-approved for and she is single to boot, so she feels a lot of pressure on her back to make sure she is ready to make the big move from renting to being a home buyer. Well, the price range she is looking at has few homes in the area. So, she finds one, but get this, the mortgage loan officer tells her that maybe she wants to wait awhile and see if the government will handout any more money for homebuyers. I am beside myself because there are so many varibles involved in helping this lady to get a nice home in her price range and at low interest rate. Now she is told there MAY be more money coming for home buyers. I talked to another loan officer and he said that money was brought up a while back and nothing more has been said. So, it is frustrating to have a willing buyer and a goofy loan mortgage officer.

We are experiencing much of the same as well. It is hard to get buyers to realize!

JUL

Liz,

We're not in a buyers market any more; we've just turned the corner.

Liz, so true, so true. Human nature takes over. It does take time, but fear of losing again can be a big motivator. I find myself saying, "Before we do that, let me be the Voice of Reality..." over and over again. Sometimes they listen, but sometimes the big-ego'd negotiator stands in the way.

With lowball offers, I always ask, "What if you don't get this house? What will that mean to you?" Helps me know where the buyer is coming from.

And of course, the question we should ask all of our buyers: "What does 'Buyers' Market' mean to you?"

Hang in there!

JUL

In our market some of the banks have listed prices at teaser amounts to encourage multiple bids. I have a couple of buyers that have made offers on homes at the listed prices only to be turned down. I have not run into too many that are underbidding in the last three months, it would just be nice if the listed prices were "real". This is also driving our appraisers bonkers because they have to determine a list to sale price ratio for the investor buying the loan.

JUL

I had one buyer recently who made 6 offers on 6 different homes for sale! It took him that long to believe. The biggest obstacle I see for most buyers is learning to filter the advice they are receiving from friends and family who listen to the news. Once they realize that I have better information, they slowly come around to face reality.

Liz - I have discovered that many buyers are not desparate, and don't really need to purchase, and that is why they are writing low ball offers. If they don't get it accepted, they can just move on to the next home and offer another low ball price, and continue to do that until someone accepts one. If the buyer never gets an acceptance, some really do not care. They are not in need of a new home, but if they can get one at a significantly reduced price, they are all for taking advantage of the situation.

JUL

It is the same everywhere unfortunately. Unrealistic Buyers, Stubborn sellers who refuse to accept that markets change, it is just not easy to make a sale anymore. Buyers want everything, sellers don't want to give anything and we are caught in the middle. It has got to get better --- eventually.

JUL

Liz, in any market some "buyers" are really just "lookers." That's why it's so important to ask those tough prequalifying questions that help us determine who the real buyers are. If their not paying attention to the stats you're showing them and if they are losing one property after another because of low ball offers, then I would go back to those questions and remind them of what their trying to accomplish. If that doesn't work, I would set them free.

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