In the Northern New Jersey real estate market, an agent negotiates all the time. You negotiate for your clients (i.e. price, allowances, contingencies, timing, earnest deposit, payment of financing/closing costs, personal property included/excluded, deadlines, etc.), with other agents (e.g. referral fees and co-brokerage fees), as well as with third parties (i.e. attorneys, home inspectors, appraisers, title companies, etc.). Then when you become successful you can even negotiate with your broker (i.e. commission splits, monthly fees, advertising costs, etc.).
In a field rife with competition, it’s important to keep up your credentials, but ultimately, my primary goal in every transaction is to protect my clients’ interests. So in December, I was one of the first batch of New Jersey Realtors who earned one of the top new designations in real estate - Certified Negotiation Expert (CNE). The class was very substantive, and contained an analytical framework for many different types of negotiations, in the context of real estate, as well as life in general.
Competitive Bargaining, Collaborative Negotiating, Psychology of Buying, and Persuasion Principles are among the topics covered in the course.
We are just entering the initial stages of the Spring real estate market season, which analysts are optimistically predicting to be busier than last year due to pent up buyer demand. As a local Realtor with Coldwell Banker Residential Brokerage and a Certified Negotiation Expert (CNE), I am going to share some tips for dealing with the inevitable “low-ball” offer that sellers will get on their property.
Picture putting your Maplewood, New Jersey home on the market for $550,000 and you are confident it's well-priced. You are thrilled when you get the call from your realtor a few days later stating she has received an offer and would like to present it to you this evening. You leave work early to get home and meet with your realtor and you simply can’t believe it – the buyer offered $500,000. You're stunned and disappointed.
If your first instinct is to feel insulted or hurl an epithet - don't! You can still end up with an acceptable sales price. According to Jeffrey Stanton, a nationally recognized speaker and Certified Master Practitioner in Neuro-Linguistic Programing, the key is being ready:
Tip #1: Work with an agent who will prepare and educate you.
It is critical for sellers to be prepared for the possibility of an unacceptably low offer. This is the job of the seller's (listing) agent -- managing expectations and emotions -- and too often this particular educational task is overlooked, with uncomfortable, potentially time-wasting results for all.
Most agents wait for an offer and say, 'oh, shucks, now I'm going to have to present this to my seller’. Not only should the agents tell the homeowners to be prepared for a low offer, they need to come to agreement on just what constitutes "low-ball."
Each market is going to be totally different. It may be 5 to 10 percent below list in one market and 30 percent below list in another. That's a unique conversation that has to happen between a seller and their listing agent.
Tip #2: Never take an offer as being offensive or disrespectful.
“Low-ball” offers may have any number of motivations, and sellers shouldn't automatically presume they stem from the buyers’ desire to be insulting.
Let me preface this by saying that I work about 60/40 with both sellers and buyers. So I know firsthand the "pain" of a “low-ball” offer from the seller's point of view. They come across at first like a slap in the face. But if you are a calm, experienced agent, who knows your marketplace, you can make them work. I love to give the example of a house I had on the market this time last year. The buyer and the agent who wrote the offer were not from our market area and didn’t understand the market place. The offer came in 20% below the list price.
Having listed and sold several of the comparable homes in Maplewood myself, I asked the agent to provide the comps she used. She was completely off the mark with her choice of comps. When I showed her the actual comps, she went back to the buyers and we were able to work through a decent compromise. Turns out this buyer didn’t want to be insulting, they were just mis-educated on the market.
Other times, a “low-ball” may be all the buyers can afford. It could be an investor or a buyer looking to steal the property, or a buyer who really likes your property and is just taking a shot at it, never knowing if you're going to say yes or no. Some listings stay on the market for months without any offer. Some sellers would be happy to get even a “low-ball” offer! So don't take a “low-ball“ offer personally, it’s purely a business transaction and your realtor is there to help you keep emotions out of the transaction.
As a buyer's agent, I have stopped discouraging buyers to go in low with their first offer, except when I know the house is newly listed, well priced and it is clear that there will be multiple offers. In those cases, you need to be competitive, but that's for another blog.
Tip #3: Do not ignore an offer, counter regardless how low.
Some negotiators suggest not responding when an offer seems out of line in order to make the point that the offer must be increased considerably. The risk you take, however, is that the buyer may become confused about the sellers motivation and walk away.
The goal is to keep the lines of communication open, so it is important to come back with something, anything. It doesn’t cost anything to make a counteroffer. If the house is listed for $550,000 and the offer is $500,000, the seller may want to counteroffer at $545,000, just to see what the buyer is going to do. You may be surprised by how many buyers come up considerably the second or third go around – you just need to get them there.
Tip #4: Pay attention to the next move, it will be revealing.
In the example above, the next move can be revealing. One of the signs in negotiations is how much of a move the other party makes. In general, the smaller the move, the closer that person is to their goal.
Take the aforementioned counteroffer of $545,000.
· If the buyer responds with $505,000, it can be interpreted as the buyer not having much price flexibility.
· If the buyer responds with $520,000, that's a big move. If the countering continues but the buyer goes up to $522,000, they may be likely nearer their limit or still hoping to effect a stronger reduction from the Seller.
Tip #5: Be willing to have the buyer’s Realtor present the offer in person.
Sellers sometimes prefer to have the offers presented by their listing agent. However, if the buyers’ agent says they are going to present an offer on my listing that's significantly below the asking price, I usually require that the other agent present that offer in person to my clients.
If it's a true “low-ball” offer where the buyer is just fishing for a price and the agent is aware of that, it might speed things along if the agent's presence is required rather than just faxing the offer. The buyers’ agent will likely say, 'let me get back to my buyers’. It's called a problem transfer. We take the problem - the low-ball offer - and transfer it to the buyers’ agent. Often times, that $500,000 offer has turned into a $520,000 offer by that evening without even starting negotiations. This often actually works.
Since taking this course of action, I enter negotiations better equipped and achieve better results for my clients. As a Certified Negotiation Expert (CNE), I have a valuable competitive advantage that helps to differentiate my services in the real estate marketplace.
My prediction for 2012: CNE agents will be the most in-demand Realtors in their local markets.
If you have any real estate questions, please do not hesitate to contact me. I can be reached via email gosselinhomes@gmail.com or via phone at (973) 985-6117. Please also feel free to browse my website for information on Northern New Jersey real estate at www.GosselinHomes.com or join my Facebook Business page www.Facebook.com/GosselinGroup for local market updates and community information on towns, such as Maplewood, South Orange, Millburn, Short Hills, Livingston, West Orange, Springfield and Summit.
This blog post was featured in www.Patch.com in a two part series. Read Part I and Part II here.
Comments(0)