| Real Estate Buyers and Sellers and The Attitudes of People Today
Today I’m going to tell a real estate story. This is a story of a hypothetical real estate transaction, and the parties involved. I chose to tell this story in a manner that is obviously slanted toward one side, but that’s not really the point. It could easily be told from a different angle. Regardless, don’t get overly focused on the story of real estate. It’s about people. It’s about attitudes. It’s about the way people have changed in the last few years. It’s about the kind of person you are, or want to be... or DON’T want to be! Hold onto your seat and remember this is hypothetical, but also do some introspection! ........................................
In today’s real estate buyer’s market, with many “deals” to be had, many buyers are looking for a “steal”. I’m sure most real estate agents are aware of this. But there’s a big problem in this area that is getting bigger every day... There’s a difference between a “deal” and a “steal”. And with real estate values leveling out, trying to get a steal typically offends a seller, and can lead to a stalemate.
Let’s think this through... Sellers are having to sell their homes for much less than what they paid. It’s a horrible position for these sellers to be in. They know they’re already having to give real estate buyers a deal, and they’re not exactly thrilled about it. It’s not that they don’t know that the market has drastically declined. Most sellers have resigned themselves to that fact. And the sellers who are listening to the advice of their REALTORS®, have priced their available real estate listing in accordance with the current market value... which in itself is a “deal” for real estate buyers!
Now here’s the problem I’ve been seeing for the last few years, but most especially in 2009. Buyers want a “steal”! And sellers are willing (they have no choice anyway) to sell their property at a good “deal”... but NOT a “steal”! So along comes a buyer who, in search of a “steal”, makes an offer that offends the seller. After presenting this offer to the seller, the listing agent listens patiently as the seller vents their frustrations about the market, their loss of all their savings, their loss of equity, the probability that they’ll have to bring money to the table in order to sell their home (or whatever type of real estate investment they have listed), and the end result is that particular seller not wanting to work with the buyer who made the offensive offer.
At this point, the possibility of a successful transaction seems to be out of the question. But a good REALTOR® is usually able to reason with their client, along with giving them a little bit of time and space to think about it, and frequently the seller will calm down and decide to make a counter-offer that they’re not really happy about, but is at least closer to the amount they need to net.
So the listing agent now presents the counter-offer to the selling agent, who then presents it to the buyer. But the buyer is now angry. They want a steal! And now the selling agent listens patiently as the buyer gives all their reasons why they should not have to pay more than what they offered.
Most likely, the selling agent has already shown comparable sales of similar real estate listings that have recently sold, to the buyer before the first offer was made. If not, they would/should do so at this point. Assuming these comps have already been shown to this real estate buyer, the selling agent and buyers should now go back over the comps together and possibly narrow down the comps a bit more. They may even take into account the possibility that the market has not yet stabilized (if that area is still in decline). The selling REALTOR® will probably also remind the buyer that in order to obtain financing, the home/real estate listing will have to appraise. And banks are NOT currently lending money on real estate that leaves any chance that they might lose money on their collateral.
The process sounds stressful, but reasonable so far... doesn’t it? Well here’s where things get really frustrating. Bear in mind, the seller is still offended by the first offer. And the buyer is angry because they wanted a steal (not a deal). So the buyer ignores the comparable sales, and even the assurance that the potential real estate purchase will have to appraise. And the buyer makes another low offer on the already reduced price they got when the seller made a counter-offer.
When the selling agent presents this offer to the listing agent, these REALTORS® already know the stress levels are about to hit the fan... and we’re not even talking about a bank-owned property! You can triple the amount of stress and frustration for ALL parties involved in those types of transactions!
So the seller receives the new offer to purchase their house. Sure enough, this time the explosion is heard throughout the neighborhood. And again, the listing agent must sit patiently and wait for the seller to vent all their frustration. At this point, there may or may not be another counter-offer from the seller! Many sellers, after losing so much money, and doing all they can to not lose their home before having a chance to sell it; will channel so much anger in the direction of this particular buyer that they will not want to sell their home to them at all. And many times, this is where the negotiations come to a halt. However, the listing agent may be able to get the seller to make another counter-offer. Only this next counter-offer will most likely be only a hair lower than their last counter-offer. The sellers are nearing the end of their rope.
So the listing agent once again presents this counter-offer to the selling agent, who already knows that the buyer is also not going to be happy! And surely enough, we repeat the previous events... buyer yells and vents; selling agent refers back to the comps and reminds buyer that there will be an appraisal, and even offers to add a clause that the buyer will not proceed with the sale if the property does not appraise. But the buyer still wants a steal! ........................................
OK. So I could continue on with the many possibilities that could happen from this point on. The sale may or may not reach a successful closing. But if it does (and here’s my point to all this), the only way either side of this transaction will be truly happy with this sale is if they feel like they made the other party “bleed”! You can take this entire scenario and use the examples in reverse. The events and outcome will be the same... people are no longer willing to compromise. And without compromise, there can be no successful negotiation.
I’ve heard many buyers say that they feel this way because of their inability to buy real estate during the sellers’ market. It’s that frustration that is causing them to be unyielding in negotiations. And most of us can understand a bit of that logic. But bear in mind, a property is worth whatever a buyer is willing to pay. And for several years, buyers were willing to pay exorbitant amounts of money so they could “keep up with the Jones’s”. And none of us can go backward in history, and change that period of time. We can only work with what is happening right now. And right now, many parts of the country have reached their leveling off point in real estate. Some areas are even starting to see an increase again. Every area is different, and REALTORS® must present comps to potential real estate buyers and sellers, on a “hyper-local” scale. If the comps are not there to support the price being asked, then that particular property is NOT worth the asking price! But if the comps ARE there, then the listing agent and the seller(s) have done their homework and priced that listing properly. Negotiating is to be expected. But they don’t have to “bleed” and/or give potential buyers a “steal”.
I want to reiterate that this entire scenario can be presented in reverse. I’m not trying to just pick on buyers. There are many sellers who have over-priced their listings, and potential buyers have every right to offer an amount that is based on current, comparable sales. But my real concern is the prevailing attitude among many real estate buyers AND sellers, that they will not be happy unless the end result was a “steal”. The prevalent ME, ME, ME attitude leaves no possibility for successful negotiations. Someone, somehow, MUST COMPROMISE!
One of my very successful clients, who at one time was near the top of the rankings in a Fortune 100 corporation, once told me that his definition of a successful transaction was... when both sides of the transaction walk away happy; feeling like they got a good deal. Neither side felt like they had been taken advantage of. Both sides had made compromises, and had reached a successful conclusion, and were now able to sit together at the closing table with no hard feelings toward each other.... I’ve always remembered that statement. It’s common sense. It’s logical. And it’s pretty darn close to The Golden Rule... "Do Unto Others As You Would HAVE THEM Do Unto You"!
So what has happened in society to cause so many people to be selfish, unyielding and even downright rude? I’m not talking about just real estate here. I know that times are tough. Just ask any real estate agent, mortgage broker or lender, home inspector, title company, appraiser, surveyor, stager, or anyone in the real estate industry.... or anyone in any type of sales, for that matter, because that’s what I’ve been doing. I’ve been asking. And I’m getting the same story all around. When it comes to buying, people today are not happy unless they feel like they really “got one over on them”. And that’s the story they want to be able to proudly tell to anyone who will listen!
So what is my reason for writing this post? I’m hoping it will cause each of us to take a good look inside ourselves and do a “pride” check. Are our actions displaying “haughty” (prideful-not in the good way), “selfish”, “self-centered”, “ugly” behaviors? Or are we acting in a manner that is “kind”, “compassionate”, “understanding”, “giving” and willing to see things from the opposite perspective?
What kind of world do you want to live in? Because it all starts with you, and me. This is not about a little story of real estate buyers and sellers. It’s about people. It’s about compassion. It’s about being the kind of person who will bring about positive change in this world.
I know what kind of person I want to be. How about you?
"Be the change you want to see in the world."