Tag Archives: negotiation

MULTIPLE OFFER PERSONALITIES

Hmmm.  How odd.  Buyers competing with other buyers?  In what’s supposed to be a no holds barred Buyer’s Market?  You know, the kind of market where buyers call all the shots. And have their pick of the listing litter whenever they deign to bestow a little largesse on those woeful  sellers, all addressed up, waiting to dance.

And yet…,.we’re seeing multiple offers flying right and left, at least in some parts of  this peculiar market. What’s that all about? It flies in the face of everything we thought we knew about how a Buyer’s Market is supposed to act. But then, these are interesting times, aren’t they? As the oft-quoted Chinese curse says: “May you live (and buy) in interesting times.”

Before we get too far into the mysterious multiple personalities that come part and parcel with multiple offers in a Buyers’ Market, let’s spend a column strolling down memory lane.  Let’s harken back to those thrilling days of yesteryear – when it was a Seller’s Market and there was nary a care in the world. Money grew on trees and competing buyers were the staple that everyone else was feasting on.

If you were a listing agent back in  1988-1989, 1999-2000 or 2004-2005,  you knew, unquestioningly, with every fiber of your real estate body, that even if your first escrow fell out, due to fate or bad luck or even a buyer’s bad behavior,  there would always be another one waiting in the wings.

For every offer, there were 4 or 5 or 20 others right behind it. Buyers tripping over buyers to get into back-up position.   Every listing was on the gold standard. A veritable stash of krugerrands buried in the back yard. You didn’t worry about counting your commission before you had it because every listing – good, bad or ugly –  sold.  The key to success was to get the listing in the first place They were all done deals.

Here’s to  a rapidly appreciating market! It cures all ills. Glosses over all imperfections. Makes every boo boo feel better.  Nothing can go wrong…until of course, everything goes wrong.

Working with buyers in a Seller’s Market? That was another story. You put your time in. Often endless hours. Showing countless numbers of properties. Rushing to get to them quickly when they first hit the market. Beating the rest of the hungry hordes flocking to the blue light special. Writing offers on properties your client didn’t stand a snowball’s chance of getting – mostly because they just weren’t ready to step up and pay what the market insisted they pay and in the end… made them pay.

Sometimes it took 3 or 4 failed multiple offer situations for a buyer to finally get it.  For the light bulb to go on. They really couldn’t negotiate. The market wasn’t going to let them. This wasn’t Burger King and they couldn’t just walk in off the street and expect to have it their way a la carte. If they wanted to buy something, anything, the capitulation had to come from the buyer’s side of the coin (lots of coin).

The challenge for every buyer was in his own head. The true negotiation was with himself. How much could he ultimately convince himself to pay for a place? How much could he trick himself into taking on? Whatever he thought his limit was, the highest price he could possibly afford …it always took more. And more. And then … just a little more.

It was The Big Squeeze. Not only did buyers routinely start with more than full price and bid-up from there, they were also pressed for time. They careened crazily through escrow with incredibly short contingency periods. After working so hard to get into contract, they were afraid of what might happen if they didn’t hit every single mark, in perfect sync, along the way.  Inevitably, there was always something unexpected that came up.  A bump in the road or in the interest rates at the last minute. An extra closing cost popping up out of nowhere.   An inspection issue that no one really anticipated. Ca-ching. The adding machine just kept adding it up and piling it on.

Buyers had to talk themselves into accepting it. Dealing with it. Working around it. Putting up with it until it could all be fixed down the line, with a tiny piece of that pot of gold that was going to be theirs, waiting at the end of the rainbow.  It wasn’t that buyer’s remorse didn’t happen back then. It was just that it was so much easier to swallow.  The gestalt of the times was cramming it down every one’s throat. The whole object was to buy something. To get into the market at any and all cost.  Because it was only by getting into the market that you got a chance to be a seller too.

So next week, let’s explore how utterly strange this phenomenon of multiple offers can get when it happens right in the heart of a market teeming with buyer’s remorse. Who wins? Who loses? Who capitulates now?

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Real Q and A

Making an offer shouldn’t be like throwing spaghetti against the wall to see if it will stick.

(Originally Published 7-08-06)

Dear Tom: We are interested in a house that has been on the market for a long time and hasn’t sold. Clearly the Seller is asking too much or someone would have bought it by now. We want to make an offer but we don’t want to waste anyone’s time. So, we thought we would just make our offer to the Seller verbally through our Agent and their Agent. What do you think? Waste Not, Want Yes

Dear Want: Except for rare instances (mostly relating to counter offers and counter to the counter offers) I am not a strong proponent of throwing verbal offers casually out into the ether of the marketplace, as though one were tossing strands of spaghetti against a wall, just to see if something might stick.

As anyone who has worked in this business long enough will tell you – talk is cheap, even if the houses aren’t. I don’t know how many times in my career, an Agent has called to say that he/she was bringing in an offer on one of my listings, only to have some sudden mysterious act of “client interruptus” take place in the form of a last minute change of heart or a debilitating attack of buyers remorse – in which case the mythical offer got hijacked before it actually ever materialized in the flesh.

I stopped telling Sellers a long time ago that we “might” have an offer coming in every time someone calls to say they are “working on something.” Too often it gets emotions worked up and adrenalin shooting through the system needlessly. There’s nothing worse than a Seller waiting  in vain for their date to show up and the dance to begin – sitting all “addressed up with no place to go.”

So rule of thumb is: unless there is a bona fide Purchase Contract completely filled out with someone’s John Hancock on it staring up at me from the safe harbor of my own desk – it ain’t an offer.

It might be a dream. It might be a flight of fancy. It might be a negotiating ploy. It might be unrealized potential. But it ain’t an offer.

As a Buyer there’s another angle you might want to consider. By making a verbal offer, you could be selling your own interests figuratively short if you are really trying to convince the Seller of  a property that has been on the market for a while to sell his/her interests literally short.

Think about it! When you tender a verbal offer, you are in effect saying to a Seller: “If I were to hypothetically think about writing an offer on your home somewhere in the range of some price, how do you think you would hypothetically respond to such an offer, were I to actually make it?” Hardly compelling stuff, is it? Specially for a Seller stuck in the morass of their own mind-set.

I guarantee you that as long as Sellers are thinking about the prospect of selling their property on a purely hypothetical basis, rather than a real one, the vast majority are going to revert back to the same conceptual set of expectations that convinced them to overprice their property in the first place.

There is only one way to transition your interest and their dreams out of the realm of the hypothetical and into the real. Put your offer in writing. Make it appear on their dining room table. Force them to review its terms and conditions in a way that requires them to do some actual soul-searching and confront their own presuppositions.

A real written offer alters the internal process of even the most recalcitrant Seller. It says to them that the whole ordeal can be over if they just agree to sign on the bottom line. And that is compelling to someone who is tired of living in the fish bowl of the marketplace.

This isn’t to say, of course, that you can write any offer at any price and expect Sellers to immediately cave in and hand you the keys and the deed to their property. What it hopefully means is that you can create an opportunity to get your foot in the door and begin a dialogue about acceptable price and terms without getting it slammed shut abruptly in your face.

Talking the talk isn’t enough. You’ve got to help the Seller walk the walk and do the difficult work of coming to grips with their own deflated expectations. Don’t worry about wasting anyone’s time. It should only take your Agent 20 minutes to write up the Purchase Contract assuming you have a reasonable sense of what you want to offer. The Seller has already wasted much more of their own time than you ever could.


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