Negotiating in Today's Real Estate Market
Today, we’re going to dig into how to evaluate your market position when buying or selling and how to act on that information to your benefit. Do you know what a buyer's market or a seller's market are? Maybe you've heard those terms but don't know what they mean. We will cover all that and more!
Negotiating and Offers
Every person's negotiating position is different from the other. Everything about your search has to do with what kind of market you're in and you need to be aware of that coming in. Here’s where your agent needs to put on their detective hat to learn more about the negotiating position and at the history in the MLS. The offer is going to depend a ton on evaluating all of the factors within that.
We’re seeing a lot of backup offers, which means you got second place in the multiple offer runoff and it’s possible that the offer they accept is going to terminate during the option period. If that happens, they will move you from the backup offer immediately into primary, meaning they're not going back on the market. In the event that the primary offer terminates, you immediately become the primary buyer, you are under contract, and now your option period begins. It’s not uncommon for buyers to terminate during the option period, even if it was their dream house, so it’s a great tool to exercise. Next, we're going to talk through what it means as a buyer and what it means as a seller.
As a Buyer…
You need to be very quick to go see homes, which means looking at the MLS portal instead of Zillow where it can take a few hours for those properties to be posted. We are looking directly in the MLS portal so that the second a realtor hits live or “coming soon” on the listing, we are immediately alerted to that. Then we're going to go see it as fast as we can, typically within 24 hours.
Tip #1: Finalize Your Budget
Due to all of this moving so quickly, we really need you to be super confident in your budget and potentially we may need to be looking under your budget so that we have room to write an offer that's over list price. If we're looking at the top of your budget, there's no room to do that and we’re going to lose out especially if there are multiple offers. You've got to be pre-approved before we're out looking at houses and writing offers. Especially in today's market, you as a buyer have to have all of those T's crossed and I's dotted.
Tip #2: Find a Good Agent!
From a buyer's perspective it is important to have a real estate agent that is deep in the weeds, that understands how these markets work, and how to best leverage that for you. Your agent should have constant communication with the listing agent. They really need to be able to read between the lines when they have a conversation, if there are other offers, do those offers look enticing, etc. You can’t underestimate the value of having an experienced, professional and likable agent. If they aren’t staying up to date on what houses are about to hit the market and are not preparing you for when they do then it is very likely you’ll lose out on all of those homes.
Tip #3: Do Neighborhood Research
We would also ask that you know what your non-negotiables are when it comes to location, because we don't want you to find your dream house and know nothing about that neighborhood. We advise that as buyers are starting to think about buying that they go drive around neighborhoods, ask friends if they know somebody who lives in this neighborhood, or post something in a Facebook group; whatever it takes to know the neighborhood. By doing this you're going to be that much more ready and comfortable to pull the trigger and lay the cards on the table when you really need to. Something we get often from buyers is them liking a home, but not the block its on; that’s exactly why it’s in your budget though! Maybe that beautiful house is going to cost a lot more in a neighborhood that you would love and the fact that the neighborhood is less desirable is going to mean that you could get a nicer house in that neighborhood. That's really going to be a huge factor in making sure that you know what's available to you within your price point.
Tip #4: Write a Love Letter
We also recommend preparing your love letter to the seller. You’ve probably heard about these personal notes that people will write to the sellers and it's a way to humanize your offer so they're not just looking at the same exact contract with the nitty gritty numerical details as everyone else’s. We want to appeal to their human and emotional side. A lot of people don't want to see their homes go to investors or people that aren't going to care for it in the same way that they do. We advise that you pull at the heartstrings with a letter. Prepping one of those love letters can be really helpful and we can always send you some examples! It typically covers some basics about you, when we find the exact house you would add things that you love about the house, and specifically use their name in the letter. We've seen time and time again sellers choosing an offer that isn't necessarily the highest, because they really connected with the personality that they saw come through in the letter. When there are two offers that are tied for first place, this is a really easy tie breaker.
Tip #5: Mentally Prepare to Act FAST
Another thing to think about as a buyer assessing a home, especially in this market, is that you are likely going to be forced to make a very fast decision about a home. You are going to see it once without seeing it again and you're going to be making a decision very quickly. Luckily, that's part of what the option period is for, so use the option period to your advantage! If you can get under contract in a place that feels comfortable for you, you will then gain more time to assess. For those of you that don't know what the options period is, it's a negotiated amount of time that we pay for the right to walk away for any reason. All we pay is typically $100 to $300, depending on the situation. This is when we do our inspections and a lot of soul searching in a really fast moving market. I think $200 is a pretty cheap price to pay to potentially not lose out on the house, take a second to breathe, get more information about the house, and decide what you want to do.
As a Seller…
Let's discuss how to navigate this from a buyers perspective . First and foremost, we don't want you to take for granted that your house is going to go and multiple offer situation. We want you to be pleasantly surprised when that happens, but do not take it for granted and in consequence, let other things fall to the wayside. You need to do all of the prep work that your agent is recommending. You need to work with them to get to market in the best fashion possible, whether you're expecting multiple offers or not.
Tip #1: Prepare Your Home
Many of today's buyers want a move-in-ready home and the closer you can get to that, the better. Small maintenance issues are going to communicate a lot to the buyer and lead them to believe that greater things are wrong with the home. Leaky sink? Loose door handles? Addressing the things would take 5 minutes to fix communicates that you've taken care of your home. Because the things that they can see are so well maintained it will make a buyer feel safer that the things they can’t see behind the walls, in the attic, and crawlspace have been taken care of as well. Those little things really do matter. You want to make your home as attractive to the most people as possible and the prep you do before you go on the market is really the majority of the work that you will do.
Tip #2: Make Plans During Showings
One of the strategies that we like to employ, especially if we're expecting a multiple offer situation, is to go active on the market on either a Thursday or Friday. The reasoning behind this is that we want to allow the largest amount of buyers possible to see your home in the first couple of days. We know that the busiest days for showings are the very tail end of the week and the weekend, simply because that's when most buyers are available. Especially in today's market, we recommend people going out of town the first weekend and putting your dog in doggie daycare, because your house needs to look immaculate for every single showing. Mentally prepare that your home is going to need to look perfect and you'll need to be gone for the majority of the weekend.
Tip #3: Price Appropriately
The most common perception is that you should price high, because there are a lot of buyers, maybe higher than what the comps are showing. We would tell you instead that the best strategy is to price appropriately. Your agent should be able to guide you in detail on what the most appropriate price would be. If your home is priced appropriately, we're going to get more buyers through the door looking at your house, more buyers ready to pull the trigger on writing an offer, and you're more likely to get into that bidding war. The most important thing to look at here is how your house compares to other houses that are currently on the market and what's recently been sold. If your house should be priced 10 grand lower, 20 grand lower, it's going to likely look worse than the other houses that should be priced at that higher price. Buyers are directly comparing the value of your house to the value of the other houses on the market and we want it to look like it's the best choice within their budget on the market.
Tip #4: Have Great Visuals
The first thing buyers are looking at are photos, floor plans, and 3-D tours. This is so important. It's the first thing that buyers see and it's what they use to determine whether or not they're going to actually walk through your door and schedule a showing with their agent. Photos are extremely important and in today's market a 3-D tour, because buyers are a little bit more hesitant to go out and see every single house in the current pandemic. The 3-D tours really help them visualize and understand a floor plan that many have a hard time comprehending from photos. Make sure you’re preparing your house accordingly for photos, we cannot stress this enough! Buyers are going to use them to make that initial decision, but they're also going to use it to commit to your house over and over again afterwards. The photos and tour are going to be the things that they send to their parents, to their friends to say, “Do you think this house is worth it?” It's also going to be the thing that they're looking at when they're under contract and can't go back to the house every day to make sure.
Tip #5: Get a Responsive Agent
The last thing that we'll say on the selling side is, you've got to have an agent that's going to be highly responsive. They need to be available to answer questions and to field offers, because we need to react quickly to those and to encourage a bidding war. A lot of what we do is make sure that everyone is aware offers have been received and stir up that scarcity mindset, to make people quickly commit if they're going to. We can really want to see everything that's available to us on the table. We don't want any of this to scare you, we just want you to be mentally prepared as you're going into a seller's market to actually win a house that you're going to be happy with long term.
You’re up to speed!
No matter if it's a buyer's or a seller's market, we want to set you up to win. We hope that this helped you prepare mentally for competing in today's real estate climate. We also have a lot more resources for you at wherewelivepodcast.com. Go ahead and take our “Are you ready to buy?” quiz or check out our blog on selling your home with multiple offers. We're always here to help if you're ready to do either!
Brianna & Keelie