One of the clients I was working with this past month made a comment, during some back and forth with the seller, about how much she was going to be paying and that it is a lot of money.
We got everything resolved on her deal so that both buyer and seller are happy, but this reminded me of this subject which can create unnecessary difficulty and hardship for sellers and buyers due to lack of information or misunderstanding.
There are a lot of factors involved in pricing of homes to sell, negotiation, searching for homes to buy, etc. all connected to money and price. I have found that sellers and buyers who understand certain basic principles about all this are more successful and have an easier time when buying or selling. So let me share these fundamental principles with you.
1. Find out what is really important to the other parties and focus on that.
When you are in the midst of negotiations or are in the process of getting from a contract to a closed deal there may be issues brought up by the other party that need to be addressed. Hopefully that other party has an experienced Realtor representing them so that you only have to address matters that really are important. Complaints come up all the time during a transaction and most of the time they are not about matters that would derail the deal and can usually be handled quite easily. However, once in a while you do have an issue that needs to be paid attention to because it is important to the other party.
Your agent should make sure that when something comes up from the other party which is important to them, that it is handled in the appropriate manner. Something that may seem to you like it should only be a minor issue may be much more important to that other person. To ignore it or address it incorrectly can come across like you don’t care what the other party thinks or has concerns about. I have been told by other agents about many deals they have had which were cancelled due to this easily avoidable error – sometimes over matters that involved only a couple hundred dollars.
So make sure that the items which are important to the other party (if reasonable) are dealt with in the matter you would want them handled if they were important to you.
2. Price/Cost and Value are 2 different things.
This is a very important principal to understand and apply correctly. The price or cost of something for sale is not necessarily the same as its value, and the value assigned to something will vary from person to person.
One buyer may be willing to pay $1,500,000 for a home that has been completely upgraded and has a pool but is in a less desirable area while another buyer is willing to pay $2,000,000 for a home that is in rough shape and needs a lot of work but is in a very desirable area. You might think they are both nuts and want to buy a condo for $600,000 and not have to mow a lawn or bother with replacing a roof. You and these other buyers have different priorities – different features and benefits have different levels of importance and thus different amounts of value.
This also applies on the other side of the sale. One seller may be willing to wait as long as it takes to get the price they want on their home either because that’s what they feel it is worth or because that’s what they want to get, while another seller wants to have the sale close within 60 days of the house going on the market and they are willing to accept less money if they are assured a buyer will close within that time frame. Each places a different value on the timing and the ultimate sale price.
Buyers and sellers both have a level of value they consider acceptable, and your agent has to find out what your definition of value is AND what the other party’s definition of value is when you start negotiations.
For my client who I mentioned at the start of this post, the location of the property she is buying is the top item of value to her about it. However, trust in the seller is equally important to her. When she was told something that seemed to be false, she started to wonder if she was being lied to by the seller and their agent. This prompted the comment about the price being a lot of money – and she was correct because it is a lot of money and she does need to be able to have confidence that what she is being told is true (and be able to verify it is true). But she was also saying that she wasn’t sure that she was getting the value she wanted for that amount of money. I had this same situation arise a few months ago with another buyer on a purchase at more than twice that price and they said the exact same thing when they thought the seller and their agent were hiding info from us.
The first thing that you can take away and apply from this point is that you should always make sure you act in a way that gives the other party, their agent and even your agent confidence that they can trust you (and you should expect the same from all of them).
The second thing you can take from this and apply is that you need to work out what you can do to provide more value to sellers (when you are a buyer) or to buyers (when you are a seller). I have had buyer clients competing against other buyers and our offer was chosen even though it wasn’t the highest one because it was considered a stronger offer. The value of the other terms of my clients’ offer outweighed the higher offer price from the other buyer for this particular seller. I have also represented sellers where we took an offer that wasn’t the highest one because it had terms that fulfilled the most important points to my seller.
I’ve also represented buyers whose offer was rejected because the seller took a ‘better one’ only to be called back the next week when that ‘better’ buyer vanished. I negotiated an even better deal for my client than we would have originally gotten and though the seller ended up with a little less they had a deal that closed.
Sellers can present more value to buyers by having a home that shows well and which has the minor repair items taken care of when they can afford to do so. They can also respond in a timely manner to offers.
Buyers can present more value to sellers by presenting an offer that is not complicated, is on the correct forms and is accompanied by proof that they can afford the purchase price. Their agent can also find out from the sellers’ agent what is important to them and try to make an offer that covers those items if it makes sense to the buyer to do so.
So make sure you and your agent work out how you can provide more value when you are selling or when you are buying and you will be more successful in the deals you pursue.
3. Success Comes From…
During markets such as the current seller’s market you can think that sellers and listing agents are able to just about throw any property on the market in any condition with any quality level of photos and have it sell within days for at or above the asking price.
There are some instances where this is actually true, but more and more I’m seeing homes falling out of contract, expiring and relisting or just sitting on the market for months and months. In a strong seller’s market the seller has a lot of advantages but still needs to, at the very least, price the home correctly in order to get it to sell.
The same applies to buyers in this market – trying to buy a home with techniques such as low-ball offers which don’t apply to this type of market will not end up in success except in very rare cases these days.
If you want to be successful as a seller or a buyer you will need to:
1) Have a good understanding of the current market conditions and what is effective in those conditions.
2) Be properly prepared. Buyers need to have their financing arranged before seriously looking and sellers need to have their home prepared to sell before showing it. For sellers this includes having adequate knowledge of any issues that might come up for buyers prior to and even after going to contract. Be properly prepared to not only get to contract but also to get the deal closed with the help of your Realtor.
3) Decide based on a proper evaluation of the available info but act quickly. Indecisiveness is your true enemy when trying to be successful.
4) Work with professionals and be professional yourself. Most matters that get in the way of selling or buying can be worked out by professionals who know what they are doing but since it is a team effort and you are part of the team, you will also have to step up your game if you want to be as successful as you can in any deal or in real estate in general.
These may seem like very general descriptions of things you need to do to be successful but they really do encompass the majority of what you need to focus on. Part of your agent’s job is to help you with the application of these in the current market and in your current situation. But it is still important that you know these are what you need to do.
We won’t always be in a seller’s market so it is important that you don’t get caught by surprise when market conditions change and the techniques that had been working no longer do.
Those people who are successful in real estate know these principles and apply them, but they don’t necessarily share them. From my experience with hundreds of buyers and sellers I have observed these points above to be some of the most important basic principles that need to be followed by any seller or buyer in order to get what they want.
Now that you know what to do, it is my job to help you with how to do it and I look forward to assisting you with this when you are ready for me.