We are in a different marketplace, aren't we? The market totally rolled over into a buyer's market in a lot of price categories. And because of that, we need to hone our negotiation skills. So today I'm gonna give you 10 strategies to help you be a better negotiator. Because we know if a buyer feels good about the negotiation, they're gonna often be excited, and tell their friends and family to use use to purchase their next property.
Remember, it's all about referrals and doing an amazing job.
1. Discovering the motivation
It's simple, but it's interesting how many agents haven't done that. We just had an offer come into my office over $2 million and guess what? It was electronically sent without a phone call to the other agent. Very frustrating experience for the listing agent. But this is the example of a lot of buyer's agents that don't have any training. They're not calling the other listing agent and asking simple...
Hey guys, we've got some good news regarding the real estate market, and that is Fannie Mae does a study, it's a purchase sentiment study. They do it every single month. And finally it's broken the downward trend.
All the way since back in February of 2022, there's just been this downward trend with sentiment among buyers and sellers about the market, about buying, about selling. And it really hit a low point here in the last couple months, but it's broken. Now it's starting to come back up.
Buyers and sellers are now seeing a little bit of a rainbow at the end of the tunnel here. They're saying the worst is behind us, and it's starting to look a little bit better.
So this is good news for us. We're gonna combine that with another piece of good news, which is affordability.
So affordability over the last couple of months has gotten way better. We had an interest rate peak, and now it's come down, down, down, down, down, and it's...
Now, this is happening a lot:
Buyers are getting skittish about interest rates, especially when they're in the middle of a transaction and their interest rates floated up because they didn't lock in the beginning.
See, a lot of buyers are gamblers. And they're optimists. So when they come into the transaction, they don't necessarily lock right out of the gate and they're gambling that the interest rates will come back down or float back down. But that gamble has not been a good gamble for the last several months.
And so interest has climbed, climbed, climbed. But if you do have that situation where you have a buyer that's had an interest rate that went beyond what they were expecting, it can create a mid-transaction negotiation.
So what you can do is you can come back to the other side and say, "Hey, we have a buyer that was completely excited about buying your house. Unfortunately, interest rates have kind of gone...
Hey guys, you're gonna be taking a listing in the next couple weeks. And when you take that listing, what if I give you a tool that can help you market it in a way that will set you apart from all the competition and help you sell for top dollar—despite the interest rate issues that we're having in the marketplace right now?
Here's your golden ticket:
When you're sitting with the seller, I need you to ask them this question:
"Can I ask you, what kind of loan do you have on this home?"
If they answer that they have an FHA or a VA loan or a USDA loan, guess what? Those loans are potentially assumable. And if they have a loan interest rate of less than 5%—even less than 6% today—that could be very valuable to a buyer in the marketplace.
Now, there are some conditions and qualifications. Obviously if they're doing a VA loan, the buyer has to be a veteran themselves. But most of these just require that the...
Hey guys, I've got another tool for you:
When you are going out to take a listing and the seller is asking you about getting top dollar for their home, one question you can ask which relates to them getting top dollar is, can I ask you how much do you owe on your current home?
This is gonna reveal how much equity they have and how much they have left to pay off.
Some—about 30% of the people you're talking to—will own their home outright. And the vast majority will have some kind of loan. But a lot of those people have paid down their loans dramatically and they have a very small balance. What if you said something like this to them?
"I got something to ask you guys based on what you just told me:
We're in a high interest rate environment. So it's making affordability a really big issue. And because of that, when people are paying more in interest, they can't afford to pay at a higher price. But if we were able to offer an...
Hey guys, have you ever heard of a blended interest rate?
A blended interest rate is gonna become really important to a lot of us selling real estate in the coming months and years as these high interest rates stick with us.
So here's what a blended interest rate is:
Imagine a buyer has a budget, and they're gonna go out and buy, let's say, a $700,000 house. They have $100,000 down, and now they have $600,000 they're gonna finance. But they can't quite swing the high interest rates that are out there today. It's just gonna put 'em in a place where they can't afford it.
But they're willing to be creative and if you have a seller that's going to be creative, you can still put this deal together.
So here's an example:
Let's say that they were able to go out and get a first mortgage for $400,000 at the current interest rate. Let's call that 7.5%, which is probably where it's headed pretty quick. And the seller was willing to carry a...
A number that we should be concerned with right now in the market is 16.1%.
So what does 16.1% represent?
It represents the number of transactions that were canceled last month. The last time we saw a number that high was at the beginning of COVID when buyers really didn't know what was gonna happen. March, April, when COVID really went into full effect in our country in 2020. That's when you saw this same level of cancellations. And that's what we're seeing again right now.
So how do we tighten down offers so that sellers have some clarity that they know they're gonna get to closing?
I'm gonna give you several things to think about. You might have a few more. But one of the things is getting the disclosure statement signed as quickly as you can.
Most states require a disclosure statement. This is where we're the seller's gonna disclose everything they know about the house to a buyer. But not waiting around, not delaying getting that...
Here's something we should all be doing with a seller at the beginning of our relationship:
When we take that listing, we should be resetting expectations on the number of live showings that will occur.
Last year, when we took a listing, we'd have 20, 30, 40, 50 showings in the first week. Today, that number maybe two or three or four or five. It will not be the same as it was last year at the same time.
So how do we reset this expectation?
One thing we need to talk about with the seller is the way the average buyer looks at homes. So last year in 2021, the NAR measured this and they found that buyers, on average, that purchased a home, looked at homes for eight weeks. And during that eight week period of time, they viewed eight homes. But of the eight homes they looked at, they looked at three virtually. And in the buyer's mind, that was a showing.
So we need to educate our sellers about what people consider to be a...
Here's something that's come off the table over the last few years:
And that is the idea of an owner carrying their contract. We don't hear that term anymore because interest rates became so low, that no one would consider carrying a contract. Well with interest rates rising, this conversation would be something that we should be having with sellers now again.
And that conversation could be as simple as this:
"Hey, Mr. And Mrs. Seller, I just have a quick question. You guys have a pretty good equity position in your house. And just one thought came to mind. As interest rates are rising for typical mortgage rates, have you guys ever considered carrying a contract yourself? In other words, acting as the bank. This is where somebody would offer you a down payment, large enough to pay off your note that you have now and pay all the fees and everything else that's associated with the closing.
"But then after that, you'd have an income...
Now here's another question that a lot of us are getting:
Is the market turning into a buyer's market?
This is really a market-by-market conversation. But I will tell you that we could easily have a situation in a lot of markets where you actually have a couple different markets within the larger market.
Here's what that means:
Markets aren't just one thing. They are a whole list of price bands, right? So you have lower tier price bands, mid tier price bands, and higher price bands. And in your market, as the market is transitioning, it's not all one thing. So you could have a lower tier price band that's still a strong sellers market. Lots of demand because that's where first time home buyers go, right?
But then as you move up the ladder, you might see that at the higher tiers—the luxury housing, for instance—that it is a buyer's market.
So what's the defining factor here?
You gotta ask yourself, how do I...
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