How to Succeed with Buyers in a No-Inventory Housing Climate
If your real estate market area is similar to ours here in northern New Jersey, you are, of course, suffering from “lack-of-inventory-syndrome.” Symptoms include:
- restless client feeling
- constant state of repetitive MLS searching
- phantom house – a feeling like the house you want is right there but when you look…(nothing)
Okay, so you know that I am joking, but the most difficult part of a lack of local inventory is the possibility of “Buyer Fatigue” – Buyers grow weary of:
- no houses to look at
- more competition for higher priced homes in less desirable condition
- fighting with cash-rich investors for what lower priced inventory does exist
- frustration at losing homes in bidding wars
We want our clients to feel good about the home they buy and working with us, so while you don’t want your clients to “overpay” for a house, how do you ensure they are comfortable with the numbers they put forth, despite the competition?
SET EXPECTATIONS EARLY
Buyer Presentations are a balancing act between:
Generating excitement for the house hunting journey you are about to embark upon
The soon-to-come overwhelming frustration of imperfect house features, condition concerns and good homes often being snatched up before you can even get in to see it
Always prepare your clients for the fast pace of the market, aggressive pricing practices, as well as that inevitable moment of “our-homes-are-100+-years-old-what-did-you-expect-you-said-you-wanted-a-house-full-of-detail-and-character-yep-that-basement–does-look-like-the-dungeon-from-SAW-and-yes-there-are-still-7-offers-on-this-house-get-used-to-it…”
(Did I mention that the agents on my team sign their names as “Dream Crusher, Chu Baldwin Homes Team @ Keller Williams Montclair?”)
Setting expectations early is the only way to make sure that your clients pace themselves and have the longevity and endurance to make it through a process that could involve a lot of patience—houses that don’t check ALL their boxes and possibly writing several offers before they win a house bid. I have found in my 13 years in real estate that clients want to be armed with all the information so they can make the best decision, even if the information indicates a hard road ahead—they value our honesty and candor.
ADVISING ON OFFERS IN A SELLER’S MARKET
Buyers so often look to us for the pearls of wisdom about how to offer on a home. Combing through the comparables, reviewing the recent sales and town statistics—while valuable information, ultimately, the Buyer often makes an emotional decision in choosing a home. So how do we help them put their best foot forward while trying to stay within the bounds of their comfort level? Just a little sample of a recent conversation I had with a client looking to put an offer on an adorable house in town, but that we knew was going to have 3-4 offers in total, including us:
Me: Guys, we know there are multiple offers in place, and it looks like the agent has called a final round of Highest and Best – so this is when we give them the highest number we are willing to pay and the best terms we are willing to offer…closing date, deposit amounts, any waivers – here is our chance to put our best foot forward and try to get that house.
Buyer: We thought about it last night and we just don’t know what to offer – it’s really hard picking a number – the comps seem to support a range, and we are pretty comfortable at the higher end of the range, but we just don’t know what number to pick, especially since we don’t know what other buyers are bidding? Seems unfair.
Me: Well actually, I would argue that this type of blind bid situation is, in some ways, the MOST fair. In this case, you know what the comps are – you use that info to inform your offer decision. The number you offer is ultimately the number that the house is worth to YOU. If we don’t know the other buyers’ offer, then they don’t know yours either, which means that your numbers can’t be used as leverage to pit you against each other to drive the price up back and forth.
Buyer: Ok, I get that, but we’re still not sure what number to offer. Any advice?
Me: Whatever you offer, I need to know that if I call you tonight and say “You got the house!” you will be excited – no calling me in 24 hours with cold sweats holding down vomit because you can’t live with your offer. We’d have to pull out, then we’re the flaky buyers and we put everyone in a bad place. At the same time, if I call you tonight and say “I’m sorry, you didn’t get the house” I need to know that you are fine, wouldn’t have paid another penny for this house anyway. There is nothing worse than finding out 45 days later that you lost a house by $5000 and regret that you pulled your punches. Whatever number you choose, it should fit both these criteria – if you get the house (JOY! ELATION!) if you don’t get the house (IT’S OK, SOMEONE WANTED IT MORE, LET’S MOVE ON).
Buyer: So basically we have to stop worrying about the other offers and just focus on what we feel this house is worth to us. We will think about it and get back to you with our final number.
What’s the takeaway here? Educate your Buyers and steel them for a long haul in a low inventory market – help them think for themselves on the offer process and they will own their choices, and you should have a client for life.
You wonder if they got the house? No, they didn’t – house listed at $450K, but was only worth $450K to them and with multiples, they just weren’t strong enough. However, the experience of their first offer gave them the confidence to make a $526K offer the house of their dreams listed at $479K the next week, which they DID get. And no cold sweats.