Five Steps to "Yes" on Overpriced Listings
In today’s market overpriced listings are abundant. How you approach a seller and your understanding of their negotiation position is essential to you achieving your goal of mutual acceptance of an offer. With this in mind, I encourage you to consider this five step guide to getting your clients' offer accepted.
- Perform a detailed market analysis on the listing. Your goal is to discover what the true market value of the home is right now. Make sure you compare listings that have similar square footage, number of bathrooms and bedrooms, were built in the same time period, and have similar architectural features. Try to find at least 3 properties in the categories of active, pending, and sold.
- Study the overall direction of the local market. The market analysis of the home is simply a “balance sheet” view of the property at a point in time. You need to have a clear understanding of where the local market has been, where it is now, and the direction it is heading. Review the local market inventory levels, average list price to sale price ratio, average days on the market, and market absorption rate. Knowing this information will prepare you for the steps ahead and give you confidence in negotiations.
- Review “if – then” scenarios with your client. I always like to review with my client how they plan to respond if the seller counters their offer. For example, if the seller responds accepting your price but wants a longer closing then do you feel you could accept that counter offer? This process always helps both me and my client identify their “must have” and “really want” terms. Identifying these early in the process will save you time and energy during the give and take of negotiations.
- Interview the listing agent. I encourage you to have a short list of questions that you pose to the listing agent regarding the seller and their home. It is important for you to know if there have been previous offers and if so why they did not work out. Ask the listing agent to tell you what terms, besides price, are most important to the sellers. Ask the listing agent to share with you the comparable homes that were used to price the home where it is at today. The agent’s response to this request will tell you a great deal about the relationship between the agent and the seller. Be prepared to work with an agent that is unable to convince his client of the reality of the market and a seller that is focused on their relationship with their equity and not what the market is telling them. Finally, end with letting the agent know that this home is your clients’ first choice but they have others that will work if acceptable terms cannot be reached.
- Ask to present the offer to purchase in person. Presenting the offer in person allows you to introduce your buyers to the seller in a personal way. My experience has been the more a seller identifies with a buyer the higher the probability of them accepting a buyer’s terms. This can be done through an introduction letter written by your clients. The face to face offer presentation allows you to present to the sellers your research on the market and the value of their home. I hate to say this, but some listing agents NEVER update the original market analysis they did when they list a home and the seller has no idea about current values and trends.
The steps you take before you actually present your client’s offer are very important and lay the groundwork for a smooth transaction between both parties. I encourage you to use these steps as a guide the next time you have to write an offer on an over-priced listing.
Question: What steps do you take prior to presenting an offer on an overpriced listing?
Make it a great day!