In this article with will review the remainder of the misconceptions that buyers have when using the services of a real estate agent and confusion as to why they should use the services of an agent.
Remember, a Champion Agent is aware of these misconceptions and have developed the knowledge to deal with them appropriately. Every buyer has belief in one or more of these misconceptions; a Champion is prepared to respond.
Misconception #5: I will never write a full price offer.
Someone has taught consumers to never offer full price; that you are a fool if you offer full price. While negotiating has a place in real estate sales, if the property is a good value, why risk the acquisition of it for a few thousand dollars?
When we counsel the client, we have to be able to convey the true cost of the difference between their projected low offer and the full price offer. Too many buyers see the lower offer as a huge savings to them, rather than what it is. For a well-priced home in a competitive marketplace of good homes, the buyer may save at best between 2% and 3% of the sales price of the home. That 2% to 3% is really just additional money they end up borrowing. For example, if they managed to save 3% on a $200,000 home, that would equate to $6,000. The real cost when borrowed at a reasonable interest rate would be $35 a month or $1.13 per day. That is probably the best that they can do when they are competing for a high demand home in a good marketplace.
If you allow this type of thinking on your client, then you might be faced with the house they didn't get. Once they have one that they fell short on, they will compare every other home to the one they lost. The one they lost will be of mythical proportions. They won't settle for anything that is less than the home they could have acquired. To be blunt, they didn't acquire it because you didn't convince them to offer full price.
Misconception #6: We can always start low and come up later.
This is the cousin of "never offer full price." You will often hear them together. The view is that sellers always counter offer. They want to sell their home, so they will dialogue with us on paper back and forth.
I remember early on in my career working with a client who was a sales manager from a car dealership in southern California who had moved to Portland. He wanted to make low offers and negotiate everything. When he saw he was not going to get anywhere on the price after a few rounds, he started in on the furniture and personal property. Fortunately, I was smart enough to put the two parties in the same office in separate conference rooms. I was also, fortunately, working with a good listing agent. We must have created almost ten counter offers in an hour of back and forth negotiating. It was early in my career, and I hadn't prepared my buyer for how the seller would react to his haggling like they do in the sale of cars. The seller was getting insulted and upset. This was especially true when he bottom-lined the price, and my buyer started in on his possessions. As I said, it was my first year in the business. I didn't have the control of the client as I would today.
Most buyers don't understand that the seller could be more emotional about their home than they are. They can easily be insulted by a low offer and become defensive and illogical. They often will counter back at a higher price than they really want just because of the initial offer. We must ensure the buyer understands the seller's options with a low offer.
The first is, become insulted and fail to respond. The second option might be, get defensive or hostile. The third option; be more difficult to negotiate with because of the initial offer. The battle lines can be drawn through a low offer. The seller can dig themselves a foxhole about price, repairs, and possessions and may not be willing to come out to find a middle ground that is a win for everyone.
The way to combat the misconceptions in the low offer area is to explain what can happen to the seller. Take the time to educate the buyer to understand the risk that they are taking when they push the seller into the three categories I mentioned above.
Then, lead in with the key questions to ask a buyer when they might attempt a low offer.
Question #1 – What will it take to be the seller's best buyer?
Sellers want the best buyer for their home in terms of sales price or net proceeds. They also want a buyer who is low in hassle, extra work, and emotions for them. With some sellers, being able to identify with the buyer has value to them. While most sellers want the most they can get from the sale of their home, there is a large group that would rather identify with the buyer. This can be especially true for people who have lived a long time in the same home, raising their family there. Just as the buyer wants the best home and best seller, the seller wants the best buyer available.
- Question #2 – What will it take to avoid offending the seller?
As I illustrated earlier, if you offend the seller with an initial offer, you have a long uphill battle ahead. The probability of you getting paid for your effort now and the probability of the buyer purchasing the home they want is contained in this question. We must be cognizant of offending the seller and try to avoid it if possible.
Misconception #7: A good property will wait for me to act.
We have all seen situations where the buyer lost the home they really wanted because they didn't take competitive action now. The definition of a great salesperson is "the ability to make someone do something that is beneficial to them or to convince them to do it faster."
We must educated buyers that the speed at which they make decisions matters. The best priced, best quality, competitively priced properties won't wait for them to act. A good listing can't be kept secret from the other agents in the marketplace who are trying to make a sale. People will find out about it and sell it. When the marketplace has limited inventory, it is easy to build urgency. The Champion Salesperson can build urgency to take action in a more neutral marketplace where not all of the listings sell or sell quickly, as well. They have the mindset and skill to be able to build urgency in a prospect anyway. A Champion builds urgency through the value of the property; the length of time and hard work expended to even find the property; the inventory levels; how closely it aligns with the needs, wants, and desires of the buyer. All of these lead to the client taking competitive action sooner. We don't know exactly when the property will sell. Educating the purchaser on the need to take action now on a good or even great property enables strong revenue growth. The best properties sell faster.
We must get through to the buyer about the rules of selling real estate.
Good properties sell fast . . . great properties can sell overnight. Too many buyers need to move quicker and take more decisive, competitive action. In any marketplace, the best priced inventory will be gone quickly. The challenge is that, even at three weeks, we don't know when the home will sell. When your buyer finds something through you that you know will be sold quickly, don't forget to drive the point home... this home won't last.
If you wait, you may lose it. The best properties won't wait for people to make decisions. I remember the toughest sale I ever had to make was to someone I knew made decisions slowly. I also knew that I was in heavy competition for this piece of development land. I knew it wouldn't last more than 24 hours on the market, and it didn't. Fortunately, I was the one to convince my buyer to pull the trigger.
The sale of that land, development lots, spec houses, and pre-sales made me in excess of $300,000 in income in a 24 month period, just from that one deal. I had to convince the buyer that if he waited, he would lose it. There were at least five other buyers who wanted this piece of land and were in the process of making an offer. They lost out on the over $650,000 that my client made in profit in less than 18 months on an investment of about $500,000. If your client waits, they could lose it.
If you sleep on it ... you may not sleep in it. A buyer needs to know that even overnight consideration for the best properties is a significant risk. We need to ask them, "How will you feel if you lose it?" and "What's your disappointment value?" The disappointment value is what it is worth to them to not be disappointed in the morning when they find out it's gone. What's it worth to avoid that feeling?
When this happens, and they lose the home, they will often blame the agent. They will begin to doubt your skill, ability, and whether you are right for the job of representing their interests.
Deal with these misconceptions up front in the early stages of qualifying or the presentation. Don't wait until you are writing an offer before you deal with them. At that point, the counsel is coming too late. You will be doing it at a time when they could feel you only care about yourself and your commission check, rather than their needs, wants, and desires. They may question whether you really have their best interest in mind.
Published: March 15, 2013
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