The Follow Me Show: Episode 2
How to Negotiate the Offer as a
Learn how to negotiate the offer for your client as a buyer's agent. We discuss the difference between negotiating the sale in a buyer's market and a seller's market, and how to get your offer chosen above all others.
***DISCLAIMER: In this episode, the clause referred to as the "kickout" clause is what is known as an "escalation" clause, a powerful negotiation tool used during the offer process to provide an upper hand for your buyer in a multiple offer situation. ***
As a buyer's agent, your job is two-fold. On one hand, you must know the market trends, have solid partners in financing, and a basic understanding of the physical characteristics of the homes you're selling. On the other hand, having your finger on the pulse of your niche, building relationships with fellow real estate professionals and the psychology of sales is just as crucial.
In order to know how to negotiate an offer, first you must understand what type of market you're in and how it affects the purchase power of your homebuyers. Some key guidelines will help you with negotiations going forward.
Rule #1 - Know your market. There are 2 types of markets that you will typically deal with in real estate. A certain type of market will require an understanding of inventory, or amount of homes currently on the market for sale, the price points of the inventory, and the types of buyers currently in the market to buy. There is a Sellers Market and a Buyers Market. The current market will determine the type of negotiating you will have to do as a buyer's agent. First, we will be going over the negotiations and processes involved in a Buyers Market.
Buyer's Market - Simply put, there is more supply, and less demand.
Benefit to the Buyer - You may be able to a home for undervalue at a cheaper price
- Time of Year - In Florida, a Buyer's Market happens typically during the winter time. It tends to start directly following School and continues till about spring break.
- Supply & Demand - In a sellers market, the buyer still drives the demand, as with the buyer's market. But the sellers have the upper hand.
when school is out, families and individuals are more likely to take vacation.. With Florida being one of the trendiest tourist spots in the world, many people knock out two birds with one stone by visiting The Sunshine state and seek our their new homes. Simply put, there is more demand.
Benefit to the Seller - You may be able to a home for undervalue at a cheaper price
- Time of Year - In Florida, a Seller's Market happens typically during the Summertime. From April-late August.
- Trends - Prices rise, less homes selling. Price points from $150k-$250k will go faster and have have more multiple offers.
So can you still negotiate in a Seller's Market? Yes. Sellers tend to sell their homes on the summertime because they can sell fast. It has more to do with speed over price, but the market absolutely has an effect on the price. Sellers don't necessarily get more for their home since the loan will still need to appraise on any financed home. However, savvy buyers and buyers agents know that in order to play ball, you'll need to put some skin in the game and are more willing to come out of pocket and pay the difference of the loan when needed. That's when negotiations come into play.
Rule #2 - Before showing, scour the MLS for anything that will tell you as much about the home as possible. A common misconception that listing agents have sometimes is that the market will sell the home. But having the details of the listing may give you the upper hand for your homebuyers.
Is it listed for 62+ days at $250k, a reduced price a month ago once, when all the other comps in the neighborhood are listed at $20k less and it's the second week of July? Then you know that it was overpriced before the Sellers Market came into full swing. That gives you potential room to negotiate a lower price, or possibly even closing costs.
Rule #3 - Give a little to get a lot. It helps to have frequent communication with agents as you sell consistently in a given area. When your buyers choose a home, get friendly with the agent. They will want to know how much your clients love the home. If it's not enough to make an offer, the listing agent doesn't want to waste time giving information in vain. So let them know that your clients are ready to submit an offer (if they do) and want to know what the sellers ideal situation is.
Be honest with the agent. Putting the information in their hands quickly is also putting the ball in their court for the sellers to start negotiating with the clients.
These three rules are will prep you to submit an attractive offer for both the sellers and the buyers, and get your clients the home they live in no time. Trust me, if you use these rules for negotiating, you will be the super hero for your current and future homebuyers. Be great.
Listen to the podcast below for a full breakdown of how to negotiate as a buyer's agent.