Presenting and Negotiating Offers

We're going to explore the nuances of presenting and negotiating offers. The post COVID market was frenzied and shortcuts were taken by many agents that had to put multiple offers on spreadsheets and evaluate the best price in terms at lightning speed so that their seller could move quickly to go compete with multiple offers on their move up property. The pace was fast and furious. Speaking of furious, that market left many consumers disenchanted with the home buying or selling experience. And if you intend to be a real estate professional for the long haul, You will have to be diligent about increasing your skills, service, and systems to provide an improved customer experience.

This episode will uncover a method for presenting offers, then the "5 Stages of Negotiation" that help us move offers into contracts and navigate the contingency period to arrive at the closing, where everyone achieves their goal.

Transcript

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Welcome to real estate. Common sense. I'm your host. Lisa Spencer. I grew up in real estate. Family was a top producing agent and a managing broker for over a decade. Eventually leading an office of over 400 agents. What I've discovered is common sense is not that common, especially when it comes to launching building or expanding a real estate business, I have interviewed thousands of agents and helped hundreds launch successful careers. Today. We're going to explore the nuances of presenting and negotiating offers. The post COVID market was frenzied and shortcuts were taken by many agents that had to put multiple offers on spreadsheets and evaluate the best price in terms at lightning speed so that their seller could move quickly to go compete with multiple offers on their move up property. The pace was fast and furious. Speaking of furious, that market left many consumers disenchanted with the home buying or selling experience. And if you intend to be a real estate professional for the long haul, You will have to be diligent about increasing your skills, service, and systems to provide an improved customer experience. We'll start with the easiest topic. First, the nuances of presenting an offer. I was so blessed that my instructor at my very first board of realtors, orientation gave the best advice and employing her offer presentation style was spot on for what we're going to talk about today. Her advice was to start with the last page of the offer and work forward to the first page. The glaring truth is that once a seller hears the price, it is difficult for them to hear the other details of the offer. So let's work through an example. Let's begin with. Thank you so much, Jane and Tammy for taking the time to be on this call or video conference so that we can review the offer that we just received. Remember when we had our first consultation, we talked about how often the first offer is the best offer. And I would say this one has potential. In the additional contractual provisions here on the last page, they are detailing that the pool equipment must be included with the purchase. Well, that's an easy, yes. As we published in the MLS that we would include these items. A very detailed agent will often memorialize in the offer details. Any special offers or incentives. So I also see here that they are asking for the home warranty to be included. How do you feel about that? Notice how I didn't offer my opinion. The seller may say, well, it depends on their offer price or no way, or that sounds reasonable. Don't get stuck here. Your response is. We can decide to eliminate it or adjust that after we've reviewed more of the offer details. Then you remind them that they are in capable hands by saying: From there, the contract is just like the blank one I gave you during our initial meeting, Then remind them of the timelines that are pre-written into the contract form and where this offer may differ. For instance, the timeframe for inspection usually allows 15 days for an inspection period. In this offer they've reduced that to seven days. This is valuable because it limits your time that the home is off the market while the buyer completes their inspections.

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Then you may move on with.

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Wow. The closing date is exactly what you were looking for. They have also checked the box. It says they will take over any assessments after closing and you'll cover them up to the time of closing. This is typical, but I want to point it out to you because we always want to confirm that they did not check the box, that the seller had to bring all assessments up to date.

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It's important to take a minute to show the seller that you have read this offer and that you're looking for any of those little nuance pitfalls that could end up costing them. Lot of money at closing. Then you'll move on by saying.

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They've said that you can select the title company. And that's nice because we can work with the one that I know and trust, which will add less stress to the transaction for you. They have provided a preapproval letter from a lender I'm familiar with. And I have great experience with, for an on-time hassle-free closing. And that is a major plus. It is extremely frustrating to get to the week before closing and have a lender ghost you. We are now at a point where they may be feeling like you're holding back on the price. So then I start with their typical loan type. Is it FHA VA or conventional, then we moved to their down payment and the earnest money. And finally the offer price. Then just stop talking. Yeah, like that pause. Let them have a minute to process before you jump in with advice. If the offer is over the asking price. Or where they anticipated it coming in, simply ask. Do you want to accept the offer as it's written? This will put your home under contract right now, the minute we counter this offer, it is no longer in play. We are opening negotiations that may succeed or fail. I'm here to be your advocate and as your agent, I will only respond as you wish. They may say, okay. Or they may say, no, we really don't want to pay for a home warranty for them. Let them get their own. You did your job by letting them know that the buyer is now free to make an offer on another house. But hopefully they're reasonable buyers and they'll understand that most offers require negotiation. Now what if the offer is under what the seller was anticipating, but within a range that you, as the agent feel is reasonable. The seller may say no, our home is worth more than that. You might respond with whenever we get an offer, we have three choices. We can accept that offer. We can reject that offer, or we can make a counter offer. We should never be offended by an offer. These people, unlike the others who came through your home and rejected it. Appreciated it enough to make a formal offer. Would you consider formulating a counter offer?

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Help them appreciate the other details in the offer before just jumping into increasing the price.

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You may say something like the closing date is exactly what you were hoping for. There are a lot of things about this offer that work for you. Is it only the price that bothers you? Let them offer the counter offer price. Assure them that you will work swiftly to get a response from the buyer's agent and that you are sure they made what they felt was a fair offer. But our counter offer is also fair And I'm optimistic that we will be able to get this to work. Remember you think that the offer was reasonable and you tried to get them to accept the offer because a counter to a very fair offer can sometimes result in the buyer considering other properties before they increase their offer. That brings us to the last type of offer the low ball offer. Even worse, the sight unseen investor offer that our market has been flooded with right now. Remember, these negotiations are not yours. They are between the buyer and seller. And facilitated by agents. The seller may be infuriated by a low offer and take personal offense. Remember your position as the calm and knowledgeable guide. You might say. I agree with you that this offer is too low and there is no reason for us to counter this offer. Unfortunately, we don't know what influenced the buyer in making this offer. What I'd like to do is respectfully ask them to resubmit their offer. I have seen buyers jump up significantly. Once they've satisfied their curiosity as to whether they could get a deal. I'm using air quotes here. Regardless, which of the three possible responses the seller chooses. The offer presentation should feel like a partnered conversation where you are providing information and asking questions that will help the seller make the best decision for them. I never let your ego speak. Always consider how to ease tensions and provide reassurance that they are doing the right thing. There are thousands of possible offer scenarios. So I hope this at least gives you a framework for developing your presentation style. After presenting an offer, we may head into the realm of negotiations. Hmm.

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Negotiations. Most realtors think they're good negotiators. Sadly negotiating is like driving. It depends on conditions. And whether someone is yielding to you or cutting you off. Even the mildest cautious driver can suffer road rage if pushed too far. The same is true of negotiating. So repeat after me, I am the calm and knowledgeable guide. It is not your house. That is being sold or your equity that is being lost. If you are negotiating for a buyer, it is not you who will be paying the mortgage or who will be homeless. If negotiations break down. Do all you can to keep everyone talking to each other. Check out our live workshop schedule for the five stages of negotiation for a more comprehensive coverage of the following guidelines on real estate. Common sense.com. But for today. We'll give you an outline of the five stages of negotiation. The first stage of negotiation begins. The minute we meet our buyer or seller. In this stage, we are focused on building trust and setting expectations around the home purchase or sale process. Often we have to combat the national real estate news. With local market statistics and information. For instance, their favorite newscaster or podcaster, or in some instances, social media influencer has been highlighting national real estate statistics. Like the real estate market is down 10%. This is a dramatic headline or scroll stopping statement. The issue is many consumers. Don't wait for the in-depth review of that statement and simply move on with their own interpretation of the real estate market is down 10%. They didn't stay interested long enough to know that that was a statistic referring to real estate number of sales and not the price. They also didn't wait for the data sourcing, which showed that one state, for instance, Portland, Oregon has seen 10% fewer sales. But Atlanta, Georgia is seeing a modest increase in sales. Sadly, the human condition is people collect information that supports the story they want to support. So the first stage of the five stages of negotiation is building trust and setting expectations.

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You may need to take time with a buyer before You even start showing properties to bring them up to date with market conditions showing them statistics that are relevant to the area they're shopping and not the national news.

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The second stage. Is conflict. Regardless of how well we set the stage conflict will happen in most transactions. The time we invest in setting expectations around the process and the current market conditions will impact how well we navigate around conflict. The conflict could begin. At the initial offer or after a home inspection or an appraisal, it can happen when they show their parents the house or at the closing table. When the buyers experience a disappointing walkthrough. One way to help prepare for these hurdles is to always end each communication with a buyer or seller with: this is what will happen next. When they get their offer accepted, you will end their celebration with this is what will happen. Next. You will need to submit your mortgage application within X days as specified in the contract and schedule your inspection sooner. If possible, to avoid unnecessary expenses. If the inspection is unsatisfactory. This is an example. The key is to walk them through their obligations and to settle their emotions. Despite our best efforts, conflict still happens. The first thing to remember. And this will be repeated. Keep your emotions out of it. The real estate transaction is already emotionally charged for most buyers and sellers. And the last thing they need is for you to bring your feelings into the drama. Refer to their contractual obligations, remind them of their motivation for buying or selling so that everyone can focus on the goal and work toward creative solutions. And this is important. Trust that the other agent is doing their job. There is no place for the middle school technique of creating a common enemy to create an Alliance and then go into battle. This is not a battle. This is a negotiation and there are many possible solutions to any conflict. Do all you can to focus on the problem. And not the people. Did the buyer's home inspection reveal, a termite issue. Don't blame the inspector, have an adult conversation with the seller to explain that if we choose not to address the termites, the buyer will not be able to obtain a mortgage. Getting a new contract for the same price with a new buyer is highly unlikely because you'll have to return your home to the market with a disclosure that the house has termites. And that this infestation or damage will cause people to take pause before making a fantastic offer. Remember, regardless of your representation status with a client material defects must always be disclosed if they are known. Any reasonable seller will accept this unexpected challenge in their home sale process and move through it with your help. But sometimes the conflict is not so cut and dry. Perhaps the home inspection went well. And an unexpected hurdle of a lower than contract price. Appraisal is now causing conflict. This is where the next phase negotiation may need to be employed. Understandably all parties are working from an emotion of disappointment. And perhaps for the seller, they may even be feeling insulted. So you are not emotional as well, even though you were counting on this transaction to pay your mortgage this month, you will not add one ounce of professional service by adding your feelings. So check them before you begin to help others negotiate. There are many solutions to an appraisal deficit. Including requesting a new appraisal. If you feel the appraiser was way off. This unfortunately is usually not the case. Often we knew when we priced the home optimistically that we were stretching the parameters of the market. Because of a lack of inventory, a special buyer came along and was willing to go to the top of the market and their price range to make an offer on this home. Unfortunately, they are not paying cash and the bank is not willing to stretch the home's value. If we did a good job with phase one expectation setting with the seller. Then they should not be shocked by the appraisal. A great way to set expectation with the seller on the listing appointment is to explain that when they choose to go a bit over that market analysis, you offered. You should say, our market is unpredictable right now. And I can support you in being optimistic. Please remember that most buyers get a mortgage when they purchase a home. So if we find the perfect optimistic buyer that falls in love with your house and pays top dollar, or we have a multiple offer situation that pushes our contract price. Higher than what we're offering. We will still usually have to face an appraisal. The appraiser will not be in love with your house or have any emotions around winning the bid. So we may face a low appraisal situation. The great thing about this is that you will know you didn't leave one penny of equity on the table. There's rarely a real estate transaction that. Does not involve some type of conflict. I've given you a few examples, but there are many, many types of conflict that come up in a transaction. So we're going to move on from conflict and it's time to go to the next phase of negotiation. Which is understanding. Become the asker of questions and not the maker of statements. Before you even take an offer to the seller that has potential for conflict. Ask the buyer's agent a lot of questions. Do all you can to understand if this potential roadblock can be broken down. Once you have a clear understanding of the buyer's position. Take the offer to the seller. Review all of the aspects of the offer, not just the pain point. Ask the seller. If we can work on this one point. Would you move forward with this offer? Remind them of their motivation for selling is the home. They found the one that inspired them to list their home in the first place. Is that still on the market? Ask them, if they want to risk taking more time to wait for another offer. Remind them of the wins contained in this offer. Take the time to fully understand the seller's position if they refuse to budge on something. Hopefully there are no hard lines and you can move through to the next phase which is compromise Let's use the example we gave earlier There is a deficient appraisal You have helped the seller understand that they have options they can cancel the contract but in the case of fha and va this appraisal will still be attached to the home even with a new buyer for for a certain amount of time. We can challenge this appraisal or request a new appraisal But appraisers rarely adjust their work and new appraisals often work with the same comps There's even a practice of combining appraisals into an average result sometimes so new appraisals aren't an instant solution Uh, Hopefully the seller remembers that you set the expectation that they were pushing the limits of this market and they're willing to seek a compromise. If there were multiple offers on the house sellers sometimes have a tendency to look backward and entertain hopes of reviving a previous offer. We need to help them understand that those buyers may have moved on to be under contract on other homes Or, cooled off their desire in that purchase. We have a ready willing and able buyer that is likely already invested in a home inspection and other expenses that prove their commitment to this house. Can we find a way to compromise to get them through this issue. Hopefully you've moved them past the options to cancel or challenge the appraisal And can offer them the options of reducing the price to meet the appraisal or asking the buyer to bring additional funds to cover the gap. If they choose the latter set the expectation that the buyer may want to bring the difference but may not be able to due to lack of funds. The key during The compromise phase is that everyone keeps talking to each other, through their agents. The buyer's agent should not assume that the low appraisal automatically results in a price reduction, and the seller's agent should do all they can to keep the seller open to all possible solutions. Keep the conversation going Until you come up with an acceptable resolution. Now move on to the last phase of a negotiation, Agreement If things got hairy. I highly recommend an in-person meeting with your buyer or seller to walk them through the final resolution even if they are eSigning. That e-signature does not mean That you can read their emotions Reading body language and offering sincere reassurance that they are doing the right thing, means so much more when it is done in person. You're likely going to work with this agent again too, So remember try to meet them in person as well if things got a little tense during your compromised talks. There is no agreement, that's the phase we're in, agreement...there is no agreement until it is memorialized in writing and we don't want anyone's emotions to rule Including your own. Only after all appropriate signatures are gathered on an addendum or other agreement, are negotiations complete. There's an important side note here. Always check with the buyer's loan officer to ensure that any addendum is worded in a way that will not interfere with the loan approval process. Once an addendum to a contract exists The lender must have access to it It's imperative to check with the lender before getting the buyer and seller to sign an addendum. There you have it presenting offers and the five stages of negotiation. Our next episode will wrap up season one of real estate common sense we are already preparing season two where we will interview the people who support us in providing the best customer experience to buyers and sellers. We have interviews with superior lenders, inspectors, title companies all lined up for our next season which is designed to help you interview your partners and understand the vital role they play in the success of transactions. Subscribe to our podcast so you don't miss anything as we share real estate common sense support For agents launching building or expanding their real estate business. I'm your host, Lisa Spencer, sending love and wishing you success! The transcript for this podcast was transcribed using Descript Ai.