When representing sellers, I always requested that offers be faxed rather than the buyers agent personally presenting the offer to my clients. I was one of the first agents in the country to take this approach with negotiations skills nearly 15 years ago. Today it is commonplace. It allows the agent and the seller time to consider the offer before responding to it.
When representing buyers, I preferred to present the offer personally. I wanted to deliver and clearly express my buyers' intentions rather than have them relayed through the seller's agent. By presenting personally, I could gauge the response of the seller by watching facial expressions. I could express my view of the property value. Also, I could share information about the prospective buyers using negotiations skills to build the human connection that so often sways the sellers' acceptance decision.
Presenting a buyer's low offer
When you extend an offer that is under the asking price, be prepared to present offsetting benefits using negotiations skills to make the offer attractive and valuable to the sellers. Alternate redeeming qualities include:
* Solid earnest money
* Buyers with impeccable credit
* Buyers with good, solid employment history
* Buyers with ample funds and a low loan-to-value ratio
* Buyers with the flexibility to close quickly or to wait as long as 90 days
When presenting the offer:
* Discuss the overall offer before revealing the price. First work through and find common ground on the other stipulations in the offer. Then work on the price after you have agreed to or adjusted the other items that aren't related to price.
* When discussing price, identify the difference between the asking and offered prices and focus the discussion only on that number. Ask the sellers, "If the buyers had come in here with cash and closing was in a couple of weeks, would the offer have been acceptable?" Take that number and subtract it from the asking price. Don't deal with the big numbers like a $350,000 asking price and a $335,000 offer. Break it down to a comparison between the $345,000 they would take now if a buyer walked in with cash and the $335,000 offer. The real difference is $10,000. Talk and plan in terms of a $10,000 difference between the seller and buyer.
* Break the cost of the difference down to a daily rate. The effect of this technique is to reduce the difference to a ridiculously small amount. Say the difference is $10,000. Ask the sellers to consider the actual impact of the difference. The majority of sellers end up as buyers, so what you're really asking them to consider is the cost of borrowing $10,000 more for their next house. In fact, the cost of that $10,000 is about $750 a year or $62.50 a month or $2.08 a day. With this information in hand, you can ask: Is it worth $2.08 a day to know that your home is sold and that you have the freedom to move into your next home? These same negotiations skills work well to raise the offer on the buyer's side, or even to reach a mid-point agreement. Maybe each party can pay $1.04 a day to create a win/win outcome for the buyer and seller.
* Using negotiations skills, explain how the buyers arrived at their offer price. Show current comps to validate their thinking. The property may have been listed months ago and in the meantime the market environment may have changed considerably. Presenting a current market analysis can help justify and win acceptance of the offer.
* If appropriate, explain that the buyers have another home in mind, saying something like, "They wanted to try to work with you first."
* If the offer is the highest one the buyers can make, then
using negotiations skills, say
something like, "The buyers would really love the home, but they
understand if there is not an opportunity for a win for everyone." This
kind of statement defuses emotions before they arise.
Above all, when presenting a low price convey that the offer is based on a realistic assessment of the market environment or the buyer's capability, not a personal reaction to the sellers or their home.
Receiving a buyer's low offer
If you did your job way back at the conclusion of the listing presentation your sellers will be well aware of the likelihood of a low offer. When one comes in, here's what to do:
* Call the buyers' agent to learn more about the buyers Ask whether they have the funds to close, whether they've selected a lending institution, and where they are in regards to securing a loan. Learn whether they're just starting and haven't even met with a lender yet, or whether they have loan approval and are just working to find the right house.
* If the buyers have already initiated the loan process ask the agent what loan amount the buyers have been approved for.
* You may learn that the buyers can obtain a loan higher than the amount shown on their offer contract. This alerts you to the fact that they are qualified to pay more but are choosing not to. Your job then is to demonstrate that the home has a higher value than the price offered.
* If you learn that the buyers have been approved for exactly the loan amount listed on the contract, ask, "Is this the maximum they qualify for?" If they qualify for more, you want to know that fact.
* If the agent can't provide the loan answers you need, present the same questions to the mortgage originators the buyers are working with. An upcoming section in this chapter gives advice for working with lending and other partners in the transaction.