Most property sellers in the market who contact us to sell their property believe that our real work as real estate consultants is to find the right buyer. And most buyers who contact us assume that our real work is find the right house for them to buy. But in fact we believe that our real work lies in bringing the deal to a successful closure and that’s what this article is all about.
There are of course many hurdles that property buyers face when choosing the right property to buy and there are many challenges in finding the right buyer for a seller’s property. But when the time comes to making contract agreements and closing transactions if this step goes wrong then no other step in the real estate process matters. The process of negotiations in a transaction involves fiduciary responsibility, market knowledge, client relations, honesty, disclosure and a high level of skill and tact. Success could mean that our client is the one who has been chosen amongst other interested parties to buy a particular home. Sometimes success is a negotiated reduction in the selling price of a house. But the end result always reflects the realities of the market and the best terms and conditions that the buyer and seller can work towards.
Informing Clients (and Yourself) of What Happens Next
After a buyer and seller come on board, we outline what happens next in the real estate selling process.
Firstly we advise sellers that initial offers always come in below the asking price. Rarely do we see a transaction that doesn’t require a counter-offer. This information at the outset adjusts expectations and avoids disappointment.
Our objective at this stage is to set the stage for the negotiations that will follow. Preparing property sellers for what’s in store is a crucial final step that saves everyone time, energy and also emotions in the future.
Along with being realistic and truthful with our clients we set an optimistic tone and outlook and create an expectation that all parties will work together to achieve a win-win outcome for both buyer and seller. Additionally we as agents also need to feel as though we have won as well not just in terms of the commissions and fees that we earn but also in terms of feeling that we have earned the satisfaction of our clients.
One of our jobs throughout the transaction process is to serve as a calming influence. Emotions can run high during the course of a property transaction and we believe our job is to remain focused on the outcome and to settle down the buyer, the seller and all involved agents. This approach can be compared to doctors in a hospital’s ICU! The best doctors display confidence and skill while reassuring their patients and other medical staff that everything is under control. If the doctor in an ICU flew into fits of frenzy, the entire clinical team would also likely spin out of control what with unchecked emotions being displayed from all corners. The same is true in the final moments of a real estate transaction. Our job is to commit to serving as the calming influence throughout a deal.
Representing a Property Seller
Sellers can get highly emotional during the final negotiation stage of a deal. They are undergoing changes, making life-changing decisions and dealing with transactions that involve major if not the biggest assets that they personally own. Our role as real estate agents in this environment and the key to our success is twofold –
- Be prepared and
- Be ready to protect the seller at every step of the way.
By being prepared before the buyer presents his / her offer, we can help shorten the meeting, help the seller prepare a better counter-offer, keep seller emotions in check and focus our client’s attention on the next crucial steps in the sales process. We advise agents working on our team to concentrate on the following points:
- Remain calm no matter how high or low the offer gets.
- Go though the buyer’s offer in detail and note down any important issues that need to be addressed.
- Flag any points that need to be brought to the attention of the seller so that they can be easily referenced during the next meeting.
Protecting the Sellers
The worst thing that can happen to a seller is to have the transaction fall apart a short time before closing. By this time a seller is emotionally invested in buying another property. They have also made plans to move by a certain date and are excited about the future. And if everything falls apart at this time, everyone loses time, marketing momentum and a considerable amount of money as well.
Even the most thorough approach can result in a broken deal once in a while. But by taking the following precautions we can do a better job of protecting our clients and also keep last minute disasters to a minimum.
- Require the prospective buyer to deposit enough token amount to secure our client’s position. Ideally the earnest money aka the token money should be set high enough to make it difficult for the buyer to walk away from the deal inspite of all contingent conditions being met and satisfied by the seller. One may think that this strategy conflicts with our objective of achieving a win-win situation for both parties but in fact this simply requires the buyer to uphold his / her end of the deal and not back out or else sacrifice the token amount. Few buyers will walk away from a deal when the token amount paid is large.
- Require the buyer to provide proof of loan approval with no conditions. Generally it is imperative in any real estate transaction that the buyer can and will perform within two weeks of acceptance of the offer by the seller. Housing loan agencies and banks are notorious for writing loan-approval letters with clauses that protect both the bank and the buyer. So it should be made clear on the counteroffer that no contingencies or conditions are acceptable after two weeks.
Keys to Representing Buyers
When it comes to representing a buyer our responsibility entails not only showing the best properties according to the requirements but also advising the buyer on making the best offer. In order to best represent our clients, we follow these best practices:
- Guide our clients towards a competitive offer. We like to perform a quick competitive market analysis or CMA (learn more about CMAs here) to determine the correct market value of the property. The factors to weigh to determine the home’s current value are the values of comparable properties (atleast 2 in the same area), local housing inventory levels and competive nature of the current real estate market place. Our findings will help the client arrive at a reasonable asking price decision.
- After the client decides on a competitive offer price, properly present the offer to the seller through an email or an offer in writing. Our goal at this point is to protect our client’s best interests by writing terms and conditions that convey his intentions and meets his goals. For most people, the purchase of a home is the biggest investment they will ever make and it will also be biggest debt they will incur in their life. The offer must therefore protect the buyer by addressing every point – the price being offered, the items to be included in the price including furniture, artwork etc., the token amount to be deposited, the closing date and any condition that the offer becomes null and void including contingencies based on the outcome of the inspections, approval of bank financing etc.
- Presenting the offer to the buyer in the best way possible. Presenting the buyer’s offer favourably to the seller can mean the difference between the seller accepting the buyer’s offer or rejecting in favour of another buyer. The stronger we can position our buyer by presenting his financial capacity, high level of commitment, motivation and human connection the more we can swing the negotiation in favour of our client.
Hope this article shed some light on how we follow the best practices when it comes to negotiating deals and helping ensure the best and most positive outcomes for our clients whether we are working with buyers or sellers or both!
Do not miss a single article!
Submit your email id to get new articles directly into your email inbox!