Residential Real EstateDon"t Let Buyers Drag The Market Down Without A Fight
Real estate has a natural ebb and flow, with home values going up and down, and staying flat. But when a market begins to turn, is the real estate industry accelerating a downturn by indulging buyers and their fantasies of perfection a little too much?
In a recent Realty Times story, a Realtor/seller found that making major improvements to her home and dropping the price below the competition were failing to bring in offers. Instead, what she received from fellow agents who were kind enough to provide feedback, were a lot of buyers" negative comments along the lines of not liking the paint color (isn"t paint something that is negotiable?) or the size of the home (in a neighborhood where all the homes are within 200 square feet of the same size.)
Her complaint was that buyer"s agents were serving more as chauffeurs for buyers and they were doing little to help her sell her home, despite her claim that she is paying 3 percent to a buyer"s agent.
A flood of mail came in, mostly from outraged buyers" agents who said they don"t represent the seller, and if a home is getting showings with no offers, it is overpriced.
"Your column focused on buyer"s agents and whether or not they were doing their job the best they could. But the reality is, you can lead a horse to water, but you can"t make them drink. If horses are comin" but they"re not drinkin", then something must be adjusted in the marketing of the home - either presentation or price - or both," wrote one Realtor.
The Realtor went on to say, "An allowance for paint, or in this case, the seller saying - "let them just make an offer" in most cases just doesn"t cut it. Buyers will move on to a house that may not need those tasks completed - even if the subject property is priced to reflect those additional tasks. Price cures all!"
Points taken, but the Realtors who objected, even with sound arguments like this one, missed the point.
The seller had already made significantly more improvements than other homes for sale in the neighborhood, and has priced it under unimproved homes in the market.
Her point wasn"t just that the buyers weren"t buying her home, they aren"t buying anything as long as they are being driven around by buyers" agents who are willing to indulge their objections house after house. The buyers" agents aren"t helping them avoid a bad purchase, as one Realtor wrote, they are helping them avoid buying anything, and that"s not good for anyone - sellers, buyers or Realtors.
Overcoddling buyers is bad for everyone
None of the buyers" agents responded to the story with any introspection - it was much easier to blame the seller. But this story was meant to suggest that if the buyer isn"t buying anything, no one is getting what they want. The buyer isn"t getting a home, the seller isn"t selling a home and the buyer"s agent isn"t making a commission.
There are several effective ways to assure that everyone gets what they want, providing the seller is being reasonable about the market, and that is for the buyers" agents to earn their commissions in ways besides chauffeuring the buyer around.
Preview homes
Agents who choose to work with buyers are going to spend some time driving with their clients, but a lot of time can be saved if they will simply take the trouble to preview homes in the neighborhood.
According to the seller/agent in the story, not one of the buyer"s agents who showed the home had seen the home before. They didn"t come to see the home when it was on tour, nor did they ask to preview the home before showing it to their clients. That puts the buyer"s agent in a tough position to overcome objections or offer solutions to the buyer if they aren"t familiar with the marketplace.
If they know the homes available for sale in a neighborhood, they know which ones have been improved, by how much, and what those improvements are worth, and they can relay that information to the buyer.
Listen to objections
Without knowledge of the marketplace, buyer"s agents have little choice but to endure buyer"s objections without offering much in the way of solutions. But are the objections real or are they disguised price objections?
If a buyer"s agent has previewed homes in the neighborhood, the buyer should be shown homes that meet the buyer"s criteria. After that, there are only objections to deal with. If space is an issue, then either the buyer has to choose a different home, a different neighborhood where the homes are larger, or homes that have room for additions.
Letting a buyer pass up a home because of something as easily changed as paint color is silly. If the buyer is expecting perfection in a 50-year-old neighborhood of tract homes, then clearly the buyer"s agent hasn"t communicated well enough with the buyer.
If the objection is solid, like not enough bedrooms or not enough yard for the kids, then the buyer"s agent has more to work with and can then continue to show the buyer homes that meet the new criteria.
If the objections aren"t serious, then the buyer"s agent needs to sit down immediately with the buyer and find out if they have a serious buyer. Find out what is keeping the buyer from making offers.
Don"t be afraid to educate the buyer
The reality is that most homes for sale are older, and most will have some warts. Otherwise, the buyer should be looking at new homes. Does the buyer understand this?
A buyer"s agent who says the following to a buyer is doing the buyer a service as a client: "If you want to be in this neighborhood, any home in this neighborhood is going to have problems, and you should expect that in this price range. It"s a matter of which problems you are willing to overlook and which you are willing to fix. If you don"t want to fix anything, then your choice is either to offer less, or pay more to a seller with a more perfect home. If you like everything about this home except the paint color, let"s find out what the seller is willing to do with an offer. If you don"t like the home, let"s move on to homes that have more of what you want, but be prepared to offer more for such homes."
A dose of reality is a kindness to the buyer. No real buyer wants to waste time in pursuit of an unrealistic goal, any more than sellers want their time wasted with lookie-loos instead of buyers. And agents shouldn"t want to waste their time with buyers who don"t understand the market or how much home their money can truly buy.
Know the customers
Buyer"s agents typically work without a contract, and often put people they hardly know in their cars to show them homes. Do they know for certain whether their buyers are ready to buy? Have they been prequalified by a lender? Have the buyers shared their preferences with the agent? Have the agents driven the neighborhoods with the buyers to show them what their money can buy and what condition they will likely find the homes?
If the buyer is prepared and ready to buy, the buyer"s agent has a lot to work with. If the buyer"s agent is chauffeuring buyers before they are ready to buy, then everyone involved is wasting their time.
Know how to navigate a changing market
Buyers in a shifting market are understandably afraid, but the real estate industry can inadvertently coddle those fears so that the buyers put off buying and the market worsens.
Like sellers are told by listing agents to price their homes for the current market, buyers should be told by buyers" agents to buy with the current market and their immediate future needs. If they are afraid they are going to lose money, then they shouldn"t be buying a home. Steer them to a lease for a while.
Buyers who are buying homes with nothing down and who plan to move in two years should be afraid. A home is not a short-term investment that can be jumped in and out of like the stock market.
However, if a buyer believes they will be in the home long enough to see some appreciation, then they should be comforted to know that most markets recover and go on to test new highs. The way to talk to this kind of buyer is to overcome their fears with some good old-fashioned market analysis, all the way back to the 80s if you have to. Show them how the dips and rises in your local market work.
They should also know that there"s no free lunch, but real estate homeownership comes awfully close. Homes show wear and tear. They require substantial improvements, which is why there are so many tax advantages to owning a home.
Interest rates won"t stay low forever, and it is seldom that low interest rates are combined with low housing prices.
The point is it is easy to blame the seller when a home doesn"t sell, but the industry should also look at why buyers don"t buy, because sometimes it isn"t always the seller"s fault.