Traditionally, the real estate process has, in some ways, resembled a courtroom.
One the one side, you have the plaintiff or the crown. We’ll call them the sellers. On the other side, you have the defendant. We’ll call them the buyers. And both the sellers and buyers have their lawyers; I mean, their real estate agents.
And while this process may not be a roll-up-your-sleeves and come out swinging brawl, let’s face it: it’s pretty adversarial. It’s about not giving “the other guy” an inch, and about getting the most for the least.
Well, that may have been true in the past, but according to Beth Braverman of Money Magazine, both buyers, sellers and real estate professional need to take a giant leap forward and escape from “us vs. them” thinking – because it’s not serving anyone’s interests, and in fact, it’s ruining a lot of great deals from taking place.
Braverman says the root cause of this is really about one word: expectations. That is, many buyers live in a housing bubble world, and many sellers live in a burst housing bubble world. The result? Buyers are offering way too little, and sellers are asking way too much. Both sides are “insulted” by the other’s position, and are walking away from deals based on subjective opinion – instead of objective logic.
Below, let’s look at Braverman’s tips for smart buying and smart selling.
Tips for Buyers
Buyers position themselves to achieve their goal – that is, to get a good deal on a quality home – by not making lowball ultimatum offers like “I’ll give you 70% and that’s it, not a single cent more!” Instead, they should make a reasonable offer that is about 10-15% below asking price, and consider other ways to achieve value, such as seeing if the seller will cover closing costs.
Buyers can also maximize their leverage by listing their current home before entering the market, because sellers dislike writing home-sale contingencies into contracts. Although buyers may feel “safer” by shopping for a home when they haven’t listed their existing one yet, it actually weakens their position. Along the same lines, buyers should pre-qualify for a mortgage, so they can negotiate with sellers without any “what if” qualifiers.
And the last bit of advice for buyers is to avoid falling in love with a potential home. That’s easier said than done! But buyers want to be in a position where they can – albeit reluctantly and even painfully – walk away from a deal if it’s not fitting their financial needs. Of course, this doesn’t mean that buyers should “pretend” as though they hate a house (e.g. “your house is a real dump, but I guess I could see myself living here if I fix it up and stuff.”). Just be able to walk away if it’s necessary.
Tips for Sellers
Sellers stay out of costly emotional wars with buyers when they avoid making judgements about an offer price; something like: “I can’t believe you’re offering me so little. Are you crazy or something!?”. This is much easier said than done, because the buyer may not have read this blog (and shame on them for that!), and so might offer something ridiculously low. If and when that happens, sellers should take a deep breath, count to 5 -- or however many numbers it takes -- and invite the buyer to come back with a more serious offer when they’re ready to make a purchase.
Sellers should also invest in a home inspector before they put it on the market, and work with a home stager to take care of any repairs before the home is listed. This gives sellers much more leverage during negotiations.
Lastly, Braverman cautions sellers from telling potential buyers that “it might be a while before we move out” – because that will kill any short sales possibilities (i.e. buyers who need to move in very quickly for work or school reasons, etc.). Despite being attached to their homes on an emotional level, sellers should be ready, willing and able to vacate the house very quickly if the right offer should come along.
Buying or Selling the Right Way
As with any purchase – whether it’s a car, a vacation, new furniture, or even what to do with your savings and investments – there’s a right way to do things, and a wrong way. The right way is the informed way; the one that uses sound business logic instead of emotional, subjective opinion.
Contact me at 780-709-0811 to get the accurate and timely information you need, so that you can make a smart buying or selling decision – one that you feel good about personally and financially.