Educating Buyer’s About a Buyer’s Market
The market in St. Louis, like much of the country, has slowed and is a “buyer’s market.” Because of this slowdown I’ve concentrated on working with buyers in order to generate commissions. Many of these buyers are mistakenly under the impression that they are entitled to massive discounts because they are bombarded by doom and gloom real estate reports in the media. Some may ask what’s the harm in asking for an extremely low price on a home?
There are two major downfalls to this practice. One is it can make an agent look unreasonable and unprofessional in the eyes of the other agent. Two, the client can lose out on a great deal.
Many agents in this market are slashing asking prices to very attractive rates. I’ve had clients ask for an additional 20 percent to 30 percent off of prices that are already 10 percent to 20 percent below market. Also, in some case the client wants to offer these types of reduced prices on properties that are newly listed or reduced.
So what can an agent do? I think the best way to handle it is to educate the client about
comps as well as days on the market so you can explain why they may not get the property. If the buyer still wants to lowball an offer, I don’t push the issue, I submit the contract as they ask.
If the selling agent says something about the offer being ridiculous, I simply say that buyers expect a lot and this is where the buyer wanted to be on the price. I’m careful not to tip my clients hand, by saying anything that would suggest they will pay more.
Honestly, sometimes I get frustrated with a clients offer. I wouldn’t like it if it was my listing. But in the end, the client decides the asking price, not me. Most agents realize this is the case.
None of my buyers have been granted a price I considered exorbitantly low. Several properties that had lowball offers quickly sold to other buyer’s. After this happens I explain to my client that I work hard to find them a good value and they may want to consider offering higher prices when properties are a good value listed.
Typically, once they lose a property or two to higher offers, they begin to come down to earth on their offers.
Howard McAuliffe is a licensed agent for Premier Realty Exclusive in St. Louis and is pursuing a master’s degree in Urban Planning and Real Estate Development at St. Louis University.
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Comments
What is the harm in making a low-ball offer?
The risk that someone else will buy the property while your client is deciding to bring his/her bid up.
In the last two weeks, I've seen three deals come together where the final sales price will be roughly 50% of list.
However, I've also had two clients lose out on homes because they were offering to low a percentage of list while compared to what someone else was offering.
Anyone that says a reason not to make a low-ball offer is for the agent to save face, needs to check his/her ego at the door. The job is to get the client's best deal - whether buying or selling - not to save face with our fellow agents.
Posted by: Toby Boyce | March 19, 2008 07:22 PM
Howard,
I totally understand where you are coming from because I'm currently working with a buyer that likes to low ball every offer. For example, he loved this property that was just reduced 50k and was about 30k under market value and he still wanted to offer less than what they wanted. I could only do some much in the beginning because he had not learned from experience, but now he listens to me and we are currently negotiating with a certain property. On the other hand, I understand Toby as well because you should not be ashamed of submitting a low offer, but at the same time we as Realtors need to educate our buyers and let them know what a reasonable offer would be. Patience is the number one virtue we need for buyers like these!
Posted by: Paul Salazar | April 1, 2008 07:01 PM
I had a simliar situation not too long ago, but the pressure to submit a lower offer was comming from the parents of the buyers I was representing. The parents thought that we should offer 20% less than the asking price, even when the listing agent told us he was expecting two other offers. I actually had to ask the parents to step into another room and explain that they were causing their child to lose out on the home they wanted. After that the parents backed off and we went with a full price offer but asked for more closing costs. Our offer was accepted and everyone was happy, including the parents.
Sometimes you have to see what the motivation is for the low ball and where it is really comming from.
Posted by: Ramona Rice | April 4, 2008 01:12 PM