Tired of getting your buyers' offers rejected?!? In this crazy market, do these things to get your clients to the closing table!
It's worse in some markets than others, but even here in the Midwest. I was just talking to one of our developers, he said his brother was at a house to look at it and there were 70 offers on it. And he was like, "Why would I even bother?" I hope that I am wrong, but I don't think it's going to end very quickly. It's a supply issue more than anything else, and we're going to have to catch up on supply and I'm sure there's a lot of sellers out there that are also equally concerned. They want to cash in on this market.
In fact, I know this firsthand talking to another friend up at the lake, he wants to sell his house, but he said "Where would I go?" It's just kind of a perfect storm of real craziness, but multiple offer situations are not new. It's something that has been around for a long time, especially with bank foreclosures, things of that nature, hot markets in really hot deals have always had this situation, and there's a lot of things that agents can do to be proactive. Putting their best forward to make sure that they have the most likely opportunity to be able to get their offer presented and accept.
I was looking at a little market thing in Prosper, and the median days on market for the 34 houses that are not pending right now, was 4 days. The absorption rate on this market report that I was seeing was red, red, red, red, RED, until I got to like the $2 million price point. It's just crazy. I took a screenshot of this Facebook group post where this guy said, "I had one with 118 offers and one was 79. Both went above 80K of the asking price. They sold for $350k and $410k. That's where I think a lot of people have kind of seen that. And every market's a little bit different. I was talking to somebody in West Texas a couple of days ago, and she was, "It's crazy here, but it's 5/10 over, it's not 50/80 over.
Regardless, I think the first thing that came to my mind when we were talking about this, and obviously, you've got some things that you've done in your career, but starting from scratch, the communication that you need to have, and showing that you're an expert in your field has to start from your first conversation with these people to be abundantly real on what it's going to take to get into the home that they want and love.
I was on our little neighborhood Facebook page last night, and there's a new house going on the market that they bought 2 years ago for $420k, and they're selling for $525k. Somebody commented, "If they get $525k, we're going to sell our house!" And I responded quickly and I was, "They'll get above $525k. They got a pool, beautiful house, blah blah blah, they're going to get multiple offers the first weekend." And she said "But where would we go?"
Even rentals are crazy right now. Its a good time to own real estate, ladies and gentlemen. If you don't own some real estate, or sell it, I would say, start to make that a goal; owning more real estate. It's a unique skill set that we have as agents, and we should be using it to our advantage topic for another podcast. Let's talk about some tactics that I've used that I know would be beneficial that might be elementary to some agents, but it might be something relatively new to others. The tried and true thing that I always use is an escalation clause. A lot of agents, prior to this year, had never even heard of an escalation clause, but it's something that I've used often, especially in a bank foreclosure situation.
Essentially you can Google this, but it says the buyer will pay X amount above the highest offer, with proof of the highest offer. You are in a position to necessarily always be the highest offer, right? It's a cool way to get your seller or your buyers into first place. Another thing that I have always done, would talk to the listing agent, prior to submitting an offer, and I would do this right at the house, and I would put them on speakerphone. I would ask my buyers to be quiet and I would ask them, "Can you tell me what's important to the seller? What are some things that are important to them?" Closing date, possession after closing, if it was furnished, some things that maybe they didn't want to leave, and then obviously contingencies, right?
If you're in the highest and best situation, you're going to want to guide your buyer to remove those contingencies, and what they need to understand is, I'm not giving legal advice here, but it's very difficult in my experience to force a buyer to buy. What's at risk is the earnest deposit. If they remove the contingency for finance, or maybe even appraisal if they're willing to pay the difference of what the bank won't loan them, the money that they've got offered for the home, what's really at risk there.
You can sue somebody for specific performance in my understanding, again not legal advice, but I've never forced a buyer to buy. I've never seen a buyer forced to buy, and especially in the market like this, just get the heck out of the way. If you're not buying fine, there are 70 other people in line. It's helping the customer understand, yes, you're making this crazy offer. Here's the worst case, in my experience, and every state's different. You might want to get some legal advice before you give that advice, but understand I've been in the position on a buy-side and I've made some crazy offers that I knew if everything goes to pot, what am I really at risk here? I think the other thing is the fact that it's not an adversarial relationship with you and the seller, especially if you control some inventory in your market; the taping will be turned.
One of the things that I've always done is try to look for affinity points that I've had with that particular seller.
I remember one house in particular that I bought. It was a multiple-offer situation. I was the first guy in, and the listing agent was just getting inundated because it was a smoking hot deal to flip. Like there was a good chunk of change. I think not quite six figures but close on the table. I remembered she was a big dog lover, specifically pit bulls. I'm talking to her, "Hey, how are your dogs? And can you believe they're proposing that pit bull band?" "Oh no, I can't believe that they're the best out there!" I got the deal, she was able to hold everybody else at bay, I wasn't being nefarious about it, I was just using what I could to my advantage. Don't forget we're in sales, right? You've got to sell the listing agent on why they should work with you. People work with people who they like, right? And oftentimes people like people who are like them. Those are things that I think that we forget about oftentimes and we just go through the motions, but you've got to set up those affinity points and some rapport.
I read a post today, about a guy on this particular topic, and he's like "I would like to use an NLP." And I was like, "Man, this guy is brilliant. I forgot about NLP." His advice was to ask them, what was important to the seller? Repeat it back to them, so that you're understanding them correctly, which is an NLP technique; mirroring and modeling. Then, reinforce that to make that relationship that much stronger with the agent. He said, "Since I've been doing this, I'm two for two, prior to that, I was losing." It's really easy to start to look externally at the world. This is the reason why my offers aren't getting through, I'm not making the money. I should, it's all their fault, right? Then, when you start to look internally at the things that you can control, now you have an opportunity to make a difference in the outcome. I think personal responsibility is the key to change and grow in any kind of situation, especially in this crazy market.
People should be able to go back and implement these things immediately because a lot of people are in situations where they're putting in offers daily, weekly, whatever it may be. It becomes a struggle, right? I'm just seeing more dumping, not really complaining but kind of complaining, in a lot of the real estate forums, they're like "Can you believe this?!" And then people just pile on with, "I know! This is what I'm doing," and I think that there's one thing, obviously this is a crazy market, you don't want to do is put your clients in a position where they overpay, or they are giving out something that they didn't have to, because you didn't ask a simple question and are the seller's agents, or the sellers going to be straight up with you 100% of the time. Absolutely not, right? If you can get a little bit of a lift from doing a combination of all of these things that we're talking about, it's all about the implementation of it.
Don't get discouraged when the first time none of them work. These things work overtime, it's not like this is going to work automatically. It's not a cure-all pill, but it's just a combination of these things that will help. You also don't want to drop your pants when you don't have to, if you are offering things that aren't that important to the seller and all it was you asking a simple question, then telling you what to do, then you can do that versus I'll do this and go this far over, and bring cash, and waive the appraisal, and blah blah blah. Sometimes you don't have to do that.
It could be something as simple as possession after closing. Maybe they're really concerned about making the switch. Maybe their house, if they're looking to purchase, maybe they've got one under contract, and need some extra time. I read about a seller who wouldn't move out of the house afterward. They used the COVID eviction ordinances to basically live there for free. They wrote a check for this place, he had no debt on it. He got like half a million in cash and he's been sitting there in the house.
I just think that looking internally to make the changes that you need to make, using some of these tactics and techniques, and just to really be brief about the escalation clause should help you be in the top spot among a lot of agents.
A lot of these agents who are dealing with these multiple offer situations, they've never dealt with this before, right? They might have their uncle's house listed and they're all of a sudden "I'm the most popular kid in school", and again, the other side is be focused on controlling some inventory, if you can. There's still a lot of opportunities to get listings out there and sellers still need a lot of help and guidance. Go get some listings, that would be what I would be doing.
I think a big thing too, with the market being what it is, I am in agreeance that it's not just going to change overnight to where it's like gets back to center, and supply and demand are back to a normal rate. It's got to slowly get back to that point. You're going to need listings in 3 months from now, you're going to need listings in 6 months from now, you're going to be listings a year from now. And really you need listings as long as you plan on being in real estate, to be honest with you. So if you don't have a plan to consistently get those coming in front of you, you're gonna be in trouble. I've talked to way too many agents over the years that just when they need to listings, it's just, "Oh I need to listings now!" And that's not how it works. They should've thought of that four months ago.
When I listed my home, which I recently sold, I had purchased my other home prior, but I had to rehab the home that I purchased. So I put in my listing agreement that possession wasn't going to be delivered until after close. I mean, you can do whatever you want. Whatever the bottleneck is, there is generally a solution if you give it some thought, right? What I like to do is I like to think about all the potential bottlenecks before I go in to meet with the customer and have those rebuttals ready. Every one that I can earthly think of, and if they throw me a wildcard, I'll be like, "Hey, let me do some research and get back to you on that. But I'm sure we can work something out to alleviate that concern as well."
Don't start to get angry and don't become adversarial with your customer or with the listing agent. I think that that's probably a huge part of the drudgery of it. Imagine being in their shoes and put yourself in their position for a moment. You got all these people hounding you, you have rules that you have to abide by as far as presenting offers, and getting back to the people who were putting the offers in. You have a fiduciary duty to your seller.
Take a step back and ask yourself "What can you do to help their life, make their life easier? What can you do to help them look like a rockstar to their customer?" These are the things that you want to think about and that you want to ask and you want to make sure that you're presenting. From the beginning, it starts with making sure that you've set those expectations up with your customer, the buyer, upfront, so they're not coming into the situation unprepared.
Explain to them why they would want to be preapproved. If you're in a multiple offer situation, it might not always be whoever has the highest offer. The decision could be made on the fact that one person has the cash (preapproved) and the other has to go find some cash. Which would you take as the seller? So just present situations to them in that same kind of mindset; putting yourself in their shoes. Make sure you figure out ways to help them stand out.
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