Many years ago I wasn’t afraid to submit a lowball on behalf of my client. Actually, if the research showed that the property wasn’t worth the purchase price, I was happy to go in with guns blaring and make my stand no matter how grumpy the seller was. In most cases I would look at a couple of facts; first there were the comparable properties. Easy enough to do when they were condos, but houses were a bit more difficult. sometimes you had to really massage the numbers to prove a point. Of course the second fact was “days on market”. We as agents look at this closely, but buyers today have been used to one simple truth…if it didn’t sell in a few days then it was overpriced. Why wouldn’t they? The news is inundated with stories of houses selling in multiple or bully offers.
So a few days ago an agent in my office tells me that he got a lowball offer on one of his listings. At $599k the agent would admit that the price was a little aggressive. If he had his way he would have listed it at $549k, held back offers and hoped for $560k but the owner was adamant that he wanted to list higher and given the market, there was always a chance. After a solid turnout at the agent open house, plenty of traffic during the weekend open houses and consistent showings during the first week. The agent, working on the direction of his client, had a holdback date, 6 days after the listing hit the street. But despite the early flurry of activity, foot traffic quickly declined and the offer date passed without as much as a nibble.
The agent did what he was supposed to do. Changed the listing to reflect that offers would be reviewed at any time, and then got on the phone. The first batch of calls went to a few agents who expressed some interest early on, followed by everyone else just to let them know that no offers were received. Unable to drum up any offers, he got back to work. Flyers, open houses, door knocking, etc.
After the second weekend of public open houses, he finally got an offer. $515K. Nearly 16% under the list price. He knew right away that this one is going to be a hard one to sell to the owner who was probably expecting something over $600k. Having been on the other end of this equation several times I know exactly what the conversation was like between the buyer and the buyer agent. After being told the house didn’t sell on offer night and seeing that the house has been on the market for over 15 days, the buyer had only one conclusion…. Overpriced. Lets throw in a stinker bid and see how low the seller will go.
Experience has taught me that this is not the right tactic. Low ball offers put the seller on the defensive right off the bat. They are likely to likely to sign back at full price or not at all. The buyer agent sits across the table from the seller with an immediate disadvantage not likely to be smoothed over very easily. So what are you options as the buyer agent? Simple. Do your homework. Conduct your own CMA and sell the price using pure hard facts because facts don’t lie. Let the buyer know that success is derived by coming to the table with a strong position backed up by hard numbers.
The seller agent has a tougher job. They do not have any influence with the buyer so must communicate to the buyer agent that they will have a better chance if they bring a reasonable offer. As you know, the seller agent can’t disclose motivation or any other pertinent facts like “I told the seller the house was only worth X” or “my seller is greedy”. Instead talk to the buyer agent about comparable homes in the neighbourhood and nudge them in the direction you need to be at.
Remember to consult local data to get a sense of what the average days on market are for the district or neighbourhood. Chances are you will be surprised how high that number is. Consider that in March 2015, one of the hottest months of the year, in Toronto’s C01 district (where my office is located) average days on market for freehold homes is 27 days yet if you asked anyone, agent or not, they would say houses sell much, much faster. There is perception and then there is the reality.
mark mclean is the Broker/Manager at the Bosley Real Estate Queen St W office and President of the Toronto Real Estate Board. The opinions expressed here do not reflect the opinions of TREB or Bosley RE.
Awhile ago I was speaking to a friend of mine about diapers. Yeah, that’s an odd way to start a blog. More specifically we were talking about all the diapers she was going through and how grateful she was to Diapers.com for the speedy delivery and awesome service. I had to admit I never heard of the company even though they have been around for about 7 years or so. Thankfully my diaper changing days are well behind me. The fact is that this was a company that came out of nowhere and turned into a half a billion dollar company. I asked my friend about it. The first word out of her mouth was ‘service’. I decided to take to the internet and do a little research on the company and lo and behold I found some interesting details that parallel the real estate industry closely. Maybe I should be more specific. They way they ran their business is the way I want to run my business.
Consider that Diapers.com had lots of competition. They knew they couldn’t win on price but they recognized that having a baby was a challenging time in everyone’s life. Sleepless nights and general chaos and mayhem. Mothers needed help, assurances, guidance, and faith that, when ordered, the diapers would arrive on time. By their very nature diapers are heavy and bulky and expensive to ship so Diapers.com decided that they did something different. They couldn’t compete on price so they poured all their energy into customer service. They believed that their brand would only be as strong as their relationship with the consumer. They poured their efforts into shipping and tracking software, creating supply chain efficiencies and using data to anticipate the needs ahead of time. If they didn’t make money on their first order, they bet on the long-term strategy… build trust and the money will come. The strategy paid off as they figured that 35% of their business came as a result of word-of-mouth. As a start-up, the two founders boot-strapped their business part-time for a few years working nights and weekends. In fact they didn’t do any real marketing until 3 years after they launched. Consider other internet businesses that build a website and pour millions of dollars into marketing in order to gain traffic then try to figure our how to make money from it.
To me this is the ultimate business case for service over price. We can learn a lot from other’s experiences. In real estate we are trusted to help our clients buy or sell their largest asset. For the busy or uninitiated, they want it to happen quickly with the least amount of hassle and for the most money if they are selling (and the least if they are buying). Ok so maybe my title is a bit over dramatic. In the end, I believe there is a place in our world for both sides and quite frankly the customer should have the opportunity to do it all themselves if they so choose. At the end of the day however I think that an agent’s referral business comes from them doing a great job and building and maintaining their relationships with their clients and not for doing it for less money.
mark mclean is the Broker/Manager at the Bosley Real Estate Queen St W office and President-Elect for the Toronto Real Estate Board. The opinions expressed here do not reflect the opinions of TREB or Bosley RE.