Mastermind for may 8th. Can you change the mindset of a buyer? and How To Convert Clients At Open Houses
Today’s Mastermind wasn’t the winner in the attendance department but nevertheless we had some great discussions started by a newer agent looking for ways to counter a potential buyer who wants to postpone a purchase. Specifically, the client’s father had grave concerns about the market. What is it with parents? How many dads fly in at the last-minute with the famous “you’re paying WHAT for THAT”? The reality is that it doesn’t take much to change a buyers mindset. It’s kind of like watching playoff hockey. You can actually see the momentum shift.
The truth is people get it in their head that the market is heading one way when the evidence you see is that it is going in the other direction. They concerned the market is falling or their purchase will lose value. Did they just read an article about poor job numbers and the impact that will have on home values? Could it be that they are just hesitating because they are afraid or have zero motivation? For first time buyers it’s the parents from out-of-town who just don’t get the big city pricing. So what can you do? Step one of shifting the mindset is to identify the concerns into several smaller, more manageable pieces. Challenge the source. Keep a level head and provide nothing but facts and make sure you have the documentation to back it up. You can’t go in with an argumentative stance as that will just entrench them in their beliefs. The fact of the matter is that your job is to keep buyers posted on whats going on with the market. First time buyers need support and encouragement. Research shows that first time buyers take an average of 5 months to buy their first house so don’t be discouraged with buyers who don’t jump at the first place they see. They need to see the market for themselves.
Next we talked about agents having trouble converting open house visitors into clients. I think every new agent wonders how much contact is too much contact. Agents know that it is important to contact all the people who signed into their open house as soon as it is over, but how many times do you reach out before you give up? NAR research indicates that you should make 8 point of contacts before calling it quits. That’s 8 times over the course of a few months, not 8 days in a row. Talk about determination. Do you have enough patience to leave a message 8 times? The point is, you don’t want to be the pebble in their shoe….just the cozy insert. The whole idea of calling the “visitor” is to build trust, show your knowledge and develop a relationship. You can do that easily by knowing what to say every time you make contact. Here are 10 we came up with. Feel free to add to the list.
1. Just wanted you to know that a similar house is coming on the market this week.
2. The house we met in sold this week for….
3. I know you are just starting your search but I wonder if you would be interested in looking at a few other houses in the area.
4. The open house was pretty busy and we didn’t have a chance to talk. I will be there again this weekend if you want to swing by.
5. I noticed you had a new car, well the house on the next block over has a big garage.
6. My office is holding a real estate seminar that I would like to invite you to.
7. I work with a lot of buyers in this area and I wanted to share this link with you on the schools/bars/clubs/galleries/shops in the hood.
8. I just got 2 tickets to the home show. Thought you might be interested.
9. How actively are you searching for a home right now?
10. I remember you asked a question about the electrical system and just wanted to let you know that the owner has confirmed…..
Hope this helps. Have a great day.
This might be hard for some of you to imagine , but there was a time, many years ago, when people lost money in real estate. Now I know you are probably thinking that we live in Canada, home of the free and continuously rising property values, but believe me, I’ve lived through it and, truth be known, I lost a pant load of money in real estate in the early 90′s. A while ago I did a handy little infographic on the Anatomy of a Canadian Realtor. In my research I discovered that nearly 60% of Canadian Realtors today have only been practising for the last ten years. Those people have enjoyed one of the longest run-ups in real estate in recent history. I wonder how many of them think the ride will just keep on going. I bring this up because in our Mastermind session last week we dealt with an interesting situation where we sold a condo downtown, only to discover later that the owner owed more than the condo was worth.
For those that haven’t heard, real estate runs in cycles. Some cycles are longer than others but the one constant, particularly true about our business, is that what goes up must come down. Hey this isn’t all bad news. Consider for a minute that a slow, if not faltering market means fewer people getting their licences and more people leaving the industry. In the 90′s the Toronto Real Estate Board lost nearly half of their membership. Can you imagine what would happen if nearly half of the nearly 38,000 GTA Realtors left the business? I’m not saying we are going to see a return to the bad old days but I think it is fair to say that the market will eventually point in a negative direction and we, as Realtors, are going to have to think on our feet when we are talking to Sellers who are going to take a loss on their property. So what can we do to minimize the depth of a Seller’s distress? Step One is to understand that we have a responsibility to do our due diligence from the beginning of the listing process. If you are listing a home for sale, our MLS rules are clear….the property has to be saleable. Consider a situation where the seller is under water. Does he have the ability to transfer title when there is more owing on it than received? While the form has fallen out of use, you should insist on the simple Mortgage Verification Form. Failing that, spend the $20 and do a title search. Selling a condo? Contact the management company and tell them you are listing a unit in the building. Are the Seller’s up to date on their maintenance fees? If your Spidey senses are tingling it is imperative that you do as much research as you can before you list.
So the million dollar question is…is the agent’s commission safe? Long answer yes, short answer no. A buyer can walk away from a firm deal if they cannot get clear title. Condo fees have to be paid first, then taxes, than first mortgage, than second mortgage, than liens, than lawyer fees, then Realtors. If the bank can’t negotiate a settlement with the Seller which includes the Realtor getting paid they may find themselves owning a condo. The listing brokerage can only release the deposit (which, thankfully is enough to cover the commissions) with a mutual release or court order, so if the lawyers call and demand the deposit to cover the debts, the listing brokerage does not have to release it. If they do, you can sue them. If everything grinds to a halt, the property can’t close and the Buyer can sue the Seller who will have probably declared bankruptcy by then. Are you getting the sense that by taking this listing you have just walked into a hornets nest? Your right….you have. Remember your commission is at stake. You shouldn’t work for free….. unless that’s your business model.
The truth is that you don’t have to walk away from a listing if you think there is going to be a shortfall. Start the dialogue early and see if there is room for a controlled and organized exit. I guess you are wondering why the agent in the example above took the listing? Truth is, he didn’t verify anything and when questioned about it he said his client lied to him about his financial affairs. Of course he didn’t bother to check.
Despite all we hear in the media about multiple offers and the hot Toronto Market, there are still lots of houses that aren’t flying off the shelves. In fact there are plenty of properties, condos excluded, that seem to be just sitting around. We have one great listing in our office that is a total surprise with 36 showings in 2 weeks but no offers. Now it may be a tad overpriced but it is at least within spitting distance. So apparently it’s not just the sellers who are frustrated. Agents are feeling it too. Well last week’s Mastermind touched on the interesting topic of submitting an offer that is lower than a Seller’s expectation, also known as a ”low ball” offer. First of all, how low does an offer have to be before you consider it a lowball? As an example, lets say we are talking about a $600,000 house. Is a low ball $580k or is it $520K? The short answer, of course, is that it depends. If every house on the street has sold for $525-530K then a $520K offer is not far off the mark, but if those houses are selling for $599-625k then yes, $520k is a bit of a stinker (presuming the market has not changed). So I wonder if low ball offers are really about perception.
The reality is that during the course of your career you will inevitably either show up at an offer table with what will be perceived as a “low ball” offer or you will be on the receiving end of one. How you play out the offer will determine if you win or lose. Here’s the thing. We are all capable of coming up with a fair price. There are a lot of tools at our disposal. But generally homes are priced too high because eith the seller assumes his home has more value than a similar home or the agent has priced it high in order to get the listing. As a listing agent you have to decide; A. Is this a listing worth taking in the first place? B. How much over market value does the Seller want to list for? C. Can I convince agents to submit an offer on this over priced listing? D. Will I be able to convince the Seller after a few weeks on the market that the house is overpriced? E. If someone submits a low offer (actually a good offer) am I capable of convincing the Seller that it is worth accepting? F. How much is this listing going to cost me in terms of time and money? These are all serious questions to consider at your initial Seller interview.
On the buy side, you have done your homework. You have looked at all the comparable homes, in fact you have the experience of actually touring previous sold homes and had even sold one just a few houses away. If anyone knows the true value of this listing it is you and the buyer has hired you to get him that house at fair market value. The only problem is that the house is listed $100K over the previous sale and it has been on the market for two and a half months. The Sellers paid to much in a bidding war last year, they renovated a bathroom and put on a new roof and now they are getting divorced. It’s time to put your skills to the test. There is no question that you face an uphill battle. The Sellers are not willing to be the only couple in the city (in the past 15 years) to lose money in real estate. Is there a solution to this insurmountable problem?
As Joe Friday said, all you can do is present the facts, “just the facts”. Here is the market, here is the buyer, and here is the money. There is no room to interpret it any differently yet there are a few things you can do to cushion the obvious blow to the Seller’s ego.
1. Try to present the offer in person. A low offer delivered by fax is just not going to work in your favour.
2. Be empathetic. Understand the Seller’s pain without seeming contrite.
3. Offer a long irrevocable time to let the Sellers come to grips with your offer on their own terms.
4. Talk about the appraisal function and how the sale might not meet financing conditions at their price.
5. Convince the Sellers that the Buyers are willing to make concessions on certain items in the house.
6. Be willing to let the offer lapse and try again later.
Hopefully a little time to digest the offer is all a stubborn Seller needs. What is it they say….time heals all wounds? If you have been in real estate over 20 years then you know that it IS possible to lose money in real estate and losing money is likely to stir a bigger emotional response than making money.
The opinions of this Blog do not neccessarily represent the opinions of Bosley Real Estate.