Q: “Denise, I am having an issue with two sets of buyers. In this market, the listing price is never the final sales price with multiple offers. Yet I am having a difficult time getting my sellers to not freak out when suggesting that they may need to increase their offer price by $5,000, $10,000 or sometimes even more than $20,000 to get the home. I am tired of writing all these offers that go nowhere! What do you suggest?”
A: This is a very common challenge right now in many markets. Buyers are browsing online and get very excited when they see something that is a great value for the money. But they may quickly forget that other buyers are going to see that too, get excited, and start the bidding frenzy that the seller was hoping for in the first place.
The key to keeping the buyer tuned-in to the true value of the property – both in terms of the market as well as their future home – is to drill the property back to its essentials and compare it to recent sales AND break down the additional cost into what it means monthly.
For example, let’s say a property comes on the market for $300,000, but you know it is probably worth closer to $315,000 and it will probably sell for $319,000. You need to prepare the buyers for the likely end result by being very up front and providing research that supports the pricing by showing what recently sold for $315,000-$319,000 and showing how that compares with the subject property.
Then you need to show what an additional $15,000-$19,000 looks like in terms of an additional monthly payment. In this case, $15,000 at 4.5% for a 30 year fixed rate mortgage is an additional $76 per month. $19,000 is an additional $96.27 per month. In those terms, $15,000-$19,000 is digestible if their pre-approval supports it.
Then finally, I would ask tough questions. Ask things like, “You want to offer $315,000 as your maximum price, but what if it goes for $316,000? How would you feel if you lost out over $1,000?” Then you can tie this question back in to the monthly payment scenario you had already worked out before and ask, “Is this home worth an additional $96 a month?”
Of course you can also talk about how time is not on their side with both interest rates and prices rising.
Don’t write another offer without having a serious discussion with your buyers about what it takes to buy in this market, the danger of waiting, and what the price really means for their monthly bottom line!
Don’t want to do the math on what the escalation means monthly? We have done it for you! Club Zebra PRO members have access to an article we just wrote complete with typical escalation amounts and interest rate table that they can use for their buyer clients. Access that here!
And if you are not a Club Zebra PRO member, you can join for only $9.95!