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Buyers and Sellers are Not Even Close - Agents to Blame?
By Ryan Ward | June 9, 2008
Not totally, but, at least partially. If you are actively working working with buyers and sellers in today’s market, you know how hard it can be to even get a realistic starting point when presenting or receiving an offer. Recently I wrote a post about someone who contacted me and asked that I place an offer almost $500,000 below the asking price of $700,000 and this may have been an extreme, but, more and more buyers are looking for deals like this that just aren’t there. The logic on the part of buyers is based partially on misinformation and partially on the perception that homes are not priced at a perceived value. Fair enough on perceived value and they may have a point in many cases, but, the logic is flawed on another level and as agents we are to blame as much as anyone. I’m afraid fear of potentially losing a client is standing in the way of doing our jobs in many cases.
I’m sure I’m not alone in my recent experience in dealing with buyers. It goes something like this:
You look at some houses above what they want to spend and they find one they like. They look at the price that the home is listed for and decide to offer 75% of the asking price. On a home listed for $400,000, they might suggest that they would buy it if they could get it for $300,000 and for you to make an offer. After all sellers are desperate. More often than not, this logic is flawed as the buyer generally has very little idea of what a fair market value is. There are lots of reasons as to why buyers have this mentality right now and all they know is that buyers have the upper hand and the sellers have to sell. As agents, it’s not responsible to simply say OK and go present an offer. You’re a professional, right? Do your job!
Educate your buyers of market value. Go over list price to sales price - and original list price to sales price, days on market, comparables, etc…Buyers smell blood and there is blood in the water, but the water isn’t completely red just yet. Sellers aren’t giving it away and not everything is a foreclosure. Oh yeah and the foreclosures. They are typically being priced lower and closer to what they are selling for than in the past. Banks have more inventory and can’t afford to leave homes drying up on the vine as in the past.
This year in North Fulton, the average list price to sold price for foreclosures is approximately 96%
 There Are Deals, Right?
 Of course there are. But, not usually off of asking price. The deals are simply homes that can be found that are usually already listed below what we determine to be fair market value. If you have a buyer who is shopping for a home using logic based on offering a number based off of the list price then you are not doing your job as a professional real estate estate agent.
It’s time to step up and explain to your buyers, AT THE BEGINNING OF THE HOMEBUYING PROCESS how to look for a deal and why that logic is flawed. Be a professional, not an order taker. Be part of the solution, not the problem. Win more clients because you know what you are talking about. Don’t get pushed around because you are afraid they won’t work with you. If you are the professional, you need to convery that. Remember, much of the hoopla surrounding buyers and there ceaseless search for the deal that they heard someone else got on the news is not based on sound logic. They will appreciate knowing that they are working with someone who can actually get them a real value, not just something below list price. List price indicates maximum value and it doesn’t mean they got a deal just because they bought something below list price anyway. Remember, you are the expert.
Category: Atlanta Real Estate, Marketing |
Hello and welcome to my Atlanta real estate blog. My name is Ryan Ward and I run The Ryan Ward Group at Keller Williams Realty Consultants. Stay informed with information on neighborhoods, market statistics, homes and editorials on local, regional and national news that affects all of us here in Atlanta and elsewhere. I enjoy life and writing so don't be surprised if you read something thsat isn't directly related to real estate. We all need a break sometimes. If you have any questions about what you read or would like additional information, please fill in the form below or give me a call at 404.630.3187.
June 10th, 2008 at 5:44 am
Ryan,
I think the problem is too many “get rich quick” books. We’ve put in several offers this year and despite giving the advice that the property is already below market value, buyers still want to go for another 20% off. (Granted, a couple of them have been cash deals but the properties I pull are desirable properties already listed below market value.)
But… the latest one takes the cake. Somebody called and wanted to put an offer of $750,000 in for a home listed for sale at $2,350,000. Going throught the “interview”, they then stated they wanted to do 100% financing because the book they read said this was possible.
You need to call one of my preferred lenders first before we can put in an offer… I’m not going to get into how that turned out.
For some reason, so many people are confused between what asking prices and market values are. It makes me want to start pulling properties with asking prices 20% above market value…
June 10th, 2008 at 2:41 pm
It seems your market is about 3-6 months behind the Tucson AZ market, we had this same problem I think we still do. Ours here is getting better and buyers are more understanding that yes even though the market is bad there are other buyers behind them looking to make a purchase also. For a while it seemed that there was very, very few buyers out there but the situation I think is getting a little better.
June 11th, 2008 at 11:48 am
Paul,
I’ve been getting this one as of late as well. People think cash makes a difference in the transaction instead of a loan. My advice to any buyer that thinks that using cash is an added incentive is that it makes little to no difference at all. Every closing is a cash closing. Period.
Michael,
I can’t wait to get where you guys are…
June 11th, 2008 at 12:58 pm
Another great post Ryan. I wish I had the writing talent that you have.
I agree with Paul, with all of these “real estate investing” books, dvd’s, classes, and TV shows out there many home buyers are out of there element. These same “get rich quick” schemes are partially to blame for our current real estate market. I know several people who leveraged everything they had to buy several investment properties 100% financed. These same people are now facing foreclosures.
On another note: Cash does make a differenc in certain situations, especially with our loan qualifications getting tougher. I recently sold a foreclosure that had several offers on it. The listing agent told me that my clients offer was excepted over similar offers because the banks liked the Cash part of the offer.
June 14th, 2008 at 5:27 pm
It’s funny how people think a little bit of cash will pay off a big note. I have managed to see several coming before the offer even got to me. The other agent confessed they were going to bring more than a low ball offer, meaning super low ball. I understand sometimes the buyer thinks that cash is more powerful than its face amount.
June 14th, 2008 at 10:24 pm
We have a lot of buyers that think a good value means simply looking at list to sold price. While in my opinion the important factors are market value and sold price.
Also buyers have totally out of touch expectations of what is out there. Sometime its fueled by stories of somewhere someone got a house for 100k under list. What they fail to realize is that in many cases the house was listed at 100 or 150k over market value.
June 19th, 2008 at 9:25 am
Interesting post, but you have forgotten one very important point.
A home is worth EXACTLY what an able buyer is willing to pay and a seller is willing to accept at any given point in time. As the sellers in many parts of the country are learning, fair market value is much more dependent on the buyer than the seller.
To take the position that buyers are unreasonable in making offers below the listing price is myopic. The list price is valid only if a buyer actually closes escrow at that price.
I do agree with you on the investing guru junk.
June 19th, 2008 at 9:40 am
Hi Dan,
I’m not forgetting it at all. What I am saying is that from my experience, buyers are coming into the market with very incorrect perceptions of what the actual market is in fact saying. This is using facts from previous times where buyers and sellers were able to agree. As agents, we need to make sure that we are doing our part to bring buyers up to speed as there perceptions are often not meeting with the realities within the proven market. I’m not blaming buyers here - I’m blaming agents. You have to know what the market is dictating and whether it’s buyers or sellers who are dictating is irrelevant. If you come into the market thinking that you can look at a list price and offer significantly below it, you are basing your decision on flawed logic.
June 29th, 2008 at 1:54 pm
The Austin market is seeing the same thing - lowball offers. Ki is right about a list price maybe having been too high in the beginning, but we as agents need to show buyers the facts and educate them. Too many agents will chase buyers in a slow market just to try to get business and they will do whatever a buyer wants. That is bad for all of the rest of us.
July 22nd, 2008 at 1:42 am
I have noticed this also lately. Most sellers just can’t afford to go so low. $500,000 off $700,000 wow! Hopefully when the market starts to go back up some, the buyers will get more reasonable.