Are your agents’ contracts falling apart even when sellers are in a power position? Here’s how to avoid it.
Are you in a strong sellers’ market with low inventory and multiple offers? If your sellers are in the power position, why are they experiencing such a high level of contract cancellations? Have you heard the frustration of an associate lamenting how their listing had 10 offers but the contract has now fallen through, and the home is back on the market? What an unfortunate experience for their seller—and the associate. Now they have to start over.
What happened? The listing real estate professional and the seller failed to negotiate home plate. They just negotiated first base (usually price and closing dates). Later, they had to negotiate the inspection (second base). Then, they negotiated the appraisal (third base). There are often other elements to negotiate before they finally get to closing (home plate).
Associates skilled in the art and science of negotiating know that when the seller is in the power position with multiple offers on the table, you negotiate for home plate. You tidy up the contract by removing as many contingencies as you can up front. A seller can demand this when they are in the power position. The minute the seller signs one of the contracts, the power position shifts to the buyer.
Knowing the five negotiating points of a contract is the key. Here are the five points, and the questions a skilled negotiator would ask of the 10 buyers who have offers on the table.
1. Price. “Who is willing to pay the highest price?”
Earnest Money. “Is anyone willing to release all or a portion of their earnest money to the seller upon signing of the contract? This money will become non-refundable as assurance to the seller that you are serious about purchasing the home.”
Cash. “Is anyone willing to pay cash and will provide verification of funds?”
Loan. “Who has a loan approval letter from their lender? Will you give me permission to call the lender and verify the buyer’s loan approval?”
Closing. “Is anyone willing to close on the dates preferred by the seller?”
Possession. “Is anyone willing to allow the seller to give possession on the following date?” In some cases, allowing the seller to stay in the property or rent back after closing.
4. Inclusions & Exclusions.
“Are you willing to accept the inclusions and exclusions as specified by the seller?”
Appraisal. “Is there anyone willing to waive the appraisal clause and bring the extra cash to closing to make up the difference?” If not, “Is anyone willing to modify the appraisal clause and purchase the property as long as it appraises for $_________ or more?”
Inspection. “Is anyone willing to waive the inspection clause?” Alternatives: “Who is willing to accept the pre-inspections that have been done on the property?” “Who is willing to have the property inspected and waive the inspection clause prior to the seller signing the contract?”
These questions may seem demanding (and they are) on the part of the seller, but it’s reasonable to ask them when the seller has multiple offers on the table and is in the power position. These questions improve the seller’s chances of making it to home plate.
As the listing associate, how do you do this? You call up the buyer’s Realtor. What a concept! A study by Stanford University found the chances of success in a negotiation improve dramatically when there is live conversation between the parties (not just emails and text). Start with what looks like the best offer and start making your calls. You and your sellers will get to home plate.
Larry Kendall is founder and author of Ninja Selling