A new listing hits the market, and you rush your buyers to see it. By the next morning, you learn there were multiple offers – at least ten – one of which was accepted, and it wasn’t yours. What happens next for you and your buyers largely depends on the conversation you had with them while drawing up the offer. In this market, multiple offers are a part of the deal. What you hope is not part of the deal is getting blamed for losing multiple offers for your buyer.
Too often, rejected buyers will take their frustration out on their agents by firing them. Is that justified? It depends. Let me illustrate. Let’s say a friend gives you $100 and asks you to buy lottery tickets for her. Instead of telling you the numbers she wants to play, she asks what you think. You proceed to pick the numbers and none of the tickets win. Who might she blame? Would the conversation be different if she had chosen the numbers?
Keep your fingerprints off the contract, especially price
The same is true in our role as a buyer’s agent. The key to maintaining a working relationship with your buyer, even when they’re losing bids, is to make sure you keep your fingerprints off the specifics of the contract, especially the price. If you advise them on what to offer and they lose, they may blame you (and rightly so), just like in lottery ticket example. However, if you have the right conversation with them in which they end up “picking the number,” they would have a hard time blaming you. You’ll also have a better chance of continuing to work with that buyer on their next offer.
This starts by asking great questions and having the proper “expectation conversation.” A buyer consultation in your office prior to starting the buying process is ideal, however the speed of this market is dictating that we have to be nimbler than that. A conversation may take place at an open house or during a phone call as you’re driving to meet them at the property. Regardless of where or how much time you have, if you can cover the following areas, you will have a better chance of winning with your buyers, even if your buyers don’t win with the seller.
Expectation Conversation Scripts
- TAKE THE BUYER’S TEMPERATURE: Find out where they feel the market is by asking what I call the “Meat Thermometer” question. “As a buyer in this market, do you feel the market is working in your favor or against you?” You want to hear them say that the market is working against them because of how fast homes are selling. Now you can stress the urgency of the market and work through the below scripts. Some agents educate the buyers by TELLING them about the multiple offer market. I feel it’s better to ASK them about it because it’s more powerful when they hear themselves say it.
- FORGET HOW YOU BOUGHT YOUR LAST HOME: “The proverbial tennis match method of offer/counter-offer over four days doesn’t exist. Today’s market is more like a sealed bid auction in which we will only have one opportunity to win. Unless we’re the best offer, we probably won’t hear back from the seller. This means we have one shot; are you willing to send your best offer first?”
- ASKING PRICE IS STARTING LINE: “In this market the asking price is really the starting line, meaning that many homes sell above asking price because the market value is greater than the asking price. When we find the right home for you, will your focus be on the asking price or the market value”? Have this conversation up front to flush out any bias they may have to paying more than the asking price.
- SELLERS MARKET vs WINNER’S MARKET: I’m not a big fan of using the term “Seller’s Market” because that implies the seller wins and the buyer loses. Rather, here’s what I would ask. “Did you know we’re in a winner’s market? It’s a winner’s market because sellers are benefiting from rising prices. Buyers win too because as soon as they secure a home, they begin riding up the same equity elevator that the sellers were on. Won’t that be fun?”
- WHAT SHOULD WE OFFER? Danger, this quicksand for agents because if you advise them on what to offer, especially when there are multiple offers to compete with, and they lose the bid, they may blame you or worse, fire you. We can still be the advisor they need by following the below model. (Note: All comments from the agent are questions.)
Buyer: What should we offer?
Agent: What are you willing to pay to own this home?
Buyer: We really like it. It’s listed at $400,000; we would be willing to pay $405,000. How’s that?
Agent: Imagine you don’t win the bid and find out after it closed that it sold for $406,000. How would you feel?
Buyer: Not good, that’s only $1,000 more. We would have paid that
Agent: Then $405,000 wasn’t your best, was it? What’s your very best number?
Buyer: What do you think we should offer?
Agent: I think you should make your very best offer first. What is your very best?
Buyer: We won’t pay a penny more than $420,000
Agent: Okay, let me ask again….If you didn’t get the home and learned that the home closed for $421,000, how would you feel?
Buyer: We would be okay at that point because we feel that $420,000 is our very best.
Agent: Excellent. If that happens and you can lay your head on the pillow, then I can too. Let’s write it up.
I believe great agents share only what they know and don’t share what they merely speculate. In this multiple-offer market, guessing how little your buyers should offer and still win the bid is only slightly easier than winning a Powerball drawing. Buyers can only offer what they feel is their very best. If you coach them to do that by following these five scripts, you and your buyers will both win more often. Keep the Faith.