Over the past two weeks, we’ve been discussing techniques of negotiating with buyers in order to bring them to the highest offer that they’re prepared to pay.
Let’s recap the first two principles…
- Create demand
- Show proof of value
Today, we’ll discuss the third and final major principle that I believe an agent needs to communicate (whether directly or indirectly) …
3. The owner’s motivation to sell is lower than the buyer’s motivation to buy
One of the best books I’ve read on negotiation explains that the person with the ‘highest need’ should come out on any negotiation with an outcome that is furthest away from their desired result than the person with the lowest need…provided the negotiation is handled effectively.
The truth is that many agents are poor negotiators and alongside their ability to market a property effectively, they can cost you tens of thousands of dollars if you don’t have the right one on your side ….especially if their need to secure a commission is higher than the seller’s need to sell and the buyer’s need to buy.
On the other hand, a skilled agent is worth multiple times their commission in a property transaction if they know how to attract the right buyers and if they understand the mindset of where these buyers are likely at.
So how does a good agent effectively communicate an owner’s low need to sell?
There’s a number of ways depending on the situation.
The first thing I would never do is come right out and tell a buyer from the outset that the owners aren’t particularly motivated to sell as this will often ‘turn off’ a buyer and will usually be interpreted by a buyer that the price it will take to secure the property must be unrealistic.
Sometimes, I might make a statement to a buyer like this…
“Thank you kindly for your offer. The owners are currently out to lunch right now so I won’t disturb them. I’ll call them later this afternoon and mention the offer to them. I’ll be honest – they have given me strict instructions that they won’t consider offers below the asking price so please anticipate that they’ll be coming back with a counter-offer.”
The first part of this statement is the key.
I like a buyer to have thoughts in their head that a peaceful uninterrupted lunch is more important to a seller than selling their property.
This sets up a picture in the buyer’s mind from the outset.
For some reason, buyers have this vision that every seller must be desperate to sell and is sweating on any offer that comes their way.
The reality is that nothing could be further from the truth in the vast majority of cases.
Any agent that rushes to contact an owner with a low offer is subconsciously telling the buyer that there’s nothing else on the table right now…and clearly the seller is not expecting any other offers immediately.
The second part of the statement must be delivered early in a negotiation so that the buyers establish a reference point (or anticipation in their mind) of what sort of offer will likely be required to secure the property.
If a buyer starts to think that their low offer might be accepted, it’s very hard to get them to bring their offer to a much higher figure if the expectation has sat for too long in their mind.
I’ll often politely inform a buyer that there is other interest on the property (if this is the truth) and that the owners would rather take their chances and wait for other offers to come in before they rush to accept an offer that is below their expectation… especially if the property is reasonably new to the market.
The fact is that sellers should have a lower need to sell than a buyer’s need to purchase.
Many sellers have enough equity in their home that they could simply rent the property that they’re moving from if they don’t achieve a certain price.
On the other hand, buyers are currently faced with a lack of supply and certainly in most areas around South-East Queensland, a huge shortage of land in the majority of areas that they are wanting to purchase.
Even if there is a supply of vacant land where they wish to live, buyers are faced with the fact that the cost of securing a block and building a home is time-consuming and often, it costs more than purchasing an existing home (even a home that’s near new).
As such, the pressure is (and should be) on the buyers.
There’s no question that when selling units, townhouses and apartments, it’s currently a completely different scenario right now (in many but not all cases) and certainly require a different way of thinking when negotiating with a prospective buyer.
There’s plenty of other subtle ways in which an agent can use the ‘low need/high need’ strategy of moving a buyer forwards…and the key here is the word subtle.
Buyers have their radars out from the second they inspect a home and are looking for any signs that a seller might be desperate (and in due course, they’ll inevitably create a few stories in their mind of their own perception about a seller’s situation) so it’s vitally important that an agent has this in mind in everything they do…from marketing a property right through to the inspection and negotiation and still throughout the conditional phase of the contract.
Remember it’s your property that you’ve worked hard to purchase, maintain and pay off…so don’t let an unskilled agent say something stupid in a split second that could diminish the time, effort and money you’ve spent over many years.
Until next week, Happy Listing & Happy Selling.