"They wouldn’t come down in price. I said, ‘Sir, excuse me, sir, do you want to know how many other houses my client can buy?’ We couldn’t bridge a gulf of $2K and the deal fell through. Their loss!” (Indignant Charlotte Realtor)
“Why ask why? Try Bud Dry.” (Old Anheuser-Busch slogan)
If you were offered both of these jobs, which one would you take?
Job #1: $80K annually
Job #2: $30K annually
Duh, the $80K one.
Now let’s look at the job descriptions:
Job #1: Work begins at 4 AM. Your job is to produce 100 widgets an hour. You cannot go home until you complete 1,500 widgets a day minimum and your job is six days a week. There is no overtime or hopes of advancement. Your boss will ask you to complete menial tasks for her during the day, which include errands and hand-feeding her. She weighs in excess of 350 pounds, so your trips to McDonalds are frequent. She prefers you to keep your hands greasy from the fries for the post-meal kneading of her feet.
Job #2: You are forced to transfer to an exotic island with your family. All expenses are paid, which include a personal chef. You have one mandatory work day per week which includes giving feedback on the company’s 4-star chef’s new dessert menu. The rest is free time in which you can visit any of the many island attractions at no cost as an employee of the company. Most of the employee training manual is about avoiding sunburn and the importance of frequenting island restaurants.
Do you still want the “$80K one”? The “$30K one” is looking pretty good now. You’d be making less, but the terms are so much better. And terms are endearing!
In life, and in real estate, terms can be more important than price. But negotiating terms is hard! Why? It is simply because it becomes a much more involved house sale. You need to know what is important to your client, which means you have to talk to them a lot and probe. The agent on the other side of the deal must also do the same thing. Then you must come together with the agent (even if you don’t like them) and hash out what is important to both parties and creatively put together a deal.
This rarely happens. The market had been so good for years that it has been easy on Realtors. You just need to stick a price out there within market price parameters, get an offer, wait for both parties to give a little on price, and then come to a deal. It’s actually thrilling to see where the price will wind up after counter-offers continually switch hands, but it is sort of a primitive method. The assumption is always that price is king.
With less financing available and more competition for buyers, listing agents are going to need to truly understand the needs of incoming buyers. Price is price and will always be important. But the battle for sellers that can’t (or won’t!) reduce price has to be made on terms.
What exactly are the “terms” I’m talking about? It is simply looking at the buyer as a whole. What are their needs? Anything can be written into a contract. Here’s an example of a buyer making offers on 2 similar houses both listed for sale for $300K:
Buyer scenario: They love the house, but don’t want to move in until their kids are out of school (which will be in 4 months). They would like hardwood floors downstairs. They have another child on the way (they’re moving for more space) which means they also need a bigger car. Because of the economy, they haven’t been on a family vacation for 3 years; now with this house purchase, they are looking at another 2 years of “staycations.”
Ordinary Seller offers to accept: $290K
Creative Seller offers to accept: $305K
AND a willingness to push the closing date for 3 months later (with a larger earnest money deposit). Their cousin, Tony, does great flooring work and will put hardwoods downstairs in for them at cost. They’ve been looking for an opportunity to get rid of the minivan they have (the kids are out of the house- that’s why they are moving to downsize) and offer it to the buyers (with an increase in purchase price). They also own a beach house which they offer to the buyers at no cost for two weeks this summer.
Which deal does the buyer take? For $15K less, it better be the $290K deal, right? Or, maybe not?
Terms are endearing; price is not always king. Be unique and fight the battle on both fronts!
What is the best creative deal you’ve ever put together that trumped a higher-priced offer?
Brett Furniss is the President & Owner of BDF Realty (“Charlotte’s Most Innovative Property Management & Investment Company”), and Rent-To-Sell Realty (“When You Need a New Solution to Sell Your Home”) which specialize in rent-to-own (lease options) and rent-to-sell homes. You can contact him directly at Brett@BDFRealty.com. For a FREE subscription to “Charlotte Property Management Weekly” via RSS, click here. Or by e-mail, click here.
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