Transcript They Are Back…… Low Inventory and Multiple Offers

ABR ® Designation Core Course
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They Are Back……
Low Inventory and Multiple Offers
Frank Mears, ABR, CDPE, CNE, CRB, CSP, GRI, SFR, SRS, SRES
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The Big Story of 2013
Low inventory
• Investors scooping up bank inventory
• Home Builders’ reduction
• Home owner holding back
• Bank shadow inventory
The Result: prices going up
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Seeds of a housing shortage
• Inventory of existing homes at its lowest level
in seven years.
• New construction at a 50 year low mark
• Distressed home listings will continue to fall as
fewer owners are delinquent.
• Normal non distressed home owners have
been holding off selling until the market gets
better
Lawrence Yun, NAR Chief Economist
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October Existing-Home Sales Cool but Low
Inventory Drives Prices
WASHINGTON (December 2, 2013) – Existing-home sales
declined for the second consecutive month in October
Total existing-home sales1, which are completed transactions fell
3.2 percent to a seasonally adjusted annual rate of 5.12 million in
October from 5.29 million in September, but are 6.0 percent
higher than the 4.83 million-unit level in October 2012. Sales
have remained above year-ago levels for the past 28 months.
Lawrence Yun, NAR chief economist, said a flattening trend is
expected. “The erosion in buying power is dampening home
sales,” he said. “Moreover, low inventory is holding back sales
while at the same time pushing up home prices in most of the
country. More new home construction is needed to help relieve
the inventory pressure and moderate price gains.”
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The Inventory Shortage Myth
Realty Trac June 2013
• Consider housing inventory. How can it be
that the U.S. Census reports there are 13.9
million year-round vacant homes in the U.S.
while major media outlets like the New York
Times reports that there is “not enough
houses for sale to accommodate the
recent flush of demand?”
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So which is it: oversupply or undersupply?
• If you believe the major news outlets there is a
shortage of houses for sale. Or, to be more clear, a
shortage of cheap houses for sale.
• If you trust the government’s numbers then there’s a
glut of vacant houses.
The truth is somewhere in the middle
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The artificial shortage of homes for sale and the
subsequent rising home prices are being driven by the
two forces: major banks and their Wall Street buddies,
many of whom were subprime lenders five years ago and
now have transformed themselves into real estate
“investors.” These all-cash foreclosure investors are buying
distressed property at the low end of the price scale,
muscling out first-time homebuyers and smaller momand-pop investors. Big investors are snatching up lowpriced foreclosures in bulk and renting them out to
people who can’t buy. By amassing thousands of rentals,
the Wall Street landlords are putting a crunch on housing
supply, driving up prices and lacing their pockets with
profits.
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• Paradoxically, home sales and prices are up,
but home ownership is down because it’s
investors — not first-time homebuyers —
buying up the majority of homes.
• RealtyTrac data shows about 3.5 percent of all
home purchases in the first quarter were done
by “institutional investors.” Institutional
purchases are up 34 percent from a year ago.
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Multiple Offers
The most frustrating situation faced by
REALTORS®
Potential for misunderstanding
What is fair? What is honest? What is to be
done?
Who decides?
There is never a simple answer to complex
situations
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Generations
Why look at generational commonalities and
differences?
 Gain insight into what is important
 Learn best ways to communicate and
market
 Learn motivations, lifestyles, hopes, and
fears
 Provide frame of reference and
perspective
The Generations
Seniors | GI Generation
Gen X
1965 - 1980
Seniors | Silent Generation
1925-1945
Gen Y
1980 - 2000
Baby Boomers
1945 - 1965
Gen Z Millennials
2000 - Present
1900-1925
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GI - Silent Generation
•
Address by Mr./Mrs.
•
Respects process, procedure, laws, specialists,
designations; experience, stability
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Verify preferred method of communication
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Appreciates personal touches
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Very loyal
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May have more time
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Usually have equity
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Sale requires patience
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Boomer Generation
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May not appreciate your value
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Include Resumes, Designations & Experienc
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High Maintenance – Constant Attention
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Probably uses email
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Time is precious
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Limited Loyalty
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Income Rich, cash poor
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Gen X Generation
• Expect technology savvy professionals, online presence
with rich content and easy to use
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Expect a packaged transaction with high-caliber skills
and advocacy
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Email and texting preferred
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Use smart phones w/ mobile apps, QR codes
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Will be loyal if they choose you
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High Expectations
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E-Transaction
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Gen Y Generation
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GenY are very comfortable in a virtual environment
and global community
• Purchase will not be restricted by domestic
boundaries; crossing a threshold may not be
necessary to make a decision; property portals will
include all decision points
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Will be an involved partner
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E-Transaction (search to close) will be
the new normal
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Generation Z Millennials
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•
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21.4% of population
66.5 million
Age in 2013: 13 and under
Technology adept, connected, introverted, short
attention span, individualistic, impatient,
communication in online communities
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Cultural Generalizations, Stereotypes
Generalizations allow revision of opinions and
responses
Stereotypes interfere with treating people as
individuals
Cultural learning can work both ways
Adapt your outlook and behavior
You don’t have to change who you are or your
culture
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High Context
Low Context
Formality, face-saving,
relationships, slow pace
Informality, direct
communication, results,
fast pace, punctuality
Asia/Pacific, Russia,
Middle East, Central and
South America, Southern
Europe, Africa
United States, Canada,
Northern Europe,
Australia, New Zealand,
South Africa
Cross-Cultural Business Skills
How can you:
Be sure your behavior is appropriate?
Project a positive attitude?
Adjust to the need for high or low
context interactions?
Do’s and Don’ts
Save face
Talk less, listen more
Relationships first
Formal, slow pace
Punctuality
Contract—end or beginning?
Do’s and Don’ts
Respect for hierarchy
Family matters are private
Practice with interpreters
Double check software translations
Observe nonverbal signals
Common sense
Non Verbal Red Flags
Re-adjusting distance
Averting eye contact
Scowling, frowning
Inappropriate laughter
Covering the face
Silence, no questions
Displaying impatience
Behaviors to Avoid
 Hands in pockets or on  Fleeing or invading
hips
personal space
 Intense, prolonged eye  Initiating any physical
contact
contact
 Crossing legs
 Showing impatience
 Showing the soles of
feet or shoes
 Pointing or beckoning
with the fingers
 Pointing or touching
with the foot
 Hand gestures
Negotiations and Decision Making
Win-win or win-lose?
Consensus, committee, or hierarchy?
Accept and adapt to the client’s practices
Follow up in writing
Gender Issues
Cultures that strictly separate sexes
may have difficulty adjusting
Be deferential to women even if their
own culture is less so
Include the spouse or other colleagues
in invitations to male clients or
colleagues
Religious Traditions
Fundamental to cultural
identity, norms, traditions
Learn about others’ beliefs
and traditions
You don’t have to change
your own beliefs and
traditions
Active Listening
Facilitates cross-cultural communication
Paraphrase
Ask open-ended questions
Invite listeners to explain understanding
The conversation IS the message
What type negotiator is the other
agent?
• Soft
• Hard
• Principled
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SOFT
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Participants are friends
The goal is agreement
Make concessions to cultivate the relationship
Be soft on the people and the problem
Trust others
Change your position easily
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SOFT CONTINUED
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Make offers
Disclose your bottom line
Accept one-sided losses to reach agreement
Search for the single answer: the one they will accept
Insist on agreement
Try to avoid a contest of will
Yield to pressure
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HARD
• Participants are adversaries
• The goal is victory
• Demand concessions as a condition of the
relationship
• Be hard on the problem and the people
• Distrust others
• Dig in to their position
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HARD CONTINUED
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Make threats
Mislead as to bottom line
Demand one-sided gains as the price of agreement
Search for the single answer: the one you will accept
Insist on their position
Try to win a contest of will
Apply pressure
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KNOW THE RULES
1. You Can and Should Negotiate
Most negotiations are not lost at the bargaining
table. They are lost because the parties never
got to the table.
2. Check Your Ego
Sometimes we are our own worst enemies.
This is not the place to show off your
cleverness.
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3. Avoid the ‘Sympathy’ Trap
Negotiation is not social work; it is
not charity. You are responsible to
look out for your clients interest.
4. Take the High Road
Anything you do to destroy trust will
harm the negotiations.
5. Be The “Squeaky Wheel”
Sometimes it pays to be a little
aggravating and persistent
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6. Beware of Knowing “Too Much’
Showing off how much you know can work against
you.
7. Confront a “Psychological” Attack
Allow it and you lose. Draw attention to it and its
power vanishes.
8. Ask a lot of “Why” Questions
It may get them to open up and reveal their true
motivations.
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9. Be Flexible
Negotiation is a “give and take” process.
Must gets
Intend to gets
Nice to gets
10. Question authority
Sometimes the authority is only voicing an
opinion.
Find an alternate authority.
11. “Listen”
You’ll discover what they really want.
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12. Search for Options.
Seldom is there only one right answer. Know
when you’re deadlocked on a particular issue.
“ Lets put that aside for now” and continue on.
13. Challenge the Written Word.
Just because its in writing doesn’t mean it’s
true.
14. Defend and Value Concessions.
Negotiations are give and take. Never
concede anything without asking for something
in return.
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15. Be Informed
“Knowledge is Power”
1. Do your Homework.
2. How
16. Try To Obtain An Offer That Can Be Closed.
Do the possible first. Leave the impossible to
later. Remember some deals can’t be made no
matter what.
Worse that not making a deal is making one in
which you loose.
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17. Empathize With The Other Party.
Understand what they want and why they want
it.
You don’t have to agree with their position. Just
understand it.
18. Get the other party to invest TIME
The more time invested, the more to lose if it
doesn’t go through.
19. Set a Deadline
No deal ever closes without a deadline.
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Remember. Everything we do as negotiators is
to try to help our clients get what is important
to them.
We owe absolute loyalty to their interest above
all other interest including our own.
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Multiple Offers
• Tilts the negotiating scales in favor
of the seller?
• Always ask if there are multiple
offers
• Always ask who has the other offer
• Know your BATNA
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Does the Listing Agent Have to Tell?
• Standard of Practice 1-15
• REALTORS, in response to inquiries from buyers or
cooperating brokers shall, with the sellers' approval,
disclose the existence of offers on the property. Where
disclosure is authorized, REALTORS shall also disclose, if
asked whether offers were obtained by the listing
licensee, another licensee in the listing firm, or by a
cooperating broker.
Multiple Offers : No
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• Standard of Practice 3-4
• REALTORS®, acting as listing brokers, have an
affirmative obligation to disclose the
existence of dual or variable rate commission
arrangements (i.e., listings where one amount
of commission is payable if the listing broker’s
firm is the procuring cause of sale/lease and a
different amount of commission is payable if
the sale/lease results through the efforts of
the seller/ landlord or a cooperating broker).
… (Amended 1/02)
Variable Rate: Yes
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The Seller’s side
The risks to seller and the seller’s agent:
• Unhappy buyers
• Multiple offer don’t always result in a higher
price. Some or all of the buyers could elect to
walk away
• “Highest and best” may result in a better offer
or result in no offers
• Seller inadvertently obligates to more that one
contract
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• To avoid being blamed for the seller’s good
fortune turning into misfortune. The key
decisions on how to handle multiple offers
should be made by the seller
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$1000.00 more than the next highest
Offers that are $1000.00 more than the next
highest up to a certain amount.
Good idea or not?
• Buyer may pay less than willing
• Buyer may pay more that intended
• Two Buyers make the same offer
• Dishonest seller
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Presenting Multiple Offers
1. Individual presentation
Presented to the seller and listing agent
only
2. Group presentation
All offers are presented at the same time
with all representatives present
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Buyers should be notified if others will
hear offer details
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Presenting using the grid method
$370 Asking Price
#1
#2
#3
#4
$375k
$367
$352k
$354k
1st deposit
$1k
$5k
$10k
$7k
2nd deposit
$0
$5k
$10k
$8k
Inspect
none
Hm/Pest
Full
Full
PQ/PA/Cmt
none
PQ
PA
Cmt
6 weeks
4 weeks
4 weeks
2 weeks
100%
90%
80%
50%
120 days
90 days
60 days
Flex
$10k closing costs
Home sale
contingency
Hm pend
none
$365k
$367k
$352k
$354k
Offer
Mtg Cmt
LTV
Close
Conditions
Adjusted Gross
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Counter Offers
• Implement the negotiating strategy
• Reassess objectives
• Identify points of agreement and
differences
• Prolonged, incremental negotiating is
risky—seller may take another offer or
buyer may walk
100
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Which offer would you ‘counter’?
$370 Asking Price
#1
#2
#3
#4
$375k
$367
$352k
$354k
1st deposit
$1k
$5k
$10k
$7k
2nd deposit
$0
$5k
$10k
$8k
Inspect
none
Hm/Pest
Full
Full
PQ/PA/Cmt
none
PQ
PA
Cmt
6 weeks
4 weeks
4 weeks
2 weeks
100%
90%
80%
50%
120 days
90 days
60 days
Flex
$10k closing costs
Home sale
contingency
Hm pend
none
$365k
$367k
$352k
$354k
Offer
Mtg Cmt
LTV
Close
Conditions
Adjusted Gross
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Counter Offer Signal Pattern
List Price @ $150,000

1st Counter @ $145k

Buyer counters @ $x

2nd Counter @ $140k

Buyer counters @ $x

3rd Counter @ $135k

Buyer Counters @ $x

No seller counter

Buyer waits for ? $$$
Equal
Reductions
create deadlock
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Counter Offer Signal Pattern
List Price @ $150,000
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Reducing
Counters Yields
Closure
1st Counter @ $147k
Buyer counters @ $x
2nd Counter @ $145k
Buyer counters @ $x
3rd Counter @ $144k
Buyer Counters @ $x
4th Counter @ $143.5k
Does buyer expect more?
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The Buyer’s Side
1. Develop a good rapport with the listing
agent.
We like to do business with agents that we have
a good relationship with.
Don’t be difficult to deal with.
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The Buyer’s Side
1. Gather information on the seller with the skill
of a detective
2. Encourage the buyer to make a strong offer
(give the seller what's important to them)
3. Strike while the iron is hot
4. Encourage the buyer to NOT “Major in the
Minors”
5. A letter to the seller?
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The Appraisal Issue
• Multiple offers may drive the price up for the
seller but will it appraise.
• What happens if it doesn’t?
• Seller counter special stipulation:
“Buyer agrees to pay any difference between
the sales price and appraised value in cash at
closing” (Have a local attorney draft the
language to conform to the laws in your state)
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When You Should Avoid Negotiating
1. When your client will lose everything.
2. When you’re “Sold Out”
When you’re running at capacity, Don’t Deal.
3. When the demands are Unethical, Illegal or
Immoral.
It’s your Character, Reputation and License.
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4. When You Don’t Have Time
You’ll make mistakes
When under the gun, you’ll settle for less than you
could otherwise get.
5. When You’re Not Prepared.
You’ll think of all your best responses on your way
home. Don’t negotiate until you’re ready.
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Remember
Every negotiation is different and
each is a learning experience.
The best negotiators are the ones
with the most information.
“Knowledge is Power”
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Thanks For Having Me
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FrankMears.com
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