Thomas Edison was quoted as saying, “We should remember that good fortune often happens when opportunity meets with preparation.” Without the latter, the former is difficult to attain.
This is often true in real estate. Top-notch broker/agents research, plan, analyze and calculate to be prepared for many possibilities in residential sales. It’s our job to be ready for whatever comes our way – and that’s no truer than when working with buyers in a competitive, seller-friendly environment.
I sometimes think my title should be Residential Real Estate Strategist rather than Consultant. Like a poker player in a high-stakes game in Vegas, I like to have a strategy and tactics in mind before making my next move.
To be prepared, I have frank conversations with my buyer/clients in advance of the critical moment – putting in an offer on a home. I want to share different scenarios that may come up on the horizon of contract negotiations before then ever appear in front of us.
You can never be over prepared for the fast-moving buyer-seller negotiations that often ensue. In many cases, I set up a strategy session with buyers even before visiting the first home. I want to offer examples of what may happen in the coming days and weeks and ask them now to think about how they want to react, as well as understand the possible outcomes from their initial responses.
As a prelude to touring homes, buyers must know their price tolerance. What is their range and absolute ceiling and how do they plan to pay for it? If financing the purchase, has their lender provided them with a “fully underwritten” letter or are they merely preapproved. Buyers also must convey their timeline; Is there a specific target date in which they need to be in their new home and what is driving that date?
In addition, I want to know if my clients wish to be aggressive with their offer. That can include whether they are willing to attach an escalation addendum with the offer when the bid is beaten by a competing buyer, and whether they want to submit a large down payment that shows serious intent. I also want to know whether my buyers are willing to forgo certain contingencies – financing, home inspection, title review, seller disclosure review – just to get an advantage against potentially dozens of other offers. (It’s my duty to protect my clients against potentially harmful situations and I coach my clients to include buyer-friendly contingencies, but it is ultimately their decision.)
More than that, I try to place buyers in certain scenarios after they have made those initial choices. If they waive the home inspection, do they still ask the sellers if they can inspect the home for information-only purposes? (Listing agents should advise sellers against allowing buyers into the home without the inspection contingency but you will be surprised how many homeowners permit it without understanding the liability they are exposing themselves to … but that’s for another blog post!)
A response strategy is just as important to the plan as is the initial offer strategy. We can discuss if/then scenarios beforehand, so when they occur we are ready to act quickly, knowledgeably and decisively.
There are three basic rules of thumb when preparing and submitting an offer, particularly in a competitive housing market:
- Make the best offer the first time – all the time.
- Have the mindset that there are no second chances.
- Be decisive. If you’re not, then back away until you are.
Even with the best made intentions, buyers are going to often face disappointment. It’s a learning process when making offers in a challenging market. If they don’t get the home – beaten out by an all-cash offer or a bid that’s 25% over list price – buyers need to be prepared for the emotional letdown as well.
The home that meets a buyer’s needs will come up – but patience must prevail.
Be prepared for all possibilities … and work with a real estate pro that consults and strategizes on your behalf.