November 6th, 2020
It’s a seller’s market right now given the fact that the supply and demand balance is strongly in favor of sellers. You can get more information on the changing market here with these live updates. But you’d be mistaken if you think the power is all on your side. I’ve been involved in hundreds of deals over my career as a real estate broker and while every transaction is different, there are some common mistakes sellers make in a hot market. And when they are made, there’s rarely a good outcome for the seller.
Top 6 Mistakes Sellers Make in a Hot Market
1) Mishandling bidding wars.
- Look, I could call this one “…pigs get fat, hogs get slaughtered; don’t be a hog…” Greed will get you every time. Sometimes the highest price isn’t the best offer. Think about it this way, where is the balance of power in negotiations when there’s a bidding war? Of course it’s with the seller; there’s only one seller and multiple buyers. And then the seller picks a buyer and opens escrow. So how many buyers in the equation now? Just one. In California, the seller has no unilateral right to cancel a deal unless contingency performance standards aren’t met and even then, it’s tough. In escrow the balance of power just switched to the Buyer. Many times, after that Buyer “wins”; the first thought they have is “…oh ****, what did I just do?!…” If that happens get ready for a whole new set of negotiations as the Buyer tries to make up their perceived overpayment in repair negotiations after their due diligence investigations. It is possible to push a Buyer too far, then have the deal fall through and now you have a “tainted” property with Buyers wondering “what’s wrong with this house”. There’s an art form involved in creating the correct perception of value by the Buyer of a Seller’s home and this finesse comes with years of experience as a Broker.
- If you don’t clearly explain “the rules” in multiple offer situations, Buyers can perceive you as “dirty”; changing the rules on them and if that happens, the 4 offers you just got may become zero, as they all walk. I’ve seen it happen … many times.
- Sometimes, Sellers will choose to give an offer deadline that is too many days away. The anxiety this creates in Buyers often manifests itself in Buyers walking. Think you have multiple offers? Guess what, maybe now you have none. Consider giving a short period of time for offers; three days or maybe the Monday after the first weekend’s open house. Motivated buyers will come to the table and holding out for something more may bite you. The phrase “bird in the hand is worth two in the bush” comes to mind. You may also want to consider respecting a Buyer by responding to offers as they come. There’s a novel concept – mutual respect. And that respect can pay huge dividends when a Buyer perceives you as playing fairly. You’ve just increased the odds of your deal closing with minimum hassles and probably minimum re-negotiations over repair requests!
- There’s a common practice these days in which agents are counseling their sellers to counter multiple buyers with “come back with your last, best and final offer”. Many times this works just fine, but realize it is not without substantial risk as Buyers are often just walking away.
2) Haggling over repairs
If you were a smart seller, you got your own professional home inspection report BEFORE you put your home up for sale so that you can empower yourself with knowledge. What, you think a Buyer isn’t going to catch a defect? Their inspector will certainly find defects. Isn’t it smarter to know about them before hand so that you can either fix them or at least disclose them to the Buyer when they’ve made their offer. Think of the good will you foster when you do that. Consider how much better price negotiations will go in your favor when a Buyer trusts you. And if the Buyer does ask for repairs to be made, don’t be greedy, consider them and explore what concessions you can garner if you did agree to some repairs.
3) Threatening to put your home back on the market
Be very, very careful with this one. If repair request negotiations aren’t going the way you want, do you really want to play this game? If the buyer walks, now you’re property carries a bit of stigma as Buyers wonder what’s wrong with your home. If price negotiations resulted in a fair price, almost always repair request negotiations work out just fine. It’s only when a Buyer feels they’ve been taken advantage of, do problems start. Bottom line here, it’s almost better to “cross the river with the horse you rode in on”
4) Being stubborn on the closing date
Be flexible. Be loose. Stay focused on the big picture. You got a good price for your house
5) Getting greedy over what comes with the house
You know that heirloom chandelier in your dining room that the Buyer just fell in love with. Why didn’t you swap it out before you put your home on the market? And if you don’t do that, make very clear what is staying and what you’re taking with you. Have your agent put it in the private agent remarks section of the listing on the Multiple Listing Service. Be clear! You don’t want the conversation between the buyer’s agent and the buyer being one like, “…whaaat? they’re taking the chandelier. How greedy can they be, you know what, lower our offer price…”
6) Refusing to pay closing costs
In a hot market like we have now, this isn’t too big of a factor, but some buyers have great income, are well qualified, but are a bit tight on cash. When you get a super price for your home, maybe even a price a bit more than you expected but the Buyer is asking you to pay some closing costs, don’t have that knee jerk reaction and say no. Consider the offer holistically and make an informed decision
So their you have it … it basically comes down to not being a hog. Be nice! Negotiate firmly, but always be fair.
Want to see an example of increasing greed in the market by sellers? Look at this chart and note that the number of relisted homes has almost doubled in the last year* (relisted why? because deals fell through!)
*time this article written is 11/5/2017 and the chart will likely have changed since this date