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This article is part of a series on best practices for negotiation in real estate called Top 10 Ways Your Agent is Compromising You. Post #1 is HERE.
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If you think it’s all about the price, you’re wrong.
It’s surprising how rarely agents call before submitting offers. Even when the Boulder real estate market wasn’t fueled by bidding wars, it was a good practice to reach out to the listing broker before lobbing in an offer. Today, it’s critical and yet most buyers agents don’t do it.
You read that right. MOST buyer's agents fail to call before submitting offers.
It’s the strongest offer with the highest probability of closing that wins the bidding war.
Why call? You might learn that the seller wants to occupy the property for a short period after closing. Or maybe they want a long closing date, a 1031 exchange, or are worried about certain inspection issues. In addition to exploring key deal points, a voice conversation with the listing agent sends a powerful message. It speaks to the agent's communication skills and is a proxy for their ability to work through any obstacles that arise on the way to closing.
It’s Not Just The Price
The strongest offer with the highest probability of closing wins the bidding war. The listing broker will make recommendations about offers received, including an assessment of closing probability. They will steer the deal. Their assessment is dependent on the completeness of the offer packet, including the price. It’s also dependent on your agent’s reputation, integrity, and professionalism.
Remember, 70% of real estate deals in Boulder are done by 30% of agents.
I’ve often pondered why agents don’t call before submitting offers. It might be a lack of negotiation experience. Maybe it stems from habits born from another era of real estate. Sadly, it might be laziness.
Pick Up The Phone
With rare exceptions, listing agents are happy to discuss their client’s needs - far beyond the non-public broker remarks on the MLS. The smart ones slip questions about the potential buyer into the conversation. From the second you say hello, a good listing agent will already be assessing the probability of closing. The really savvy ones will guide you towards what it takes to be competitive or even more importantly, encourage you not to submit if your buyer's offer is not strong enough.
Why? Because collecting blind offers is an inefficient way to negotiate. It leaves money on the table and amplifies the risk of a buyer getting cold feet (or renegotiating over price on inspection issues). Skilled real estate agents selectively disclose information about competing offers, blending negotiation and auction. And it happens over the phone.
According to Guhan Subramanian, author of Negotiation? Auction? A Deal Maker’s Guide (HBR, December 2009), "You need to clearly understand your potential buyers, the characteristics of the asset in question, your own priorities, and the relative importance of speed and transparency to obtaining the best price." That happens not just with a comprehensive, well written offer. It happens with skillful communication, from the first phone call to the last signature at the closing table.
If you’re interviewing real estate agents, be sure to ask them about negotiation strategy and tactics. Ask how they will handle multiple offers. If they stumble over their response, or worse fail to mention that critical initial phone call to the other side, find yourself a better agent. You can’t afford to lose the deal over negotiation inexperience or an overdeveloped ego.
Tale From The Trenches
A few weeks ago we entered a bidding war for a spectacular Boulder house with a view. OK, strike that. In reality, the house was a dump. The view was spectacular. To preserve my ability to negotiate with this particular agent in the future, I'll avoid further specifics.
I took clients to see this property. They were excited. Before leaving the grounds, I had already made a call to the listing agent.
Ready for a shocker?
The listing agent never returned my call. He didn't return any of the three calls I made before the published offer deadline. It was a massive dereliction of duty. It's also the first time in 13 years of real estate negotiations and 20 years of investment experience that a counter party has so completely failed to perform their fiduciary duty. Of course, his client will never find out that my buyers might have been willing to go higher. I'll also never forget his lack of professionalism.
Based on past experience, I expect fewer than half of buyer's agents who submit offers will start with that critical first phone call. It’s incredibly rare for the listing agent to turn off their phone in the run-up to a bidding war.
In the end, we submitted blindly and were one of several offers competing for the property. Because the listing broker didn't pick up the phone, the seller will never know how much money was left on the table.
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The ideas and strategies described in this blog are the opinion of the writer and subject to business, economic, and competitive uncertainties. We strongly recommend conducting rigorous due diligence and obtaining professional advice before buying or selling real estate.
image credits: Martin Kníže, Jordan McQueen, Maarten van den Heuvel
Ready to buy or sell? Schedule an appointment or call 303.746.6896.
You can also like our Facebook page or follow us on Twitter.
As always, your referrals are deeply appreciated.
--
The ideas and strategies described in this blog are the opinion of the writer and subject to business, economic, and competitive uncertainties. We strongly recommend conducting rigorous due diligence and obtaining professional advice before buying or selling real estate.
image credits: Martin Kníže, Jordan McQueen, Maarten van den Heuvel
