Buyer’s Leverage is Increasing in Current Real Estate Market

Negotiating is one of the less glamorous parts of real estate but it is essential to a fair and successful transaction. Humans seem to have it in their genetic code to avoid hard conversations. In fact, according to this NBC News article, we are avoiding them more than ever. Mix that with the hot seller’s market of the last few years and buyer’s have been getting beat up by high prices, waived contingencies, and a general lack of power in the market. But, it looks like that is finally changing. Here are the stats from my last three sales when representing the buyer:

1. $14k off asking price, $19k in seller concessions. Half of the chickens and ducks 🙂.
2. $19k off listing price
3. $15k off listing price. Over $100k in repairs to the property including a new metal roof, crawlspace mitigation and beam repair, and new ($65k) septic system for the cottage. 

The last one is a bit of an outlier as a metal roof and completely new septic are pretty rare, but it shows that buyers are gaining some momentum. There was competition on two of them and plenty of showings and other agents talking about possible offers, but we were able to get under contract and use our leverage to get better terms on the final sale. Those leverages points are critical and I get into the details in the list below. But, before I get into those there are still some negotiating rules that remain true:

-Cash is king and is even more so today. If a client can pay in cash and close quickly that is a best case scenario. 

-The price will always be the focus on the seller. Make sure an offer will satisfy a seller enough to get under contract and then work on other items like concessions or repairs.

-Inspections: Many buyer’s agents weaponize inspections and ask for a price reduction or seller concession no matter what. That is not a great way to keep up professional relationships. Reduce the number of days for the inspection period and connect with the listing agent. Setting expectations with them can go a long way. 

-Finally, it does matter that this is election year in unstable economic times. Buyers and sellers will both be wary. 

Leverage points to consider:

• Client education: Most buyers are savvy these days, but there are still a lot of unknown details until clients are deeper into the process. I try to utilize my teacher background to help clients feel as prepared as possible. One of my favorite tools is a deep dive market analysis. On the first home above, we actually offered on another property at a price that our analysis supported. But, the owner wanted to go for a higher starting price and then the market rejected the price and the house sold for much less than we offered initially. 

          My client was a first time homebuyer, but he was smart and we did the work beforehand. We worked through potential scenarios,                reviewed the critical parts of the contract, did multiple analyses of comparable properties, and we talked about what it will FEEL                  like to be in the negotiating process. That is what YouTube videos and articles cannot help you with. To me, one of our best points of            leverage was my clients patience and resilience. A big part of that is their personality, but a good agent also helps build that up at                 the beginning of the process. 

• Days on Market: This is an interesting one. Using days on market is as much emotional as it is mathematical. Sellers and listing agents seem to have a threshold where they start to worry and become more willing to negotiate. Much of that feeling is dictated by the local market and what other homes have been doing, but if a buyer’s agent is paying attention and sees a change happening they can work with their clients to stay patient and let those days tick up to their advantage.
• Perceived projects and costs: The market is big on “turn key” right now because of the affordability crisis. Buyers can only afford to buy the home, not put big money into it right after they purchase it. So, if a buyer is willing to take on a property that is perceived as unique or needing work they will often face less competition and more favorable negotiating conditions. 
• Inspection: This is worth mentioning again. Many buyer’s do not understand that there is a second negotiation that happens even after the offer is initially accepted. And this is why inspections are so important! Seller’s have all of the leverage when a property first goes on the market. But, if a buyer can get under contract then there is a second negotiation that can only happen if an inspection was accepted as part of the agreement. Having a professional look through the the structure of the home is important enough. But, getting another chance to reduce the price or get repairs done is also valuable. This is where some of the most nuanced negotiations take place. 

Reach out and let me know if you have any questions about using leverage during negotiations. The big part of this is to remember that there are humans on the other end of the transactions. So it pays to be kind but strong. Even the toughest people seem to melt a little under the pressure of dealing with such large sums of money and complicated contracts. As a former Seahawks quarterback (who shall not be named because he left for Denver) once said “The separation is in the preparation!” 🙂