Let’s Talk About Low-Balls!

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Hello Naples Friends,
It’s time to talk about low-balls. I’ll go over the good, bad and ugly parts and dive in deep about how you can protect yourself or really hurt your odds on getting the Naples real estate you wanted most. There’s information for sellers, buyers and agents! Pull up a chair. We’re going to talk about some things and hopefully share a few laughs.

Why Are We Talking About Low-Balls?

I’ve seen more low-ball offers this year than probably the last 9 years combined. Some buyers are recognizing they’re getting a little more muscle at the negotiating table and like everything new, we’re not always good at the stuff we haven’t done in a long time. I’m going to save buyers today from making what could be a grave mistake and prepare sellers on how to best handle low-ball situations if it happens to them.

What Is A Low-Ball Offer?

You might be surprised to find the term “low-ball” is not 100% understood. It’s not an exact number or specific discount off list price. It’s subjective and that’s why so many agents, buyers and sellers are so misinformed. That’s how the problem begins. If your agent doesn’t know they’re dealing with a low-ball, the advice isn’t going to be there and it can go really bad really fast. That’s why it’s important to work with an agent who understands your market and can prepare you for the best approach.

Buyers, What Is Your Goal?

  • Maybe you want a deal.
  • Perhaps you’re worried about overpaying for a property.
  • Maybe you want additional insurance you’ll recoup what you need if you want to get out in a couple of years.
  • You want to pad your bottom line because you are planning on spending a great deal of money on renovations.

Whatever your reasons, it helps by understanding the market. It also helps for your agent to know your true objective.

Consider Your Competition!

I see buyers all the time who strike on a property they don’t really like and who don’t value what others will value about the property. “This is what it’s worth to me.” This can be a good strategy when you’re the only one looking or the property is an oddball. This can be good on properties that need enormous renovations if they are not priced well.
This isn’t a good angle if the property is amazing and you don’t really care about it. Sellers want to sell to somebody who will love their property as much as they did especially if the property evokes emotion like beachfront properties or golf homes located on amazing view lots. It’s also not a good plan if the home is amazing but you don’t like the decor and many others will. Shorting an offer on one of those is difficult to get by the seller. More than likely they know their value.

True Stories

The Furniture Add On
We received a decent offer on a property this year but the buyer absolutely blew it with the other terms. The price would’ve worked but he decided to ask for all of the furniture which was WILDLY OVERVALUED by the seller. It was easy to see based on the seller’s estimated value. There are tons of examples where you can easily see the other side’s position. Why fight it if isn’t necessary? The Seller rejected the offer. Had he left the furniture out he probably would’ve gotten his deal but to that seller, the price along with asking for a house full of free furniture was a deal killer. More importantly, the seller felt like the buyer was trying to take advantage of her.
You can totally close doors and make it extremely difficult to get them open again when you take things too far. This buyer lost out on his favorite choice because he did something really stupid at the end of his offer. It could’ve been prevented if he and/or his agent recognized the seller greatly overvalued her furniture and left it out of the deal. Buyer still has not bought.

Using An Extremely Small Data Set For Comps

I received an offer on an amazingly remodeled home but the agent comped out other properties in original condition. They started with a 29% discount when the average in the community was 6%.
Our conversation went like this:
Me:  Why did you come in so low?
Him: Nothing has ever sold for more than “x” in this subdivision.
Me: Nothing has ever sold remodeled. Here are 10 reasons proving we’re close to the market.
Him: Remodeling doesn’t matter.
Me: Then why was this property your buyer’s first choice when there’s a crappy one down the street priced lower?
Him: Bring me a counter.
Me: You’re going to have to put more skin in the game.
Him: You’re an idiot.
Me: The difference between our list price and your offer price is more than the total amount of the last two deals you closed so I don’t know what to tell you. LOL
Unfortunately, the agent and the buyer had no idea what they were doing. If you don’t think remodeling in some of Naples best areas adds value, I have about 50,000 comparable sales that prove otherwise. This buyer lost out on his favorite choice because he had no direction. If your number is too low, the seller isn’t going to counter. Sometimes against all egotistical measures, it’s worth encouraging the buyer to come back with a higher number to prove they really want to make it happen. It’s very hard to do but can increase the chances of getting your first choice done. That didn’t happen here and why you want to work with somebody who knows how to keep a deal alive if the true objective is to buy the property.

Sellers, What Are Your Goals?

  • Maybe you’re shooting for a specific number.
  • Perhaps you have a certain date you want to be sold.
  • It could be you have some weird terms that make it harder to negotiate like post-closing occupancy.
It’s a simple fact a portion of our selling prospect base punts off the market when sellers realize they aren’t going to hit their monetary goals. That helps keep our inventory levels in check but some amazing properties go off the market which can lead to a limited property selection. Here’s where a ton of sellers make mistakes. They think it is a very short term dip and do not realize a market can go south for a very long time. The last real trend was a 4-year free fall.
I’ve heard a ton of sellers say:
  • If it doesn’t sell this season then we’ll just sell next season (expecting to get the same or even a higher price)
  • I’ll just rent it out and sell it in a year. (expecting to get the same or even a higher price)
  • I’ll just fix (something that doesn’t appreciate the value of a home) and ask more next season.
Not that our next downward trend is going to last 4 years but what if it does? Are you prepared to wait 7 years for the market to get back to higher values? It could take that long.
True Fact: 
At the top of the seller’s market buyers are bummed they have to pay crazy prices to get what they want. A small fraction punt out but most of them buy anyway. They grumble, but they pay. They argue but they’ll pay and they’ll also forgive repairs the seller won’t fix. Some sellers really like to stick it to buyers during this time. It’s gross.
During the top of the buyers market, buyers like to get a little crazy too. They ask for wildly unreasonable repairs and allowances after they’ve bloodied the noses of our poor sellers. Some buyers are utterly ruthless. Many sellers are plain terrible about not having the upper-hand. They fight, argue, cry and moan. Some shoot themselves in the foot.

Keep Your Perspective!

The best thing you can do is keep your perspective. Were you selling so you could upsize/downsize within Naples? Good news! The property you’re buying is probably less expensive too. Make it up on the other side. Perhaps you’re punting out of Naples. Is the difference going to change your livelihood or prevent you from doing what you were going to do with your money? Most end up saying, “No.” when they really think about it.
I’ve had that conversation 5 times this year already.

True Stories

The Buyer Has A Solid Point
I received an offer at the end of last season that fell short of seller expectation. I knew it was going to be a tough sell but pondered why the buyer offered the price he suggested. After doing a new market analysis it became abundantly clear this buyer had done his math. He didn’t offer 1% less than current market value. He didn’t offer $1.00 less than the current market value. The market had changed that much in 60 days.
I brought the offer to the seller and explained the new market and the offer. My seller understood but was bummed out about the number. We talked about the consequences of not taking it. She couldn’t do it. This can be a terrible position because many times the first offer really can be the best offer. She countered. Buyer walked. The next day she called and said, “I woke up this morning feeling like I have made a horrible mistake. Can you save it?” I did. Her neighbors haven’t faired as well since that sale. We got lucky because once a buyer walks, they don’t always re-engage. They run faster the other way as the market continues to drop.
Is The Difference Really A Deal Killer?
I received a call from a lady who was already listed with a different agent and pondering an offer she had gotten. The difference was $30,000 between what she wanted and what the buyer was willing to pay. She had already bought her next place and was debating on countering or waiting until next season for a better offer. The curiosity of what is behind door #2 is fierce. I mean, there’s a game show about it so….????
The problem here is the clock has already stopped on her ability to negotiate better on her next property because she already purchased. When I looked at the price of her place she was selling and the price she paid for her new place, $30,000 didn’t amount to very much at all. I had to ask. “Take your time answering…is $30,000 going to prevent you from doing what you imagined with your money?” She laughed. That anguish melted. It’s that easy.
It might be you can’t accept the highest price a buyer is willing to pay. More negotiating may be necessary. You can always go for it but know buyers tend to walk more in a depreciating market.
Keeping things in perspective can mean everything when it comes to making the most right decision.
Is The Buyer Done Picking On The Seller Once The Price Is Negotiated?
Not always! The nature of the beginning negotiations tells a great deal about how the rest of the transaction is going to go. It could be the buyer is coming back for more when it comes to repairs and concessions. If your agent doesn’t understand how this works it can mean terribly unreasonable requests are coming your way in the shape of repair negotiations.
I heard about a deal earlier this past season where the buyer came back expecting a new roof even though it passed inspection. That deal ended up crapping out because the seller told them to pound sand.
Buyers, just because you nailed your price going in does not mean sellers are going to stay pinned under your unreasonable expectations. If you don’t believe me ask me about how many deals went south this year in MLS. By the way, I have had zero deals go south after the property went under contract.
Sellers, make sure you and your agent know the difference between a reasonable request and a bad demand. If your deal dies, you may end up having to disclose tons of property defects that will make it harder to get the next buyer to the table. It could also end up costing $1,000’s of dollars out of your pocket to fix the things on that original inspection report which could result in costing you more in holding costs and value on your property if the market continues to deteriorate.

Agents, Get Your Act Together!

Some of our clients are going to have a tough time with some of this stuff and it’s up to us to help them through it. Here are some things you can do to help reach your client’s true goals!

Buyers May Have Their Own Ideas Of What To Offer

Don’t be an order taker! Do the best you can for your client. I think there are 4 types of offers!

 

Get Bitch Slapped

This is when your offer is so low, the seller rejects it. They may not listen if you come back if the offer is really bad. In extreme cases, the seller will never entertain anything from you again out of principle. Stay away from this at all costs. I’ve seen sellers reject entire companies because they think the entire company sucks now.

Get An Invite

This is when your offer is so low the seller spends no time countering but sends you an invitation to come back when you are more realistic. At least you’re invited back but it’s still terrible. You likely have no compelling reasons for this offer and failed to explain your buyers’ position. Do this to increase your chances of a counter.

Get A Counter

You’re in the game, try to get it together.

Make It Stick

This is the sweet spot where the buyer comes in somewhere under full list and what the seller wants but higher than warranting an argument about it. I’ve done this a few times this year. The point is to be clear with the listing agent that there is no more money. If your other terms are favorable and your conversation is compelling, you’ll stick it.

True Stories
I had a deal this year where the number the buyer was offering had to be very precise. It went like this:
Buyer: How do we guarantee we get our number without paying too much?
Me: Make it stick. Then I explained.
The buyer wrote the offer.
Me to Agent: I have an offer. You’re welcome to change everything but the number.
Agent: The seller wants more.
Me to Agent: If you change the number we’re out.
It worked.
I had a buyer a few years ago who looked at property in Park Shore. The agent said no less than 6 times, “the owner is motivated.” My buyer perked up.
The next day he called. Here’s how it went:
Him:  Shannon, I think I want to make an offer on “x”
Me: (not surprised)
Him: I’d like to offer “y”
Me: (wakes up from passing out) What?
Him: Yup, the guy said the owner was motivated, let’s see.
Me: No.
Him: Oh are you going to be one of those agents who is too proud to present my offer?
Me: Nope. There are 1,000 agents in this town who will let you hang yourself. I’m not one of them….and then I hung up. (Terrible I know)
1 minute later my phone rings.
Me: Hello?
Him: Hahaha ok, what do we do?
I gave him a solid strategy and he ended up with a ridiculously amazing deal during a very healthy market. Had I let him go his way, it would’ve pissed off the seller and he would not own the absolute best unit that could’ve been purchased in that timeframe.
Smart people listen to their smart agents and end up with tremendous properties at great prices.
Buyers and sellers lean on us to tell them what they need so they can get their deal. If you don’t have the courage to tell them, refer them to me where you can at least get a % of a deal that happens instead of losing all of it because you don’t handle it well.

Do You Know What The Seller Is Thinking?

I’ve had a couple of scenarios this year where a crap offer just showed up out of nowhere. WHAT ARE YOU DOING? This is what we’re here for! If you surprise me with a garbage offer, I might surprise you back. Just kidding. Expect a phone call asking for an explanation because I want to make it work. Showing takes time, writing a contract takes time. Why are you willing to blow it all by going into negotiations blind?
If I know I’m going to write up something that isn’t going to be received well, I’ll at least contact the listing agent and try to get some insight.
  • Where are you?
  • What has happened so far?
  • How are your sellers feeling?
  • Have you seen any offers?
  • How was it handled?
A smart agent can determine how a seller is going to react to your offer. You can prepare your buyer for likely outcomes. When you properly set the expectation the deal may not go over well but buyers are going to be less angry when they are treated poorly which could help you approach plan “B”. Plan “B” might be changing your strategy, punting out or doing better? You never know until you ask!
If A Buyer’s Agent Is Asking Questions, Don’t Be An Ass.
Sometimes when I ask questions I get a superiority complex from the other agent. I’m just trying to help you get a deal together.
What is that cheesy golden rule they taught us in real estate? He who has the gold makes the rules! Yeah team, sometimes the gold is the money the buyer is bringing to the table, other times it’s the property for sale. Don’t get it twisted.
When I open a dialog with a seller’s agent who has nothing interesting to offer, I’m cued that the one who might kill the deal is the seller’s agent. I can always do my own market analysis, have 17 negotiating points to discuss why this is a good offer but it helps tremendously when I have a pulse on the other side of the deal.
But Shannon, we were taught to never talk about anything other than the list price. I know. But there’s no reason you can’t have a chat with your seller and agree on a compelling side story to use when the call comes in. It’s called real estate 202. Some agents never learn this. It’s lazy, stupid and prevents a ton of sales.
There Are Up To 4 Deal Makers and Up To 4 Deal Killers On Every Deal
Unless there’s more…but more on that later. The listing agent, buyer’s agent, seller and buyer can all kill the deal and sometimes you have to figure out who’s the rotten apple and how to prevent the whole deal from spoiling. You can easily have a seller who wants to sell and a buyer who wants to buy with only 1 agent who wants the same and that can lead to trouble.

True Story

I had a buyer who got a little sideways with the seller’s agent during a showing. When we presented our offer, it was rejected hard and fast. Listing agent’s response was, “You came in WAY too low,”  Buyer’s response was, “Yeah, ok. We tried.” My response was, I don’t actually think so. I waited a day or two and asked the buyer to do something he had likely never done in his life. It took an enormous amount of coaxing but I got him to offer $25,000 more. We got the deal done. $25,000 may sound like a big bump but try .004% more than our original ask. We stuck it and closed at that value. It wasn’t that the offer was too low, it was that the selling agent was pissed and wanted to kick my buyer in the teeth. We got a 19% discount on that place. 4 years later he made over $1,000,000 on it.

Your Negotiating Character

There’s a reason why some agents in town say, “Dear God Shannon, please bring me an offer! I’d rather work with you than “x”. Sometimes I have agents who say, “I want my clients to buy your listing because I can’t stand the listing agent who has the other one they like. It happens.
I’ve sold some great stuff because of my personal position. I don’t always agree with what my client is doing and it often helps a deal when the other side knows I’m with them even if my client isn’t. It’s called character. You can maintain your client’s position without throwing them under the bus or pretending to agree with them.
Your good character grants you the opportunity to get stuff done you wouldn’t have been able to accomplish without it. This helps you win more deals and rock out your performance for your clients. Give it a shot.

Who’s Ready To Do Some Business?

Thank you for reading my post.
  • If you’re looking for a listing agent who is going to be a true advocate to help you reach your goals,
  • If you’re looking for a buyer’s agent who will do the best they can to help you get a great deal,
  • If you’re looking for a good agent to help you sell your listing or bring a buyer,
I’m your girl. Answer your phone and I’ll answer mine.
Best Regards,
Shannon Lefevre, PA
Your Naples Smart Girl!
John R. Wood Properties, Inc.
239-595-6223
Shannon.com
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