Steve: Hello, this is Steve Strickholm of KD&A Full Throttle Coaching with Julie Olson, one of our great national coaches.
Our coffee with the coach for this week is on current market conditions, winning the bid. And the topics are a win-win strategy and market value versus price, determining leverage, communication, competitive terms, maintaining your objectivity and remembering your fiduciary duty.
So let's start with Julie and win-win strategy and about not going in battle. Talk to us about that, Julie.
Julie: Well, you know, we're talking about winning the bid and it is super competitive out there because we don't have enough houses to sell and we have more than enough buyers.
And so when we talk about winning the bid, you seem to think that you might have to go into battle. But what you want to remember is that you are not going into battle.
What you're doing is you're trying to work with the other agent to provide a solution, a solution for your buyers so that they can buy a house and a solution for the seller so that they can get the best offer for their property and the least risky purchaser.
Steve: So is that mean that like, do you want to be like combative, like pushing your way in or is it more like being cooperative? Tell us about that.
Julie: So I can tell you as a listing agent that if someone comes on too strong and they call and they say, yeah, we had a good offer and you have to get us an answer in such and such amount of time trying to take control of the situation, I will think, yep, that person is kind of a pain and I don't really want to spend 45 days dealing with this.
And you get what you what I call a demerit. And you move down the list of who do we want to work with? So that's like making sure that you're easy to work with as a buyer, representing your buyer.
That's right. You want to be cooperative. You want to be easy to work with.
And you want to find out what's the most important thing to that particular seller. You know what's important to your buyer and you know that they want the house and you know the top price that they'll pay.
Now you have to find out, you know, does the seller want an extended closing date? Do they want the highest price? Do they want to have maybe they've had a bad inspection before or they've had a transaction fall through because of financing so that you have all the right answers to the questions and provide a solution for that agent.
So your goal is to provide the best solution for that agent because typically you don't have any contact with the seller. Right. So you want to be cooperative, easy to work with and have the mutual best solution so that really moves you up the list and gives your buyer a better chance of putting the deal together with the seller.
Steve: That's the best way to win the bid. Yep. Great.
So let's talk about market value versus asking price because that's really critical. And I know one of the things we talk about is providing an analysis for the client prior to the offer. Tell us about that.
Julie: There's a couple of things you have to do right now. For any of you who have been out in the marketplace, you know that what you feel is a fair value for that property is probably not what it's going to sell for because properties are selling for unbelievable prices right now. So one of the things that you want to do is you want to provide an analysis for your buyer ahead of time.
And if you're a listing agent, you want to provide an analysis of current market condition and current prices right before people start looking or reviewing offers. So that's step number one. Then step number two is you take a look at the current market conditions as far as list price to sale price ratio.
Because if you have a buyer who says, well, I know this property is on the market for $400,000, but I really only want to spend $375,000. Well, then you pull out the statistics that say, well, the average price in this or the average list price to sale price ratio is 102%. So the chances of you coming in at 90%, you are reducing the odds in winning your bid.
So that's why you want to provide an analysis to your client prior to the offer and really get them set up to be a good partner with you in presenting a cooperative bid and working with the seller and the seller's agent. So how about finding out if there's a negotiating room or if it is a bid to win? Talk to us about that. Okay.
So there are still properties out there that haven't sold in the first 30 days. So if you have a client who maybe wants to come in at 90% of the list price, what you're going to need to find out is what is the seller's situation?
Are they anxious to close quickly? All the things that might be important because you might have some leverage, you might have some negotiating power if there's no other offers on the table. However, if they say, yes, we've had 14 showings in the last 35 minutes and we have two offers written and four more promise, your buyer needs to know that they're going to have one shot at this and they better put in the best offer that they have.
Steve: So that'd be the bid to win. Right. So you have to find out.
Julie: That would be their winning bid. You give me your top line, put out your best foot forward. And if it's good enough, you'll get the house.
If it's not good enough, we have to write the purchase agreement on another house. We have to keep looking. So how about offering too low of a value on the house, putting too low of an offering? How can that alienate people and how can you avoid that? Yeah.
Sometimes if you're working with an investor, they have a formula. So you'll just write a lot of offers and they'll keep writing offers with their formula, which is typically not full price until they get one.
But the typical buyer of today, if they decide that they're going to come in too low, my experience has been by the time you get done negotiating, they actually end up paying more than they would have if they would have like, say, if it was a $350,000 house and they decide they're going to come in at $300,000, the seller's going to say, I don't like them. I just want to reject it. And then if their agent can talk them into working just a little bit more, it's the one we have in writing.
Let's give it a try. Let's try negotiating. You might end up with, instead of going in there at, you know, $350,000 or $340,000 initially, so that the seller didn't want to lose it.
You might end up paying $345,000 or $347,000 mainly because the seller says this person needs to be punished. And that is your punishment. Because you came in low, I am going to make you pay a little bit more.
So there's an emotional component in the relationship between the buyer and the seller. And there can be a penalty fee if you alienate the seller. Exactly.
Thank you very much. Yeah. And if it doesn't happen at the time of negotiations, you know, if they're worried that maybe they're not going to, you know, we're not going to be able to pull it together if they're really motivated and there's no one else out there, that penalty could be incurred at the time of the inspection.
So you already got a good deal on it. And I am not going to do any work orders. And don't even ask me.
Steve: Because as you say, and I've heard you say in the past that there are really two offers. One is the initial purchase agreement. And the second offer is when you do the inspection.
Julie: That's right. That's exactly right. So one of the best ways to what agents are telling people is don't have an inspection if you want to get the bid.
I don't know about you, Steve, but that sounds like liability to me. Well, yeah. So let me ask you one last thing.
Is there anything about the current list price to sale price ratio that you want to give people any other tips on that? Making sure that you get that worked out before you go in and start bidding on properties. Well, the buyer needs to know, like, say, if you're in a starter home area and properties are listing at or selling at 105% over the list price, you need to know that so that you know the right price to go in. So here, let me give you an example.
So I was showing properties up to they were qualified up to 550. And they kept losing houses at 525 and 550. So what we had to do is we had to drop our price range that we were looking in down to 430 so that we would have we would be able to purchase a property and bid over the asking price because they couldn't do that at 550.
Yeah, like keeping your powder dry. So basically bid at 80 or 90%. No, you're gonna have to maybe go 10% over or more.
Steve: So that's a great, great piece of feedback. So thank you, Julie, we're gonna now move on. And we hope to talk to you really soon and have everybody for our next session, which will be on determining leverage.