The real estate market is sizzling, which can mean multiple offers, bidding wars, and even a few broken hearts. At times like these, your agents can build lifelong relationships by being a skilled negotiator, excellent communicator, and trusted advisor.
Whether you’re representing buyers or sellers, everyone –– including fellow agents –– should leave the table feeling that the process was handled fairly and honestly.
Here are some tips for helping clients through a tight housing market while adhering to ethical standards:
Seeing buyers through a seller’s market
In a seller’s housing market, buyers are already at a disadvantage. Add to that an ongoing pandemic and stress levels may be skyrocketing. Your clients may be anxious to leave a big city, set up a permanent home office, or move closer to family members.
Now more than ever it pays to stay calm, rely on your expertise, and keep legal and ethical requirements top of mind. This is a great opportunity to be a voice of reason during the highs and lows of searching, viewing, and negotiating.
In representing your buyer’s best interest, be sure to:
- Educate them on evolving market conditions and their options for making offers. First-time home buyers, especially, will be counting on your expertise to guide them through fast-paced decision making.Explain that offers aren’t always kept confidential (unless required by state law). Having sellers disclose their offer to other buyers may feel uncomfortable, but in a hot housing market they should be prepared for that reality.Handle losses with a level head. If a client’s “dream home” goes to another bidder, it may be for reasons entirely outside of their control. In fact, they may never know what terms or prices are being offered by other buyers. Focusing on next steps with optimism will keep things moving in the right direction.Discourage buyer “love letters,” videos, or emails appealing to the seller as they can violate Fair Housing Act regulations. Even though so-called love letters aren’t uncommon, they may cause homeowners to choose a buyer based on identity instead of merit. To combat discrimination, “no love letters” might simply be an office policy. If buyers insist, it’s best to stay out of it by not handling or reading their communication with sellers.
Most of all, present your client as a serious buyer right out of the gate. As long as you fully explain the pros and cons, there are several strategies that may make them more attractive to sellers:
- Avoid contingencies. In a seller’s housing market, buyers should be entering negotiations pre-qualified for a mortgage. Moreover, offers should be free of seller concessions whenever possible.Aim high. In a market where other sellers are happy to offer more than asking price, low-ball offers can take buyers out of the game before it even begins. Sometimes, offering just a few thousand dollars over asking makes the difference (without dramatically affecting your client’s monthly budget).Be earnest. While a 1 to 3 percent earnest money or “good faith” deposit is typical, a seller’s market may require more in order to stand out. Advise your clients on price points that keep them competitive as well as risks involved should they back out of the deal.Forgo appraisals. While certainly not advisable or possible for every buyer, those who are purchasing with cash or planning major renovations may be comfortable forgoing an appraisal, especially if the seller provides one from a reputable inspector.
Helping sellers through high-pressure moments
Bidding wars sound like a dream come true for sellers, but managing multiple housing offers comes with its own brand of stress. As an agent, this is the perfect opportunity to show integrity by playing fair with all parties involved. Remember to:
- Keep in mind that the thrill of multiple offers is often mixed with highly emotional decisions. In a super tight real estate market, sellers may feel pressured to act within hours or days of listing.Prep sellers appropriately. As part of your listing interview and presentation, it’s wise to prepare clients for multiple offers, explain options for navigating them, and ascertain their directives for dealing with different scenarios.Communicate openly and honestly with buyer agents. House hunting can be an exhausting experience for buyers who desperately need a place to land, especially if a new job is starting. Regular status updates help all parties manage expectations and feel heard.Protect your listing client from undue pressures and deadlines. Buyers may unwittingly impose unrealistic demands on sellers, so it’s best to communicate directly with their agent.Crunch the numbers. Make sure sellers understand the net profit a sale will bring. Buyers with FHA loans, for example, will require an inspection. Sellers should be aware of how making repairs may affect the bottom line.Negotiate on timing. Sometimes, even more than price, timing is a big factor for sellers in a frenzied housing market. Ensure your clients have ample time to coordinate their next move by negotiating with buyers who may be flexible in order to land their dream home.
Since our founding, one of the pillars of our success has been a deep and strategic focus on agent training. This is how we cultivate referrals, achieve consistent service from market to market, and retain many clients for life.
As you help clients navigate rough waters, NAR’s handy guide for buyers and sellers may be a useful tool in your arsenal of resources. With the right resources, and a positive mindset, your clients will be in good hands.