In many of today’s residential real estate markets the sellers are in control. When inventories are low and prices are going up it’s a sellers’ market. That’s when buyers need to tighten their strategy to get an offer accepted. When buying a home, a car, or any other major purchase, your primary strategy is understanding what is motivating the seller. Many people assume that it’s only money but that’s not always the case. Once you understand the seller’s motive, you can structure your offer to meet it.
Every sale is unique but the seller’s motivation most often falls into one of three categories:
- Sales price – what the seller will pocket from the closing table.
- A fast closing – a seller’s need to close on another home or another reason to close fast.
- Emotional attachment – the seller has to sell but wants to sell to the right person.
Learning the Seller’s Motivation
Learning the seller’s motivation usually means having your agent make a telephone call to the selling agent asking for some history about the home or more specifically about the seller’s history with the home.
If the agent immediately provides and in-depth history, it’s a strong indication the seller has an emotional attachment with the house. Here, a good buyer’s strategy is writing a letter to the seller explaining in emotional terms why they love the home and want to buy it.
If the seller is motivated mainly by money, the buyer makes a big mistake sending over a low-ball offer with a short acceptance time limit. If there are multiple offers, the low-ball offer will go to the bottom of the pile, never to be looked at again. Even if it’s the only offer (not likely in today’s market), the time limit might be ignored while the seller waits for a better offer. The seller can always make a counter offer even after the time limit expires.
The all cash offer can stand out when the seller needs to close the deal fast. Of course that’s not an option for most buyers and too many or too strict of contingencies can still slow the closing down. Removing contingencies is often the answer for both all cash buyers and those needing financing that have been preapproved.
It’s Just a Telephone Call
Don’t wait for your agent to suggest picking up the phone to call the listing agent to learn the seller’s motivation. As the buyer, you need to require that this be done before any offer is made.
If the seller is all about the money, you need to make an offer at or near the asking price. In a highly competitive market, the asking price may only be a starting point. Before making the offer, you and your agent should research prices of the most recently sold homes in the area. If you get into a bidding war, you might not receive a counter offer. The seller might just send out a letter asking for your best and final offer.
If the seller wants to close fast it can cost the buyer some peace of mind when contingencies have to be given up. The ability to back out of the deal if the inspection turns up serious problems with the house is one of the big contingencies you can consider giving up. The all cash buyer can skip the inspection all together. The financed buyer can’t skip the inspection. They can try accepting problems “as is” but the lender can still kill the deal.
The appraisal is another contingency that buyers can consider giving up. The all cash buyer can skip the appraisal altogether. The financed buyer will have to have an appraisal. However, the financed buyer might be able to keep the deal together if he or she can pay the difference between an appraisal that comes in below the agreed to sales price.
It all begins with that telephone call to learn what is motivating the seller.
Please leave a comment if this article was helpful or if you have a question.
Author bio: Brian Kline has been investing in real estate for more than 35 years and writing about real estate investing for seven years. He also draws upon 30 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest. In the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.