The strength of this sellers’ market is unprecedented in my 35 years in real estate. It is affecting every market in North America. It is particularly strong in suburban, semi-rural and rural markets. Inner-city commodity condominiums are the exception, but even those markets seem to be finding their base.
I know that many of you are incredibly frustrated with this market. If you represent buyers and don’t have a strategy to win these multiple offers, you are working hard and making no money. Let’s try to change that.
I work with some very productive agents in different markets across Canada. From their experiences, I learn a lot. First off, the agents that are excelling right now are predominately listing agents, and frankly, that is the only way to have sustainable success in real estate. Those same agents do represent buyers, and, in most cases, they are successful in getting their buyers into a home in a reasonable period of time. So, what are they doing differently?
Here are the five most critical steps:
1. Let go of your belief about the market value
When a property sells for over the asking price, it is not selling for over market value. Market value is simply the value that a buyer and seller will agree to when neither is under undue duress. When supply is low and demand is high, the market value increases quickly. When the market is rising fast, you can’t use past sales to indicate market value. Past sales tell you what a different buyer was willing to pay for a different property in a different market. That information is valuable, but it is not necessarily tied to market value.
I purchased an investment property in the Gulf Islands in B.C. recently. I was looking for the past few weeks and had some interesting interactions with agents. I had three different agents tell me that the market was overpriced and I shouldn’t be buying. They touted their theories passionately, and when they finally gave me a chance to speak, I simply asked, “What if you are wrong?” This prompted them to tout their theories even more passionately. I didn’t hire them.
None of us can know where this market is going. The best economists in the world don’t understand the current market complexities. The real estate market could collapse. It could continue to increase dramatically. We don’t know.
Pull out your definition of market value, share it with your buyers and help them decide what they are willing to pay for a property.
2. Educate your buyers before they enter the market
It is exceptionally complicated to buy a property right now. Your buyer clients will likely be in competition, and they are hiring you to help them win. The team that wins the Stanley Cup has an incredible amount of skill, knowledge and impeccable teamwork. You’ll need the same.
Buyers’ agents have been lazy and lackadaisical with buyers, which won’t cut it in this market. If you don’t have the confidence and courage to step up and represent your buyers, you shouldn’t be working with them. You are doing them a disservice. This means interviewing your potential buyers, educating them on the market’s complexity, getting the exclusive buyer contract signed before you see any homes, and then building a strategy with them to ensure a successful purchase.
3. Build a strong strategy
Together with your buyer client, figure out what it will take to buy a property in your market. Gather all the essential information to help with this. How big is the buyer pool? Are all winning bids unconditional? What are the prevailing listing strategies? While the seller has the lion’s share of power, how can you earn back some power? How will you uncover information about the seller and the listing agent? This is where your negotiation skills are critical. You must have an in-depth understanding of negotiation principles to win.
4. Help your clients make good decisions
None of us want our buyer clients to overpay, but if you insert your opinion and they don’t buy, and the market continues to increase dramatically, you have hurt them irrevocably. Keep your opinions to yourself AND help your buyers by not putting them in a place of duress. Duress puts them at risk of overpaying. As a strong listing agent in a sellers’ market, I was always looking for the buyer and/or buyer agent who was under stress because I knew that they would likely overpay.
5. Keep your client under the radar
The more offers your client makes, the more the listing agents know about them and can use that against them. For my Gulf Island purchase, I watched the market closely for a few weeks and then swooped in and bought a property before the agents on the island knew much about me.
It worked – along with several other negotiation principles. Imagine if I was looking and bidding on properties for weeks. My chances of success would go down dramatically, and I would likely have to pay up big to be successful in buying a property. Under your exclusive buyer rep agreement, you owe the buyer confidentiality as part of your fiduciary duty. This is always critically important, but now, more than ever. Take your legal responsibilities seriously, and you will shine well above your competition.
Properties are trading. The number of transactions is high. This market is extremely complicated. If you aren’t getting your share, it’s time to up your game. My negotiation courses have been adapted for the current market condition. If you haven’t taken them, why not? And if you have, many people are retaking them to improve their performance in this market.