Approaching The Competitive Phase Of The Negotiations
As a Buyers Advocate (or buyer’s agent as other states know us), we meet buyers in our travels all day long. Many of them confidently select good properties on their own, and some bidders and negotiators I’ve come across in auction and negotiation situations have held their own so well that I’ve been inclined to give them a card and ask if they’d like to be trained to become a professional bidder.
However, for all of the confident and capable buyers out there, a vast number of them come unstuck at the competitive negotiation phase because it’s often mysterious. Mystery can lead to scepticism and mistrust; something that real estate agents are plagued with often, whether deserved or not.
Competitive negotiations result when more than one buyer are fighting for a property at a price matching (or eclipsing) the vendor’s selling price. As opposed to auctions where the process is known, legislated and consistent in each state, the negotiation phase is inconsistent and usually conducted at the agent’s discretion.
We canvas all kinds of cries for help (including the odd protest or two), but the reality is that an agent can determine how they wish to gather offers and coordinate competing buyer timeframes and offer processes.
Whether they like the variability of the processes or not, buyers let themselves down when they don’t establish the agent’s rules up front.
This isn’t the most significant mistake though. Buyers completely let themselves down when they opt out of the competition merely on the grounds of not liking the process. If I opted out of every negotiation on this basis, I’d miss out on a lot of great properties for my clients.
The first question I will ask once I’ve gleaned some information about the sale and I’ve finalised my due diligence and comparable sales analysis is “Are you open to presenting written offers today?” Most people would assume that because a property is open for inspection, it’s available for sale right now. This is not always the case and for many different reasons. Firstly, if the property is going to auction, the vendors may be completely keen on having their auction day (or the agent(s) may be even keener), but in some cases, properties must legally run all the way to auction. It could be a deceased estate, a divorce, a court order… the list goes on. No amount of nagging and whinging will change the situation. In some states (including my home state of Victoria), agents can legally take a property to market without having a contract prepared yet. While buyers may wish to make verbal offers, an agent is within their rights to resist this until the contract is available for signing. I prefer to stay quiet until I know that the property can and will be sold.
The second question I ask is, “what is your process when dealing with competing buyers?”
This is vital because the approach I could take will vary based on the negotiation tactics I’m able to employ. If the agent’s answer is “best and highest”, we must be prepared with our analysis, confident about value, and willing to put forward one (and only one) offer with our most attractive terms nominated for the vendor to consider. We don’t like this process much at all, but in some cases, it can work to our advantage, particularly given the buyer sentiment towards this process.
Some agents will arrange their final competing buyers in the agency boardroom; literally around a table in a meeting room. It’s intimidating, intense and the sale finalisation takes a mere five minutes. Agents conduct ‘bidding’ this way in an effort to offer buyers transparency and to make the process faster and clearer for all parties. Where it can come unstuck is when buyer terms vary, but for a Buyer’s Advocate, it’s a powerful method of purchasing particularly when other buyers are nervous and uncomfortable about it.
Some agents will take an ‘acceptable’ offer and phone around all other buyers, offering every interested party a chance to challenge or decline. Buyers who complain about this method often forget that the agent is working for their vendor and are not in the business to go around doing buyers a sharp favour. Assuming that an agent will take one offer to the vendor without exhausting the rest of the buyer market is naïve. We’d all love to think that we can purchase any property we like without competition, but the reality is that we’d like our agent to work for us if we were on the other side of the coin, selling our home.
Buyers who opt out of the race on a property they love, just because they are uncomfortable with the process can live to regret it for months or years later.
Asking the questions, absorbing the rules and being confident are the three best tips I can offer buyers who find themselves loving a property that other buyers also love.