The Question is Your Lifeline

In Part 1 of my February E-Note I wrote about the anchor price. Failing to understand anchoring could cost you tens of thousands of dollars. Forget the question, “How much less than asking price can I get the home?” Start asking, “ What is the home worth?” This latter question is your lifeline against the anchor that weighs most buyers down.

When looking at prospective homes with clients post showing, we never ask them if they want to make an Offer. We don’t sell homes so why would we ask that question? We do note that when a client has an interest in a home they should ask us to prepare a market analysis. I believe we have smart clients who are smart enough to know when they have an interest in a home. They don’t need an agent pestering them with – “Isn’t this a lovely kitchen?”

None-the-less, after showing a client a home recently, the client called to let me know they had some interest in the home and continued with:

“We are only willing to pay $600,000. We won’t go a penny higher.” “Fine, I countered but let’s first see what the home is worth. I’ll get you the written market analysis by the end of the day tomorrow.” The asking price was $650,000.

Sometimes the truth hurts and makes things difficult. I knew my client wanted to buy the home and I knew what their top dollar amount was. On completing the market analysis, the problem was the home was only worth $535,000 – $550,000.

I note “problem” because I was not clear we could get the home for value in which case I would have to tell our client, “We can wait to see if the home drops to the value point and keep looking for a home, or you can spend more than you should for the home.”

Look, my goal is to remove emotion from the home buying equation. The benefit of the market analysis is that the numbers say something. The numbers tell us area sale averages, number of homes for sale, average asking prices and a host of other information and, more specifically using recent sales, the value of the home in question.

Understand on the selling side you have an agent whose job it is to sell. The anchor, the home asking price, may have no relationship to value. The asking price may have been set by the seller or may have been set by the agent to get the listing. In real estate this is called “buying a listing.” How to do we get to the market value when the gap is $100,000?

The actual negotiation began long before the Offer was written. It began with our understanding the marketplace and the seller’s motivations for selling. Our job is a bit easier when the asking price is close to value, but that doesn’t always happen. So what happened to our client who was not going to pay a penny more than $600,000? I’ll let you know in my March newsletter. In the meantime if you want to hazard a guess please feel free to send me an e-mail at homebuyeba@gmail.com