Multiple buyers can help out wishful sellers - Denny Grimes and Company: MarketWatch Update

Jul
06

Multiple buyers can help out wishful sellers

Current market has buyers in control

Do you remember the song "When You Wish Upon A Star" from the Disney movie "Pinocchio"? Many sellers hum that tune to themselves as they lie in bed each night, wishing a buyer would come along and unshackle the chains that hold them to their property. They dream about freedom.

Be careful what you wish for, because it may come true. Sellers, if you are wishing for a buyer, you might find one and the chains that bind you will be replaced with something worse - strings. You will then be treated to a puppet show, but it won't be fun, because you will be the puppet.

We all know it's a buyer's market, which means that in many cases, the buyer is the puppeteer and the seller becomes Pinocchio. The buyer pulls the string and the seller reacts. Sellers have little control or voice because they fear they will jeopardize a sale they have waited months or even years for. Sellers can soon discover, like Pinocchio did, that sitting on the workbench (market) beats being turned into a jackass and spending the night in a whale.

Sellers, there is a better path to freedom that doesn't involve a fairy's intervention. All you have to do is look for two buyers instead of one. Some may think finding one buyer in today's market is hard enough, so finding two could only happen in a fairy tale. But it happens more often than you think. In fact, finding two buyers can be easier than locating one and the result will be a lot easier on your bank account.

Finding more than one buyer takes a proper mindset. The traditional lexicon of "sellers speak" needs to be shelved and saved for when a rational market returns. Sellers are puppet-show bound when they use terms like "We need to leave some wiggle room," "If they like the property, they can always make an offer," or my favorite, "I'm not going to give my home away." These sellers believe that a higher asking price will put more money in their pockets, when the reverse is true. It is a paradox, but lowering your asking price can sometimes allow you to net more.

There are predictable outcomes when pricing a property. Common sense tells us that if a property is priced ridiculously high, it will not attract lookers. Price it way too low and a line of buyers form in the driveway and down the street. Those prices are easy to identify. The challenge is to find the pricing sweet spot, which is a price that creates both interest and urgency.

The pricing sweet spot can be guesstimated, but it usually requires fine tuning once the property is exposed to the market. How do you know if you are close to the sweet spot? It's easier to tell when you're off. For example, if you have not had a showing since John McCain was a POW, then you're off a bit. On the other hand, if you are getting several showings a week, you may be close.

Buyers are predictable, too. When they feel they are the only one on earth interested in a property they become the seller's puppeteer. With little effort they can make sellers nod their head, crawl on their hands and knees and even bend over. The sellers don't like it, but short of something magical, they can do little about it. But if another buyer becomes interested in the same property, all of a sudden, like magic, the strings are cut and the seller becomes a person, one who is on equal footing with the buyers.

The existence of, or even the real threat of a second offer will always improve the seller's negotiating strength. Generally, the second offer is stronger because buyer No. 2 is aware of the first buyer. Buyer one will often counter-offer after learning that he/she is not the only one on the planet interested in that particular property. The presence of the second offer can mean the difference of tens of thousands of dollars for the seller.

There is no magic if the price is too high. Smart buyers realize that a good offer, from their point of view, is one that the seller is not happy with, but one that the seller is afraid to say no to. This is a flawless strategy. The only thing that can mess it up is the existence of another buyer.

Buyers will not pay more than market value, but they will pay less. I believe many buyers are paying less than market value because they are the only ones interested in it. But if sellers can find the pricing sweet spot and get a second buyer interested, chances are they will sell it at, or much closer to, market value.

It will take more than wishing on a star to sell a property now for what you could have sold it for several years ago. But with proper pricing you can do the next best thing, which is get an offer with no strings attached.

Keep the faith.

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