by Neil Jenman
Reading Time: 7.5 minutes apx
If you’re thinking of selling your home in a so-called “tough market”, be careful.
When all the talk is doom and gloom, it’s easy to feel gloomy and despondent. This makes you susceptible to short-selling your home.
Here are some positive facts about negative real estate markets. Plus, some suggestions to protect the price of your home.
THE MARKET
The real estate market is not the stock market.
You’re selling a home. You are not selling BHP shares.
If you own shares and the ASX price is $80, you can’t sell those shares for $90, you must accept $80 – that’s the market price.
In real estate, however, you can do plenty to control the price of your home. You are not a cork bobbing on an ocean subject to “market forces”. You can figure out how to get the best price for your home.
As one smart and ethical agent, Bill Nasby, famously said: “The market is between your ears.”
I agree.
The most valuable real estate in the world is between your ears.
Do not let anyone – especially agents – tell you that “the market sets the price”.
That’s agent ‘speak’ which means: “The sooner you lower your price, the sooner I get paid.”
KNOW YOUR ENEMY
Most agents are the sellers’ enemy.
Agents are trained at getting sellers down in price. Oh sure, agents say they are dedicated to getting the highest price – especially before sellers sign-up. But if that’s true, why do they learn so many tricks to persuade sellers to lower their prices?
If agents were serious about getting the best price, they’d focus more on getting buyers up in price, not getting sellers down in price.
Honestly, you should hear how they (agents and trainers) talk about you (home-sellers) behind your backs. It’s shameful. It’s disgusting. And highly unethical.
As one trainer – the foul-mouthed bloke – tells agents (words to the effect of): “To succeed in real estate, grind sellers down.”
Yes, agents you need to be “grinders”. Forget ethical conduct. Just beat sellers over the head with your “bad market stick”. Most soon capitulate. And then you get your commission. That’s the essence of the real estate “game” – especially in a so-called “tough market”.
Here is a fact: The market is not the problem. The problem is most agents. They are too greedy, too lazy, and too stupid. Most agents don’t know much more than they are taught – yes, and that’s “grind the owner down in price”.
If an agent is negative about the market, if an agent says you need to “be realistic”, chances are almost certain that you’re speaking to the wrong agent – for you.
Especially if you want to sell for the right price.
THE “RIGHT PRICE”
Let’s settle this issue of price.
Many people will give you their opinion of the “right price”. Aside from agents, the world is full of armchair experts who regurgitate real estate cliches.
Such as:
“The market sets the price”.
Nonsense. A good negotiator and a smart seller set the price.
“A property is only worth what a buyer is prepared to pay.”
Oh really? Then why are most homes sold below the highest price most buyers are willing to pay? Explain that one.
No, this means you need to price it so it’s easy for agents to sell.
When you pay for marketing, not only do you promote the agent, but you also give the agent ammunition to talk you down in price. “See, it’s been advertised, and it hasn’t sold, you need to lower your price.”
Agents use this line to get you to drop your price. In most cases, you should drop such agents.
No. You need to be realistic and meet an agent who can negotiate properly.
Here is the true definition of “right price”: A home is worth what a skilled negotiator can persuade buyers to pay.
Here’s what skilled negotiators know: When buyers fall in a love with a home, the price is secondary. The money is not as important to the right buyers as their love for a home.
LOVE FIRST, MONEY SECOND
It happens all the time: Agents look at a home and instantly think: “What do the sellers want?”
But they have got it the wrong way around. If a home is lovely – especially as in “loveable” – agents need to ask this question: “Can I find a buyer who will fall in love with this home?”
Love is the most powerful force in the world. People kill for love. Wars are fought for love. And homes can be sold for great prices based on love.
Find the right buyer – one who loves the home – and watch what happens. The right buyer will find the right money to pay the right price. Just as when you find the right person in your life.
When you are in love, you can move mountains.
And you can certainly find the money to buy a home you love.
INTEREST RATES
When interest rates rise, buyers can’t borrow as much. So, sellers must lower prices.
Really?
Why should sellers suffer because buyers haven’t got enough deposit, or their income is not high enough? The buyers need to find a way to go up in price, not push sellers down in price.
There are plenty of ways buyers can find extra money to buy a home they love without sellers having to drop their prices.
Here are seven alternatives that a smart agent (or seller) can suggest that will help today’s buyers to buy homes without needing a huge discount from the sellers.
Isn’t it fascinating?! Agents learn ways to talk sellers into dropping prices; but, when it comes to their commission, it’s the opposite. They refuse requests to discount. You’ll be told “It’s company policy” or “We never reduce our commission”.
Well, here’s what to say to such agents: “It’s our policy that if we reduce our price, the agent must reduce their commission. If not, no sale.”
The agent must realise they are at risk of getting nothing.
So, if you’re asking an agent to drop the commission from, say, $20,000 to $10,000, make it clear that their choice is not whether they get $20,000 or $10,000, it’s whether they get ten thousand dollars or nothing.
Only the most unbelievably stupid agents (and be warned there are a few) will choose to get nothing instead of something. Or they will then do what they should do – persuade buyers to pay more.
Finally, when it comes to getting agents to reduce commission, here’s a question to shake the most recalcitrant agent: “Have you ever cut commission for anyone?”
Any agent who says they have never cut commission is lying.
If they cut commission for someone else, they can cut it for you too.
The lending business is always competitive. The best agents have good contacts. They often refer buyers to lenders who offer better deals, thereby enabling buyers to pay more for homes they love.
How many garages are filled with seldom-used adult toys? Jet-skis, motorcycles, boats, the list is endless.
If an agent asks a buyer: “Can you sell anything to raise more cash to buy the home you love?”, it’s amazing what may happen. Often the female partner will say: “You bought that Harley seven years ago and you haven’t ridden it seven times.” Sure, he “loves his Harley” but here’s the question: What does he love more – his rarely ridden motorbike or the lovely home for his family?
Sell some toys and create some extra cash to pay the right price for the home you love.
Rather than give buyers a discount because they can’t borrow enough to buy your home, offer to “carry” the amount they want discounted.
Let’s say they want you to reduce the price by $50,000 because they are borrowed to their max. The agent (or you) should ask: “If you could borrow that $50,000 would you do so?”
Of course, they should say yes (after all, that’s the reason they are giving you). You then reply: “Okay, well, we will let you pay us off the fifty thousand dollars at one hundred dollars a week for ten years (or whatever arrangement you make).”
This is a better arrangement than dropping the price. Lawyers will make it legal.
Instead of asking you for a discount, tell buyers to ask their boss for a pay rise. As the saying goes: “If you don’t ask, the answer’s always no.” Maybe they can work more overtime? Get another job? Ask relatives for financial help?
Come on, let’s exhaust all other possibilities before [financially] attacking the sellers.
Most agents are clueless about negotiation. To agents, being a “negotiator” means beating sellers down in price – that’s it.
There is a booklet which outlines 42 Rules of Modern Real Estate Negotiation. As a seller, it’s indispensable.
The booklet is not for sale. If you are a genuine home-seller or a polite agent who genuinely wants to do well by your sellers, you can download a copy of the “Rules of Negotiation” at no charge. [See link at the end of this article].
Most sellers overlook this obvious point. You can’t get the right price unless you get the right agent.
If you can’t find the right agent, you are better off selling your own home without an agent. It’s not as hard as you may believe.
If you can’t find a good agent, we’ll give you a free copy of a book that tells you how to sell without agents. [Please see the link at the end of this article].
PROPERTY SEASONS
Historically, property prices keep rising. But, at times, the average price in some areas goes down. That doesn’t mean your place has to go down too. Unless you have a ‘cookie cutter’ property (one that’s near-identical to others), you don’t have to automatically drop your price.
Picture the real estate market like the weather. It changes from time to time.
Think of the 1979 Peter Sellers movie, Being There, and how Chauncey Gardner became an adviser to an American president thanks to his homespun simplicity.
Here’s what he said: “In the garden, growth has it seasons. First comes spring and summer, but then we have fall and winter. And then we get spring and summer again.”
The president replied, “Well, Mr. Gardner, I must admit that is one of the most refreshing and optimistic statements I’ve heard in a very, very long time.”
Sometimes I wonder how people get through life without having read the book, Being There (by Jerzy Kosinski) or having seen the movie.
Real estate has its seasons. Maybe it’s the winter now. So, why not wait for spring and summer to return – as it surely will?
That’s how you stop your home price from falling – don’t sell low in the wrong season.
Or, better still, find a good agent who can explain to buyers that real estate has its seasons. If they are going to ‘hold’ your home for many years – perhaps decades – they will live through many seasons.
Smart agents say to buyers: “Why not buy the home you love now and pay the ‘spring’ or ‘summer’ price requested by the owners – and get the home you want?
If you don’t pay the price the owners want – which is no more than the price they could have got last year (and will get again one day – soon) – you’ll likely spend many years lamenting your decision – or lack thereof.”
The best way for buyers to secure the home of their dreams is to pay a bit more. If they are buying a home in 2023 and they intend to live there for, say, 20 years, until at least 2043, why not pay a 2026 price? Sure, it may be a few thousand dollars more. But here’s what’s likely to happen: By 2030, the higher price paid back in 2023 will look cheap. And, by 2043 or beyond, when they sell, the price they paid back in 2023 will seem unbelievable.
Best of all, the buyers get a home they love. Perfect.
All you need, as a home seller, is an agent who understands and appreciates real estate seasons – and knows how to persuade buyers to pay the right price today.
YOUR PERMISSION
Here’s the most important point to protect the value of your home: Your home cannot be sold without your permission.
No matter how much pressure is upon you, if your agent has not proved to you that everything possible has been done to get you the best price, do not sell.
Tell the agent something they all hate to hear: You want to think about it.
And then call the author of this article. I give you my word: Either I – or one of my colleagues – will let you know if we think you are getting the best price. If not, we will do everything to support you (and even your agent!) to help get you the best price.
If not, don’t sell.
It doesn’t matter what the agent says “the market” is doing, it’s what you do that’s important. Sure, in a tough market – in the winter real estate season – desperate sellers allow agents to push them down in price. But why should you suffer because other, more anxious, sellers accept low prices?
If you have a lovely home and it was worth a great price in a boom, you have a duty to do all you can to try and get the same price in a gloom.
Don’t let anyone tell you “It can’t be done”.
As you have seen, there are many strategies you can use to make sure your home does not become a casualty of a so-called “falling price market”.
Your home cannot be sold without your permission. Do not give your permission to sell unless you get the right price.
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To receive the 42 RULES OF MODERN REAL ESTATE NEGOTIATION, please click here.
If you can’t find a good agent and you would like HOW TO SELL WITHOUT AGENTS, please click here.
And, of course, as always, if you need any real estate support, please be sure you call us 24/7 on 1800 1800 18 or email [email protected].
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Stephen Stanton says:
Thanks Neil,
As always, a perspective that commands a reassessment of the popular narrative.
Cheers.