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They Are Back…… Low Inventory and Multiple Offers. Frank Mears, ABR, CDPE, CNE, CRB, CSP, GRI, SFR, SRS, SRES. The Big Story of 2013. Low inventory Investors scooping up bank inventory Home Builders’ reduction Home owner holding back Bank shadow inventory The Result: prices going up. - PowerPoint PPT Presentation
They Are Back Low Inventory and Multiple Offers
1ABR Designation Core CourseThey Are BackLow Inventory and Multiple OffersFrank Mears, ABR, CDPE, CNE, CRB, CSP, GRI, SFR, SRS, SRES
2The Big Story of 2013Low inventoryInvestors scooping up bank inventoryHome Builders reductionHome owner holding backBank shadow inventoryThe Result: prices going up
3Seeds of a housing shortageInventory of existing homes at its lowest level in seven years.New construction at a 50 year low markDistressed home listings will continue to fall as fewer owners are delinquent.Normal non distressed home owners have been holding off selling until the market gets betterLawrence Yun, NAR Chief Economist4October Existing-Home Sales Cool but Low Inventory Drives Prices
WASHINGTON (December 2, 2013) Existing-home sales declined for the second consecutive month in OctoberTotal existing-home sales1, which are completed transactions fell 3.2 percent to a seasonally adjusted annual rate of 5.12 million in October from 5.29 million in September, but are 6.0 percent higher than the 4.83 million-unit level in October 2012. Sales have remained above year-ago levels for the past 28 months.Lawrence Yun, NAR chief economist, said a flattening trend is expected. The erosion in buying power is dampening home sales, he said. Moreover, low inventory is holding back sales while at the same time pushing up home prices in most of the country. More new home construction is needed to help relieve the inventory pressure and moderate price gains.
5The Inventory Shortage MythRealty Trac June 2013Consider housing inventory. How can it be that the U.S. Census reports there are 13.9 million year-round vacant homes in the U.S. while major media outlets like the New York Times reports that there is not enough houses for sale to accommodate the recent flush of demand?6So which is it: oversupply or undersupply? If you believe the major news outlets there is a shortage of houses for sale. Or, to be more clear, a shortage of cheap houses for sale.If you trust the governments numbers then theres a glut of vacant houses.
The truth is somewhere in the middle7 The artificial shortage of homes for sale and the subsequent rising home prices are being driven by the two forces: major banks and their Wall Street buddies, many of whom were subprime lenders five years ago and now have transformed themselves into real estate investors. These all-cash foreclosure investors are buying distressed property at the low end of the price scale, muscling out first-time homebuyers and smaller mom-and-pop investors. Big investors are snatching up low-priced foreclosures in bulk and renting them out to people who cant buy. By amassing thousands of rentals, the Wall Street landlords are putting a crunch on housing supply, driving up prices and lacing their pockets with profits.8Paradoxically, home sales and prices are up, but home ownership is down because its investors not first-time homebuyers buying up the majority of homes.RealtyTrac data shows about 3.5 percent of all home purchases in the first quarter were done by institutional investors. Institutional purchases are up 34 percent from a year ago.
9Multiple OffersThe most frustrating situation faced by REALTORSPotential for misunderstandingWhat is fair? What is honest? What is to be done?Who decides?There is never a simple answer to complex situations10Why look at generational commonalities and differences?Gain insight into what is important Learn best ways to communicate and market Learn motivations, lifestyles, hopes, and fearsProvide frame of reference and perspective GenerationsThe GenerationsSeniors | GI Generation1900-1925Seniors | Silent Generation1925-1945Baby Boomers1945 - 1965Gen X1965 - 1980 Gen Z Millennials2000 - PresentGen Y1980 - 200012Cross market Generation BuyAddress by Mr./Mrs. Respects process, procedure, laws, specialists, designations; experience, stabilityVerify preferred method of communicationAppreciates personal touchesVery loyalMay have more timeUsually have equitySale requires patience5 GI - Silent Generation13Address by Mr./Mrs. Unless authorizedInclude Resumes; Designations; ExperienceAppreciate personal touchesHandwritten Notes; Thank you notes; Phone CallsAbility to personally speak with you directly rather than use voicemailVerify preferred method of communicationEven if email is used by themUse larger type fonts forPostcards, Flyers, Newsletters, Personal Mail
Very LoyalWord is their Bond; Handshake seals DealComfortable with Mass Production; StandardizationPay cash rather than use credit cardsRespect Process & PoliciesRespect Specialists & ExperienceUsually owe no mortgage on propertyMay not appreciate your valueInclude Resumes, Designations & ExperiencHigh Maintenance Constant AttentionProbably uses emailTime is preciousLimited LoyaltyIncome Rich, cash poor3Boomer Generation14Limited Loyalty to People or BrandsSelf-Absorbed; Unconventional; DemandingExpect Designations & ExperienceTime is precious commodityNeed ConvenienceShop on LineDemands value for the dollarIncome rich/cash poor; credit cardsInterview and compareExpect technology savvy professionals, online presence with rich content and easy to use Expect a packaged transaction with high-caliber skills and advocacyEmail and texting preferredUse smart phones w/ mobile apps, QR codesWill be loyal if they choose youHigh ExpectationsE-TransactionGen X Generation 15Pop in a link for Did You Know
Self-Reliant; IndependentSkeptical; detached; easily move on Grew up on Fast Food, Color TV, one-stop shoppingTechno Toys integrated into daily lifePay w/ Plastic; Income Rich; Research & shop on-line regularlyMore apt to use cell phoneRather than have/want home phoneGenY are very comfortable in a virtual environment and global communityPurchase will not be restricted by domestic boundaries; crossing a threshold may not be necessary to make a decision; property portals will include all decision points4Gen Y Generation Will be an involved partner E-Transaction (search to close) will be the new normal
16GenY and NextGen+ are very comfortable in a virtual environment and global communityProperty searches will be on line; e-signatures will be common; purchase will not be restricted by domestic boundaries; crossing a threshold may not be necessary to make a decision; virtual tours will be virtual reality tours; property portals will include all decision pointsFocus on texting, email and interactivity Will be an involved partner in all aspectsWeb-driven e-presentations; e-newsletter; etcWhat else?!!!
They will be exposed to far more global interaction than any previous generationMore apt to relocate anywhereTerrorism will probably yield stronger family ties and a resurgence of patriotismE-Bills and e-banking, shopping, computers part of their daily lives; color imperativeE-transaction and packaging expectedGeneration Z Millennials 21.4% of population66.5 millionAge in 2013: 13 and underTechnology adept, connected, introverted, short attention span, individualistic, impatient, communication in online communities17Cultural Generalizations, StereotypesGeneralizations allow revision of opinions and responsesStereotypes interfere with treating people as individualsCultural learning can work both waysAdapt your outlook and behaviorYou dont have to change who you are or your culture18
19High ContextLow ContextFormality, face-saving, relationships, slow paceInformality, direct communication, results, fast pace, punctualityAsia/Pacific, Russia, Middle East, Central and South America, Southern Europe, AfricaUnited States, Canada, Northern Europe, Australia, New Zealand, South Africa Slide 3-#Cross-Cultural Business SkillsHow can you: Be sure your behavior is appropriate?Project a positive attitude?Adjust to the need for high or low context interactions?Slide 3-#Dos and DontsSave faceTalk less, listen moreRelationships firstFormal, slow pacePunctualityContractend or beginning?
Slide 3-#Dos and DontsRespect for hierarchyFamily matters are privatePractice with interpretersDouble check software translationsObserve nonverbal signalsCommon senseSlide 3-#Non Verbal Red FlagsRe-adjusting distanceAverting eye contactScowling, frowningInappropriate laughterCovering the faceSilence, no questionsDisplaying impatienceSlide 3-#Behaviors to AvoidHands in pockets or on hipsIntense, prolonged eye contactCrossing legsShowing the soles of feet or shoes Pointing or touching with the footFleeing or invading personal spaceInitiating any physical contactShowing impatiencePointing or beckoning with the fingersHand gesturesSlide 3-#Negotiations and Decision MakingWin-win or win-lose?Consensus, committee, or hierarchy?Accept and adapt to the clients practicesFollow up in writingSlide 3-#Gender IssuesCultures that strictly separate sexes may have difficulty adjustingBe deferential to women even if their own culture is less soInclude the spouse or other colleagues in invitations to male clients or colleaguesSlide 3-#Fundamental to cultural identity, norms, traditionsLearn about others beliefs and traditionsYou dont have to change your own beliefs and traditionsReligious TraditionsSlide 3-#Active ListeningFacilitates cross-cultural communicationParaphrase Ask open-ended questionsInvite listeners to explain understanding The conversation IS the messageSlide 3-#What type negotiator is the other agent?Soft
Principled30SOFTParticipants are friendsThe goal is agreementMake concessions to cultivate the relationshipBe soft on the people and the problemTrust othersChange your position easily3131SOFT CONTINUEDMake offersDisclose your bottom lineAccept one-sided losses to reach agreementSearch for the single answer: the one they will acceptInsist on agreementTry to avoid a contest of willYield to pressure3232HARDParticipants are adversariesThe goal is victoryDemand concessions as a condition of the relationshipBe hard on the problem and the peopleDistrust othersDig in to their position
3333HARD CONTINUEDMake threatsMislead as to bottom lineDemand one-sided gains as the price of agreementSearch for the single answer: the one you will acceptInsist on their positionTry to win a contest of willApply pressure3434
3636 KNOW THE RULES1. You Can and Should Negotiate Most negotiations are not lost at the bargaining table. They are lost because the parties never got to the table.2. Check Your Ego Sometimes we are our own worst enemies. This is not the place to show off your cleverness. 37373. Avoid the Sympathy Trap Negotiation is not social work; it is not charity. You are responsible to look out for your clients interest.4. Take the High Road Anything you do to destroy trust will harm the negotiations.5. Be The Squeaky Wheel Sometimes it pays to be a little aggravating and persistent
38386. Beware of Knowing Too MuchShowing off how much you know can work against you.
7. Confront a Psychological Attack Allow it and you lose. Draw attention to it and its power vanishes.
8. Ask a lot of Why QuestionsIt may get them to open up and reveal their true motivations.39399. Be Flexible Negotiation is a give and take process. Must gets Intend to gets Nice to gets10. Question authority Sometimes the authority is only voicing an opinion. Find an alternate authority. 11. Listen Youll discover what they really want. 404012. Search for Options. Seldom is there only one right answer. Know when youre deadlocked on a particular issue. Lets put that aside for now and continue on. 13. Challenge the Written Word. Just because its in writing doesnt mean its true.14. Defend and Value Concessions. Negotiations are give and take. Never concede anything without asking for something in return.414115. Be Informed Knowledge is Power 1. Do your Homework. 2. How16. Try To Obtain An Offer That Can Be Closed. Do the possible first. Leave the impossible to later. Remember some deals cant be made no matter what. Worse that not making a deal is making one in which you loose.424217. Empathize With The Other Party. Understand what they want and why they want it. You dont have to agree with their position. Just understand it.18. Get the other party to invest TIMEThe more time invested, the more to lose if it doesnt go through.19. Set a DeadlineNo deal ever closes without a deadline.4343Remember. Everything we do as negotiators is to try to help our clients get what is important to them.
We owe absolute loyalty to their interest above all other interest including our own.44Multiple OffersTilts the negotiating scales in favor of the seller?Always ask if there are multiple offersAlways ask who has the other offerKnow your BATNA
45Standard of Practice 1-15REALTORS, in response to inquiries from buyers or cooperating brokers shall, with the sellers' approval, disclose the existence of offers on the property. Where disclosure is authorized, REALTORS shall also disclose, if asked whether offers were obtained by the listing licensee, another licensee in the listing firm, or by a cooperating broker.Does the Listing Agent Have to Tell?Multiple Offers : No46Standard of Practice 3-4REALTORS, acting as listing brokers, have an affirmative obligation to disclose the existence of dual or variable rate commission arrangements (i.e., listings where one amount of commission is payable if the listing brokers firm is the procuring cause of sale/lease and a different amount of commission is payable if the sale/lease results through the efforts of the seller/ landlord or a cooperating broker). (Amended 1/02) Variable Rate: Yes47The Sellers sideThe risks to seller and the sellers agent:Unhappy buyersMultiple offer dont always result in a higher price. Some or all of the buyers could elect to walk awayHighest and best may result in a better offer or result in no offersSeller inadvertently obligates to more that one contract
48To avoid being blamed for the sellers good fortune turning into misfortune. The key decisions on how to handle multiple offers should be made by the seller49$1000.00 more than the next highestOffers that are $1000.00 more than the next highest up to a certain amount.Good idea or not?Buyer may pay less than willingBuyer may pay more that intendedTwo Buyers make the same offerDishonest seller
50Presenting Multiple Offers1. Individual presentationPresented to the seller and listing agent only2. Group presentationAll offers are presented at the same time with all representatives present
Buyers should be notified if others will hear offer details 12451$370 Asking Price#1#2#3#4Offer$375k$367$352k$354k1st deposit$1k$5k$10k$7k2nd deposit$0$5k$10k$8kInspectnoneHm/PestFullFullPQ/PA/CmtnonePQPACmtMtg Cmt6 weeks4 weeks4 weeks2 weeksLTV100%90%80%50%Close120 days90 days60 daysFlexConditions$10k closing costsHome sale contingencyHm pendnoneAdjusted Gross$365k$367k$352k$354kPresenting using the grid method
52Which would you counter?Answer ALL OF THEMWhat you see is not always what you getCounter OffersImplement the negotiating strategy Reassess objectivesIdentify points of agreement and differences Prolonged, incremental negotiating is riskyseller may take another offer or buyer may walk10053$370 Asking Price#1#2#3#4Offer$375k$367$352k$354k1st deposit$1k$5k$10k$7k2nd deposit$0$5k$10k$8kInspectnoneHm/PestFullFullPQ/PA/CmtnonePQPACmtMtg Cmt6 weeks4 weeks4 weeks2 weeksLTV100%90%80%50%Close120 days90 days60 daysFlexConditions$10k closing costsHome sale contingencyHm pendnoneAdjusted Gross$365k$367k$352k$354kWhich offer would you counter?
54Which would you counter?Answer ALL OF THEMWhat you see is not always what you getList Price @ $150,0001st Counter @ $145kBuyer counters @ $x2nd Counter @ $140kBuyer counters @ $x3rd Counter @ $135kBuyer Counters @ $xNo seller counterBuyer waits for ? $$$Counter Offer Signal PatternEqual Reductions create deadlock
55Put on two slides with pattern on right sideReducing Counters Yields ClosureCounter Offer Signal PatternList Price @ $150,000
1st Counter @ $147kBuyer counters @ $x2nd Counter @ $145kBuyer counters @ $x3rd Counter @ $144kBuyer Counters @ $x4th Counter @ $143.5k
Does buyer expect more?
56Put on two slides with pattern on right sideThe Buyers SideDevelop a good rapport with the listing agent. We like to do business with agents that we have a good relationship with.
Dont be difficult to deal with.
57The Buyers SideGather information on the seller with the skill of a detectiveEncourage the buyer to make a strong offer (give the seller what's important to them)Strike while the iron is hotEncourage the buyer to NOT Major in the MinorsA letter to the seller?58The Appraisal Issue
Multiple offers may drive the price up for the seller but will it appraise.What happens if it doesnt?Seller counter special stipulation: Buyer agrees to pay any difference between the sales price and appraised value in cash at closing (Have a local attorney draft the language to conform to the laws in your state)5960 When You Should Avoid Negotiating1. When your client will lose everything.2. When youre Sold Out When youre running at capacity, Dont Deal.3. When the demands are Unethical, Illegal or Immoral. Its your Character, Reputation and License.
60614. When You Dont Have Time Youll make mistakes When under the gun, youll settle for less than you could otherwise get.5. When Youre Not Prepared. Youll think of all your best responses on your way home. Dont negotiate until youre ready.61Remember Every negotiation is different and each is a learning experience.The best negotiators are the ones with the most information.Knowledge is Power62Thanks For Having Me