I’ve seen many negotiating mistakes over the past few decades, but the worst negotiating mistakes actually killed deals entirely. If you’re a buyer, how you negotiate is critical to reaching mutual acceptance, but if you have a seller who does not know how to negotiate in this market, you may have to walk away.
Negotiating Mistakes Kill Deals
Negotiating mistakes come in all sizes and shapes, but often the seller has an inflated opinion of the value of their home. That plays out like this. A seller will ask their listing agent to do an evaluation of their home, which includes a CMA, or a comparative market analysis. Many sellers have strong personalities that overpower the listing agent’s personality. That can result in their agent going along with an inflated listing price. But it’s very subtle. In other words, neither the seller nor the agent are intentionally over pricing the home. In an area like Sequim, many of the custom homes do not have comps that can establish the fair market value, and a seller always wants as much as they can get, so they price it higher rather than lower. They don’t want to leave any money on the table, and that is understandable, but listing substantially over the market is a set up for failure.
First, the seller convinces themselves (with the enabling help of their listing agent) that the house is worth more than it really is. So when a buyer comes along and makes a realistic offer much closer to true fair market value, the seller will feel insulted or tell their listing agent they will not accept a “low ball offer,” even though it really is not a low ball offer.
Many sellers rely heavily on their real estate agents for advice, so the fault in many failed transactions for big negotiating mistakes often falls in the lap of listing agents. In all fairness to listing agents, sellers sometimes insist on a high listing price, and while an agent can refuse to accept an overpriced listing, they know the seller will just list with another agent if they don’t list it. When that happens, the seller eventually reduces his listing price and the property sells. If the first agent didn’t list it, he misses out entirely on a commission. In the real estate business, we see this play out all the time.
Recently I represented a buyer on a home that was overpriced. My client’s offer was eminently reasonable and very much in line with true fair market value based on multiple data points and comparables. The home had been on the market a long time, an indication that other buyers felt it was overpriced, too.
The sellers came back with a counteroffer that was so far from reality, my buyers simply walked. My buyers said, “These sellers are not realistic, and they are way overpriced. There’s no sense trying to reach an agreement.” I was able to find them another home that they love and bought for cash. The sellers probably have no idea that they made serious negotiating mistakes that killed their sale.
Negotiating Mistakes by Listing Agents
The listing agent shared the problem and the source of these negotiating mistakes, and this is very revealing. The listing agent informed me that she had comps that would prove the value of the home, and that the listing price was fair and the house worth what they said it was worth. I do not doubt the agent’s sincerity, but here’s what may not be obvious. The listing agent was terribly wrong, and her advice to her client killed the sale. The sellers may have been stubborn, but they were also relying on their listing agent’s advice, or at least that appears to be the case. Unfortunately, it takes time for the sellers and the listing agent to realize their error of their ways, and that could be one or two years down the road. What a waste! Imagine all the stress, frustration, and lost time for the sellers. For some sellers, the only way they will learn is to go through that whole process for how ever long it takes.
By the way, that house is still listed for sale, and it’s still overpriced. The seller lost a great buyer and their negotiating mistakes lost a sale. Too bad. How long will the house sit on the market now? Possibly a long time, until the seller reaches their threshold of pain and reduces the price. In the end, they will be fortunate to get an offer like the one they once had on their dining room table. Alas, negotiating mistakes can chase buyers away.
Possibly Related Posts:
- Why Negotiating is Not for Amateurs
- From Offer to Mutual Acceptance
- The Danger of Unmanaged Emotions in Negotiating
- In Real Estate Knowledge is Power
- What Makes Negotiating Hard?