Buyers Just Want Price
You think?
From Bloomberg:
"Buyers just want price,” says Mike Morgan, a Stuart, Florida-based lawyer, real-estate broker and consultant who researches property markets for hedge funds and financial institutions. "Buyers have become educated and they can easily cut through the fluffy incentives.”
"On one $429,000 home a client wanted me to sell, the seller wanted to give the broker a $30,000 bonus on top of the commission. I told him it wouldn’t help. I told him to just drop the price.”
Then there was this advice about marketing strategy:
Morgan suggests you sell exclusively through Internet-based property sites and local Multiple Listing Services. He has found that newspaper ads, signs and open houses don’t work as well as the Internet.
"If you don’t get any calls on your listing price after a week, drop your price $10,000 or about 2 percent of your original asking price,” Morgan says.
"The market will tell you what the price of your home is. You better be priced 10 percent under your competition — and then be prepared to think about accepting offers under that.”
This isn’t news, or at least it shouldn’t be. It is an inconvenient truth many agents won’t speak. In the spirit of the current election season, I have this message for those agents who tell you that you need to siphon off what’s left of your equity to pay them more: "It’s the price, stupid."
If print advertising worked, 20,000 properties would be advertised in the local paper. But instead of being flush with real estate advertising dollars, newspapers are cutting back or shutting down because ad revenue has moved online. Incentives and bonuses to agents don’t work as well in the San Diego real estate market of today like they did in the 90s.
The reason - the Internet.
Once the real estate industry woke up and realized that the Internet was winning the war for the eyeballs of consumers, and yes, prospective home buyers, they allowed listings to be shared online. Buyers are often now the first to identify the properties they want to see, taking agents out of the role of gatekeeper of MLS information. The listing information made available online does not include the commission amount and any bonuses offered to the buyer’s agents, so these agent incentives rarely play a role in selling a property.
Offer any bonus to the buyer in the form of closing costs or an interest rate buy down and you will get the attention of those who matter - the buyer and the agent who has their buyer’s best interests at heart (that concept is called fiduciary, and it’s actually the law). If you really want to leverage a monetary incentive and trump the neighboring competition, offer to pay off any Mello-Roos on the property. It will save the buyer more money every month than a price reduction of the same amount, and it makes the property more salable for them when its their turn.
In this market if the buyer likes the property enough to write an offer, an ethical agent won’t get in the way because you are not offering them a bribe.
Comments
9 Responses to “Buyers Just Want Price”
Got something to say?
Feeds and Links
In addition to the price being aggressive we have noticed in the Atlanta market that the property also must be in move-in ready condition. Buyers are almost looking for new construction in resales. They want fresh paint, new carpet, updated kitchens and so on.
We have also found that the print media for advertising has fallen from favor. Sellers have to realize that working with an agent who can get them maximum exposure is in their best interest. Unfortunately many agents have a website just to be able to say they have a site. They are clueless with how to utilize it to their sellers advantage.
Well said! And to add to that, any smart agent would pass along those “agent incentives” to their buyer especially if it’s what it would take to make the deal happen. Greed gets you nowhere, playing it smart will not only help you get the deal, but probably a referral!
I would have to agree with you. Even if you lower the price less then market value the buyers are still coming in 30,000 less then asking price. They just want a deal.
Passing along the agent incentives to the buyer would be up to state licensing law wouldn’t it? In NJ we aren’t allowed to do any type of kick backs, gifts have limits, etc,… it’s pretty regulated here. How do they work it in your area?
I do agree with the statement in the original post though, that the incentives should be offered to the buyer as opposed to the agent.
I’m not suggesting that the agent incentives are given to the buyer by the agent. The strategy is that instead of offering to pay the agent more in incentives, the seller takes the same money and uses it to help the buyer with closing costs or interest rate buy downs. That is legal in every state.
I totally agree! A year ago maybe the bonus would’ve helped get the property shown by other agents, but these days all buyers care about is their price.
Greed is what got our economy into the perdicament it is currently in!
“South Jersey” asked about “kickbacks”. In Florida an agent can “give back” money back to the buyer at closing — dollar amount or percentage. For instance if the buyers agent was to receive 5% co-broke, he or she could give back 2% to the buyer as an incentive to help close the deal. Every time I’ve done it, it was applied toward the buyers closing costs so that it wouldn’t affect the sale amount and appraisal values of other homes.
A kickback refers to settlement services and mortgages. Meaning you can not refer your buyer to a mortgage company or title company, and receive a referral fee from that company for doing so.
In addition to price, incentives seem to matter to buyers. Getting a buyer to buy is a challenge in this market. I find that making the deal make sense to a buyer is what it takes. IF a buyer finds a property they want to purchase, closing is where it requires a professional to get the deal dun. Buyers need to feel safe about their purchase and find value in the deal. Interest rates only go so far to the overall affordability of the property. HOA fees and property taxes are often deal breakers that put the monthly carrying cost out of reach. Offering to pay HOA fees for the first year or paying off mello-roos can make the difference in getting the buyer to close the deal. It can often make a bigger difference than a drastic price reduction.
Yeah broker commissions were really during the first part of this correction (slowdown, recession… whatever it is this week) but after all the real estate agents and their families bought new homes the value of co-broke incentives dropped.
Buyers do like incentives though and as you mentioned they like them to pay for closing costs, a down payment of an interest rate buy down. At the end of the day - it’s all about final price and these incentives affect the final price
I agree 100% with Bob. If the listing agent really wants to get the home sold and has a clue of what is going on. They would have what ever money the seller is willing to give up go to closing costs or at least lower the price. Price is what sells the home in any market!
Of course agents like the incentives, but if they are working in their clients best interest they will help them find the best home for their needs, not a bigger commission.