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
Seeds of a housing shortage • Inventory of existing homes at its lowest level in seven years. • New construction at a 50 year low mark • Distressed 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 better Lawrence Yun, NAR Chief Economist
October Existing-Home Sales Cool but Low Inventory Drives Prices WASHINGTON (December 2, 2013) – Existing-home sales declined for the second consecutive month in October Total 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.”
The Inventory Shortage MythRealty Trac June 2013 • Consider 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?”
So 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 government’s numbers then there’s a glut of vacant houses. The truth is somewhere in the middle
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 can’t 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.
Paradoxically, home sales and prices are up, but home ownership is down because it’s 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.
Multiple Offers The most frustrating situation faced by REALTORS® Potential for misunderstanding What is fair? What is honest? What is to be done? Who decides? There is never a simple answer to complex situations
Generations Why look at generational commonalities and differences? • Gain insight into what is important • Learn best ways to communicate and market • Learn motivations, lifestyles, hopes, and fears • Provide frame of reference and perspective
The Generations Seniors | GI Generation 1900-1925 Gen X 1965 - 1980 Seniors | Silent Generation 1925-1945 Gen Y 1980 - 2000 Gen Z Millennials 2000 - Present Baby Boomers 1945 - 1965
5 GI - Silent Generation • Address by Mr./Mrs. • Respects process, procedure, laws, specialists, designations; experience, stability • Verify preferred method of communication • Appreciates personal touches • Very loyal • May have more time • Usually have equity • Sale requires patience
3 Boomer Generation • May not appreciate your value • Include Resumes, Designations & Experienc • High Maintenance – Constant Attention • Probably uses email • Time is precious • Limited Loyalty • Income Rich, cash poor
Gen X Generation • Expect technology savvy professionals, online presence with rich content and easy to use • Expect a packaged transaction with high-caliber skills and advocacy • Email and texting preferred • Use smart phones w/ mobile apps, QR codes • Will be loyal if they choose you • High Expectations • E-Transaction
4 Gen Y Generation • GenY are very comfortable in a virtual environment and global community • Purchase will not be restricted by domestic boundaries; crossing a threshold may not be necessary to make a decision; property portals will include all decision points • Will be an involved partner • E-Transaction (search to close) will be the new normal
Generation Z Millennials • 21.4% of population • 66.5 million • Age in 2013: 13 and under • Technology adept, connected, introverted, short attention span, individualistic, impatient, communication in online communities
Cultural Generalizations, Stereotypes Generalizations allow revision of opinions and responses Stereotypes interfere with treating people as individuals Cultural learning can work both ways Adapt your outlook and behavior You don’t have to change who you are or your culture
Cross-Cultural Business Skills How can you: Be sure your behavior is appropriate? Project a positive attitude? Adjust to the need for high or low context interactions?
Do’s and Don’ts Save face Talk less, listen more Relationships first Formal, slow pace Punctuality Contract—end or beginning?
Do’s and Don’ts Respect for hierarchy Family matters are private Practice with interpreters Double check software translations Observe nonverbal signals Common sense
Non Verbal Red Flags Re-adjusting distance Averting eye contact Scowling, frowning Inappropriate laughter Covering the face Silence, no questions Displaying impatience
Behaviors to Avoid • Hands in pockets or on hips • Intense, prolonged eye contact • Crossing legs • Showing the soles of feet or shoes • Pointing or touching with the foot • Fleeing or invading personal space • Initiating any physical contact • Showing impatience • Pointing or beckoning with the fingers • Hand gestures
Negotiations and Decision Making Win-win or win-lose? Consensus, committee, or hierarchy? Accept and adapt to the client’s practices Follow up in writing
Gender Issues Cultures that strictly separate sexes may have difficulty adjusting Be deferential to women even if their own culture is less so Include the spouse or other colleagues in invitations to male clients or colleagues
Religious Traditions Fundamental to cultural identity, norms, traditions Learn about others’ beliefs and traditions You don’t have to change your own beliefs and traditions
Active Listening Facilitates cross-cultural communication Paraphrase Ask open-ended questions Invite listeners to explain understanding The conversation IS the message
What type negotiator is the other agent? • Soft • Hard • Principled
SOFT • Participants are friends • The goal is agreement • Make concessions to cultivate the relationship • Be soft on the people and the problem • Trust others • Change your position easily
SOFT CONTINUED • Make offers • Disclose your bottom line • Accept one-sided losses to reach agreement • Search for the single answer: the one they will accept • Insist on agreement • Try to avoid a contest of will • Yield to pressure
HARD • Participants are adversaries • The goal is victory • Demand concessions as a condition of the relationship • Be hard on the problem and the people • Distrust others • Dig in to their position
HARD CONTINUED • Make threats • Mislead as to bottom line • Demand one-sided gains as the price of agreement • Search for the single answer: the one you will accept • Insist on their position • Try to win a contest of will • Apply pressure
KNOW THE RULES 1. 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.
3. 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
6. Beware of Knowing “Too Much’ Showing 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” Questions It may get them to open up and reveal their true motivations.
9. Be Flexible Negotiation is a “give and take” process. Must gets Intend to gets Nice to gets 10. Question authority Sometimes the authority is only voicing an opinion. Find an alternate authority. 11. “Listen” You’ll discover what they really want.
12. Search for Options. Seldom is there only one right answer. Know when you’re deadlocked on a particular issue. “ Lets put that aside for now” and continue on. 13. Challenge the Written Word. Just because its in writing doesn’t mean it’s true. 14. Defend and Value Concessions. Negotiations are give and take. Never concede anything without asking for something in return.
15. Be Informed “Knowledge is Power” 1. Do your Homework. 2. How 16. Try To Obtain An Offer That Can Be Closed. Do the possible first. Leave the impossible to later. Remember some deals can’t be made no matter what. Worse that not making a deal is making one in which you loose.
17. Empathize With The Other Party. Understand what they want and why they want it. You don’t have to agree with their position. Just understand it. 18. Get the other party to invest TIME The more time invested, the more to lose if it doesn’t go through. 19. Set a Deadline No deal ever closes without a deadline.
Remember. 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.
Multiple Offers • Tilts the negotiating scales in favor of the seller? • Always ask if there are multiple offers • Always ask who has the other offer • Know your BATNA
Does the Listing Agent Have to Tell? • Standard of Practice 1-15 • REALTORS, 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. Multiple Offers : No
Standard of Practice 3-4 • REALTORS®, 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 broker’s 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: Yes
The Seller’s side The risks to seller and the seller’s agent: • Unhappy buyers • Multiple offer don’t always result in a higher price. Some or all of the buyers could elect to walk away • “Highest and best” may result in a better offer or result in no offers • Seller inadvertently obligates to more that one contract
To avoid being blamed for the seller’s good fortune turning into misfortune. The key decisions on how to handle multiple offers should be made by the seller
$1000.00 more than the next highest Offers that are $1000.00 more than the next highest up to a certain amount. Good idea or not? • Buyer may pay less than willing • Buyer may pay more that intended • Two Buyers make the same offer • Dishonest seller