Buyer’s Agents Need to Make Sure Their Thinking is In Order

Posted By on Dec 25, 2015 | 0 comments


I recently came across a post in the Lab Coat Agents Facebook group where an agent was decrying the fact that their buyer would allow a deal to die over $5,000. Someone else responded that it’s the seller’s fault that the deal died and that the buyer is fine because “there are plenty of home out there.” See here:

plenty-of-homes

This is an example of broken thinking. There are NOT plenty of homes out there. Not in late 2015 headed into 2016. It’s a seller’s market and it’s a “seller’s market” because there is low inventory. FEWER choices for buyers to pick from when shopping for a house.

Now it could be the case that the agent that said there are plenty of homes out there lives in a unique market where there really ARE plenty of homes. That is, their particular area is a pocket of difference from the national market as a whole where there is a greater than 6 month supply of homes on the market thus creating a buyer’s market in their local area. That could be true. What is more likely though is that they simply say that as a coping mechanism. That is, when working with a buyer they have deals fall apart over $5,000 and they tell themselves that it’s the seller’s loss and not their buyer’s loss because “there are plenty of homes out there” for their buyer to choose from. This thinking allows them to fight disappointment and continue on in their quest to get their buyer matched to a house so that they can get paid and not have all their previous work with that particular buyer turn to ruin and end in no commission check in the end. We all do that kind of thing in our own way. Nothing wrong with that. We all have our mental mantras we use to deal with adversity.

It’s important to point out, though, that in this case the thinking is broken.

In a seller’s market, deals dying really is more of a buyer’s problem than a seller’s problem. A home has a market value and that value rises over time in a seller’s market with low inventory. If one buyer dies on the vine at a particular offer price, it’s only a matter of time before another buyer will come along and buy. And maybe at a HIGHER price. Since time passed and time passing = higher price (generally) in a seller’s market.

This same level of benefit doesn’t transfer to the buyer’s side of the equation. Buyer’s don’t write offers on the “second best” house for them. Ever. They write on the house that they believe is the BEST. If the deal dies over $5,000 then whatever they choose next has a HIGH chance of NOT being the best house for them over the course of time that they live there.

What I mean is that the “second best house” that they end up getting because they killed a deal over $5,000 on the “first best house” – well that second-string house may be lacking things that would have been of value to those buyers over the period of decades they end up living there. You can’t put a dollar value in intrinsic things found in a home but it’s VERY possible that a buyer who kills a deal over $5,000 will end up in the “wrong” house for them. The result? They’ll lose $5,000 of Intrinsic VALUE every single year that they live in the “2nd Best House”. Simply because the 2nd Best House lacked something that “The Best House” had.

The point is that in a sellers’ market the BUYER has more to lose in the long run than the seller does. While it’s ALSO true that a buyer might actually find a BETTER house after killing the deal on the first house over the $5,000 disagreement…when there is an inventory shortage the possibility of that happy happening coming about is significantly DECREASED and the chances that they will match up to a house that will shortchange them for years to come is significantly INCREASED. This is a simple function of there being fewer choices available in a low inventory “seller’s market” while, on the flip side, someone shopping for a home in a buyer’s market – when there are many choices available – has a greater chance of finding a “better” house on the second go around. Though there’s never a guarantee of that…even in a buyer’s market.

Anyway, my point is that saying things like “there are plenty of houses” when there really isn’t is a thought pattern that can strengthen agent resolve in an adverse negotiation scenario…but it doesn’t help the buyer in the long run. Especially in a seller’s market.

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