Why understanding 'motivation' can land you a real estate bargain
A buyer who spots a new listing these days needs to focus now on how to appeal to the seller
It doesn't take a rocket scientist to know a buyer is searching for motivation and trying to guess if a home's selling price might be flexible, or if the seller may be hungry for a low offer.
Searching for motivation is always a factor for both a seller and a buyer. Let's examine motivation and how to play it out.
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First, let's position ourselves as a buyer in today's market. A buyer who spots a new listing these days needs to focus now on how to appeal to the seller.
Does a buyer reveal he is desperate to buy a home; show that he has a more than enough cash, has a preapproval letter exceeding the price he has offered; and say he will reduce the contingency period significantly after making an offer $100,000 above the listing price?
We now even see buyer offers written to state, "Escrow period can be the seller's choice, of 30 days to 6 months." An offer might give a seller a 30- to 45-day rent back for $1 total rent.
I've even received an offer (as the listing agent) that said, "Price to be $20,000 above seller's highest offer (limited to $200,000 above the asking price as an outside limit)."
Is this crazy? This is a buyer's motivation in full color and without any hesitancy.
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Now, what if a property has been on the market for 90 days, its listing price has been reduced three times, and the MLS and Zillow history shows the property has fallen out of escrow three times?
Do you think a buyer would jump at this listing the same way he would for a new listing in mint condition priced to attract multiple offers?
Of course not.
When a home is a new listing and a hot property, a seller is completely in the driver's seat.
Now let's look at a property with a not so favorable history. This scenario is entirely another story.
Perhaps there are several buyers who see a property but recognize it is way overpriced.
In the beginning, the seller may have appropriately said to their agent, "These people can't afford my property, so find me a buyer who can appreciate and pay for all of the amazing improvements I have made."
Sometime after 180 days, the house remains unsold, and the seller may come to realize the home is overpriced.
Now it is up to the seller whether to chase buyers with a price reduction; to lease the home out, rather than sell it; to remain on the market without a price reduction; or to remove the home from the market.
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In some cases, a seller may need to sell, eliminating several options that allow buyers the leverage they have been waiting for.
Some buyers look specifically for homes that have been on the market for a long period of time and whose seller they can eventually wear down to a very attractive selling price.
Such scenarios include the following: a seller who has purchased another home noncontingent on the sale of their home; a seller who has already moved out, leaving their home vacant; a seller in financial stress or default; a seller who has accepted an out-of-state job; a seller who has health issues forcing him or her to relocate; or a family selling the home of a parent who recently passed away.
These cases still exist.
There are far more cases of motivated buyers than distressed and desperate sellers, but both certainly exist.
My advice to a buyer is to offer your best and stop trying to get a bargain.
My advice to a seller is to price your home competitively and expose it to the market with the guidance of a good real estate agent who is professional, ethical, knowledgeable and prioritizes your best interest.
Be sure to discuss a variety of strategies before making a commitment to an agent or a price.
Ron Wynn has been among the top 100 agents in America for over 10 years, as noted on REAL Trends/Wall Street Journal. Wynn has represented over 2,200 sales totaling over $1.5 billion in sales volume in his 30-plus-year career as a real estate broker in California.