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There’s No Crying in Real Estate

Many of you who have read my weekly articles have expressed your appreciation that I write with such honesty and told me how much you enjoy reading them. I do like writing them, but this week’s article has been something I’ve avoided writing about. My concern is this subject will scare some of my readers, and potential clients, into feeling like they need to wait until the real estate market calms down a little. As I pondered this subject matter this week, I decided it does need to be discussed so my readers will understand that now, more than ever, it’s absolutely critical to work with an experienced REALTORĀ® who can help you navigate today’s frustrating real estate market.

Most of you probably know we are in a very strong seller’s market. Not every home is selling in the first 48 hours, but the very best ones are. Although this is great for sellers, it wreaks havoc on the buyers and for the real estate agents on my team. Let me tell you what typically happens when we begin to work with a first time home buyer in this fast-moving real estate market of 2020 and I’ll use Robert and Teresa as an example (names have been changed).

Robert and Teresa are first time home buyers. They came to us as a referral from one of our past clients that told them, “You have to call Ron. His team is awesome and they’ll take great care of you.” I paired them up with one of the experienced agents on my team and we set up an appointment to come into the office to discuss the home buying experience and answer all their questions.

During this meeting, my agent explains to them that we are currently in a very strong seller’s market and that the very best, most updated homes will typically sell in the first 24-48 hours. They’ll need to be ready to make a very quick decision if they like the home because there will likely be five to ten other people writing offers as well. In this market, the seller’s asking price is only a suggestion and many buyers will write offers that are $5,000 to $15,000 over the seller’s asking price.

Having this discussion up-front is critical because we need the buyers to understand what they’re up against, but to be honest, many times this information does not truly sink in the first time they hear it. I think it’s hard for them to imagine how this can happen, but to make matters worse, their parents are always pretty skeptical and I do occasionally get a phone call from a concerned parent.

Once Robert and Teresa are pre-approved with a qualified lender, we take them out looking at a handful of homes that fit their criteria. I say “handful” because it’s typically only about three or four homes that are currently available. I still remember ten years ago when we were in a very strong buyer’s market and they had 30 homes to choose from, but those days are long gone now. It’s actually pretty rare they find a home they like the first time out, so at that point, we set them up on an automated email alert for any new homes coming on the market.

My agent warns them, “You need to constantly check your emails and when a new home shows up in your inbox, you need to call me immediately. This is critical because if you wait until tomorrow, that house may be gone!”

One day goes by and no new homes pop up, then two days, then three days, then finally on the fourth day, a great home comes online. It’s everything they wanted in their first home and seems to be priced well at $200,000. They call their agent and schedule a time to show the home at 5:00 right after they get off work. When they show up to see the house, they’re shocked to see several other cars parked up and down the street in front of the home. There are several buyers and their agents, nervously waiting to get inside and see their “dream home.”

Once inside the house, Robert and Teresa love everything about this home. The kitchen is beautiful, there are many new updates, the backyard is fenced and huge. This is definitely “the one!” Their agent is so happy for them as they skip dinner to drive back to the office and write up a contract. Their agent calls the seller’s agent and leaves a voicemail to ask if they have other offers. They begin to write up the offer and discuss what price they should offer. Because this is Robert and Teresa’s first home, they don’t want to overpay so they want to write the offer at the seller’s asking price of $200,000 and hope for the best.

As they are halfway through signing the offer, the phone rings and it’s the seller’s agent. It’s now 6:30 and the home has been on the market for nine and a half hours. The seller’s agent explains that they’ve had a lot of interest and already have three very good offers from other buyers. After hearing this, Robert and Teresa decide to raise their offer price by $5,000 to $205,000. My agent is hesitant to tell them it probably won’t be high enough, but also understands Robert’s hesitancy to go any higher, so she writes the new price into the offer and they sign it. The next morning, my agent has to call Robert and Teresa to give them the bad news that the sellers received eight offers and have chosen another offer.

It takes a while for Teresa to recover from that loss and disappointment, but two days later another home comes on the market. This one is even better than the last one, but it’s also $10,000 higher. My agent knows they can easily afford to go a little higher in price, so she shows them this house and again, they love it. Again, they write up an offer, but this time Teresa really wants this house, so they write a better offer that’s $8,000 over the seller’s asking price and since it’s a newer home that’s only 15 years old, they decide to write into the offer that they will take it in “as is” condition and not ask for repairs to be made. Unfortunately, this home receives twelve offers and the winner was an all-cash buyer.

Well, as they say, third time’s a charm so a few days later another home comes on the market. This home isn’t quite as nice as the first two, but now Robert and Teresa are getting frustrated. They want to buy a nice home. This one doesn’t have everything they wanted, but it’s nice and they say it will work for them. Again, they write an offer, but this time their agent suggests they write an “escalation clause” into the contract. This escalation clause states that they are willing to pay $1,000 over the next best offer up to a limit of $15,000 over the seller’s asking price. My agent explains to them that they need to be prepared to pay $15,000 over if someone else offers $14,000 over and if that happens, the seller’s agent will be required to show them the signed competing offer to prove it. They are nervous, but they understand and agree to do it. Luckily, later that evening, the seller’s agent calls to say they won and the house is theirs for $13,000 over the seller’s asking price. The buyers are still nervous, but very happy!

This is a common scenario that plays out every week in this Kansas City real estate market. It’s not easy on the seller’s agent either because when a great home goes live, the seller’s agent has to take hundreds of phone calls, text messages, and can’t get anything else done that entire day because of all the other agents calling them. Then at the end, they have to call nine other agents back and give them the bad news. I’ve actually had several buyer’s agents start crying to me on the phone. “I can’t believe this! I have to call my buyers back and tell them they’ve lost another home. This is the fifth home they’ve written an offer on and I’m afraid they’re going to just give up.”

Keep in mind, that agent doesn’t get paid for all her time and expenses unless her buyers close on a home. Countless hours spent meeting with the clients, showing homes, writing up five offers, and getting the buyers’ signatures. It’s enough to drive many real estate agents out of this business, and quite honestly, many of them do quit because they can’t take the rejection and frustration.

My team has a better-than-average track record of success in winning multiple offer situations because we know all the tricks and ways to make it happen for our buyers, but it’s still pretty challenging sometimes. If you know someone who’s thinking about buying a home in this market, please make sure they call me. We can definitely help them find a great home.

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