Closing the Deal: The Grand Finale Versus the Premature Exit
Jotham Sederstrom Aug. 22, 2012, 7:15 a.m.
What’s the bottom line? Where can a deal be made? What takes it? What price can I get if I close quickly? Is there room in the asking price? How low will the seller go?
Buyers of real estate will always ask their broker how they can jockey themselves into the best position to get the best deal for the real estate they are considering buying.
Those with strong cash positions will tout their ability to close without lender financing. Those in need of financing will boast that they can pay a higher price for more time to close. Those with surety of funds to close will insist they can close as soon as the ink on the contract dries, for a price reduction.
How a broker answers these questions is more critical for the seller than how the selected purchaser proceeds. The broker’s response can set the stage for an award-winning performance with the highest possible price, the smoothest negotiations and a memorable grand finale. Or the results could be worse than a dropped curtain in mid-scene.
The typical question every buyer will ask is; “What makes the deal?”
Stop by any broker’s desk and every call with a buyer will always include this inquiry. I once overheard a zealous junior agent tell a buyer he was speaking to what he thought the seller would take. His answer was approximately 15 percent below the listed asking price. The buyer then submitted an offer of 25 percent below what the broker told him. The young, enthusiastic agent almost tripped over his own feet, squealing with delight over his accomplishment of getting an offer from a well-heeled buyer as he ran over to the listing broker to present his work of art.
Unfortunately for him, the listing broker, a seasoned and well-respected professional, had already received several credible offers as high as 15 percent over the asking price! The young gun, whose heart started palpitating from deflated joy, stood motionless, paralyzed from the shock. The senior broker explained to him that his first mistake was how he answered the question of what makes the deal.
She managed to convince him to put aside his disappointment and accept this moment as a valuable lesson. Coaxing him into a chair, she told him how to make the buyer’s question work for him, not against him. He had put himself and the seller at a disadvantage by reducing a price without ever receiving an offer. He was negotiating against himself and was destined to lose positioning. The buyer, who was sophisticated and shrewd, used this as his starting point, rather than the original asking price. The broker reminded the agent that if a property is priced properly by the seller and his advising broker, there is no reason to assume it is an inflated starting point that automatically gets reduced. If the junior agent had actually understood the value of the deal and how to best position it so that he could get the most value for the seller, he would have advocated more strongly on the seller’s behalf
The junior agent needed to overcome his preconceived notion that all properties are priced over what the seller will accept. He also needed to understand how to present the deal in the most positive light.
Had the agent collaborated more closely with the listing broker, he may have had one of the offers that was over the asking price, not way below.
Whenever a broker answers the question with a number lower than the asking price, the seller’s position is immediately compromised.
As with all rules, there are always exceptions. There are sellers who insist on a full-blown boxing match with any buyer. Some sellers enjoy the tussle of hard-and-fast, blow-by-blow negotiations. A great broker will always position the seller’s needs first. If the seller enjoys the art of sparring and tells the broker to start higher but to encourage offers by whispering that he will come down if the offer has certain crucial elements that are important to him, then it becomes a strategy.
Deal components, such as a fast close, no contingencies or conditions, no due diligence period or a large and hard deposit, all become trading pieces. A savvy broker will combine those that are most important for the seller and work in tandem with potential purchasers to create the highest and best of each element.
So the next time a purchaser asks you what makes the deal, turn the tables and get his offer first.
Adelaide Polsinelli is a veteran real estate professional with more than 25 years of real estate brokerage experience. She is senior director at Eastern Consolidated, an investment sales firm in New York.