Sellers' Are Losing Their Negotiating Position
Perhaps without realizing it, sellers in today's market are finding themselves in a weaker and weaker negotiating position against today's more aggressive real estate buyers.
Many sellers, especially those who purchased at the top of the real estate market in 2004-2005, have asking prices which they believe will allow them to part with their property with a small profit or at least break-even. The problem is that today's buyers really don't care if the seller breaks even or not.
Here's an example of what's going on in the marketplace ...
Let's take a property that has been on the market for six months -- not an unheard of time in today's real estate market. Finally, an offer comes along from a bona fide buyer, but it is 20 to 30 percent below the asking price. The seller counters the offer at a price more to his liking. If a property has been on the market for a long period of time, buyers assume that there are no other buyers making offers on the property. With no competition, buyers have no incentive to raise their offer to offset an offer from another buyer. So, buyers often simply reject the counter-offer and demand that the seller accept their original price and terms. If the seller refuses, the buyer often moves along. There is so much property available that buyers simply move to the next property in a long list of possible properties to buy. The seller is left with his house still on the market and the carrying costs of ownership.
Sellers have very little leverage in these negotiations because buyers have so many property-buying choices and such little competition from other buyers. When months pass and there appears to be only one buyer willing to make an offer, only a naive seller would think he has the strength to be an aggressive negotiator and demand his price and terms. If it took six months to generate the first offer, it may be another six months before a second offer comes along. That means six more months of carrying costs on the property!
When there is only one offer instead of multiple offers coming in, sellers have no negotiating strength. They can reject the buyer's offer, but they do so at their peril. It may be a long time before they see another offer in a market like we have today.
Some advice? Sellers should take every offer seriously and treat it like it is the only offer they are likely ever going to get.
For more information on today's real estate market in the Tampa Bay area, visit my website at http://www.thestpeterealestatesite.com/.
Many sellers, especially those who purchased at the top of the real estate market in 2004-2005, have asking prices which they believe will allow them to part with their property with a small profit or at least break-even. The problem is that today's buyers really don't care if the seller breaks even or not.
Here's an example of what's going on in the marketplace ...
Let's take a property that has been on the market for six months -- not an unheard of time in today's real estate market. Finally, an offer comes along from a bona fide buyer, but it is 20 to 30 percent below the asking price. The seller counters the offer at a price more to his liking. If a property has been on the market for a long period of time, buyers assume that there are no other buyers making offers on the property. With no competition, buyers have no incentive to raise their offer to offset an offer from another buyer. So, buyers often simply reject the counter-offer and demand that the seller accept their original price and terms. If the seller refuses, the buyer often moves along. There is so much property available that buyers simply move to the next property in a long list of possible properties to buy. The seller is left with his house still on the market and the carrying costs of ownership.
Sellers have very little leverage in these negotiations because buyers have so many property-buying choices and such little competition from other buyers. When months pass and there appears to be only one buyer willing to make an offer, only a naive seller would think he has the strength to be an aggressive negotiator and demand his price and terms. If it took six months to generate the first offer, it may be another six months before a second offer comes along. That means six more months of carrying costs on the property!
When there is only one offer instead of multiple offers coming in, sellers have no negotiating strength. They can reject the buyer's offer, but they do so at their peril. It may be a long time before they see another offer in a market like we have today.
Some advice? Sellers should take every offer seriously and treat it like it is the only offer they are likely ever going to get.
For more information on today's real estate market in the Tampa Bay area, visit my website at http://www.thestpeterealestatesite.com/.
-30-
posted by Terry Ward at 12:14 PM
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