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Are You Inside The Tent

Many people misunderstand what it is a real estate agent does. Most people would say agents sell real estate. Unless they happens to be the Vendor, agents are not selling real estate for a living.  If that was the case, that would make the person a real estate trader.

Real estate agents market and negotiate the sale of other people’s properties; the only commodities they sell are their marketing and negotiating skills and services.

Whilst this is a pedantic distinction it is important as the use of language often requires exacting use of words.  This however is not the subject at hand, which is to discuss if as a real estate buyer, you understand if you are inside or outside the tent!

One of the most difficult things to achieve when negotiating a sale is to encourage people to step across the threshold and make a meaningful offer on a property. It is easy enough to solicit a low bid. This however would be of no interest to a vendor and does not help to move two parties close to the point where they can make a deal.

There are several techniques which, can be employed to elicit a meaningful first offer.

The most common method is to sell the property by Public Auction. Public Auctions are about setting deadlines by which time buyers and vendors need to make firm decisions. For this method to work, it is imperative that the auction process is allowed to run its full course.  There is a tendency in the industry to encourage offers prior to auction day.  This diminishes the transparency of a “Public Auction” and prevents all potential purchasers having the same opportunity to meet the advertised deadline.

Sometimes Public Auctions do not achieve the desired result. Properties which, do not sell at auction need to go to the next level of marketing. Whilst on Sydney’s Northern Beaches auctions represent a sizable proportion of property sales, there remains a significant number of properties which are sold by Private Treaty.

There is a clue as to the negotiation process in the name of each method of sale.  Public Auction is a relatively public, open and transparent process. Private Treaty, demands a level of private negotiation techniques.

The problem when negotiating by Private Treaty becomes how to elicit a meaningful first offer.  Many buyers, particularly in a down market will sit and wait, or open with unacceptable low offers.

We need to consider if potential buyers are inside or outside the tent. The tent is the place in which negotiations occur. You are only inside the tent if you are participating in meaningful negotiations. i.e. you have made an offer and are actively pursuing the property within the vendors price guide. If you are sitting and waiting to see what happens you are outside the tent.  You are not privy to what is actually happening in the negotiation process.

Many potential buyers ask to be kept informed in the event there are any offers made; these people are sitting outside the tent.

A buyer outside the tent should never be advised of other people’s Private Treaty offers.

Other active participants who have made a private offer, deserve the right to their privacy. Remember it is called a Private Treaty sale.  Only once you have stepped inside the tent do you earn any right of knowing other peoples offers. Once inside the tent, your privacy is protected from those sitting outside. Only those already inside the tent or those who may subsequently come inside are privileged to know what other people have offered.

The counter argument is to ask, “why wouldn’t an agent shop around an offer to other interested parties in order to see what else could be achieved”. By promising everyone full disclosure, means no one will be encouraged to make a first offer. Everyone will sit and wait for someone else to make a first offer. Just like Penguins sitting on an iceberg surrounded by Orcas.  Every Penguin waits for another to jump in to see just how hungry are the Orcas.

Secondly, touting offers does not respect the privacy of the person who makes the first offer in good faith. That act needs to be respected. Finally, if other people are to subsequent make offers off the back of some else’s effort, chances are they will only make marginally better offers, resulting in a tenuous quasi auction process.

Everyone needs to consider what the property is worth to them and make their first offer based on their own judgement.

Shane Spence is the principal of Shane Spence Real Estate at Fairlight since 1997 and services Balgowlah and the local Northern Beaches area. Shane can be contacted on 0412 226 722 or shane@shanespencerealestate.com.au For more details go to http://www.shanespencerealestate.com.au

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