Are You Inside The Tent
Many people misunderstand what it is a real estate agent does. Most people would say we sell real estate. Unless the property I am selling happens to be my own I am not selling real estate for a living; which, if that is what I did for a living, would make me a real estate trader, not a real estate agent.
As a real estate agent I market and negotiate the sale of other people’s real estate; the only commodities I have to sell are my skills and services.
This is a pedantic distinction but our use of language often requires exacting use of words in order to achieve a given objective. But I digress from 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 take the first step to making a meaningful offer on a property. It is easy enough to solicit a low bid, which is of no interest to the vendor and which does neither party any good and diminishes the process when the two parties cannot come to an agreement around price.
There are several techniques an agent can employ to elicit a meaningful first offer from which to build to achieving a sale.
The most common method is to sell the property by Public Auction, which is all about setting deadlines by which time buyers need to make a commitment. I am of the opinion that it is imperative that the auction process is allowed to run its full course, that offers are not enticed before the auction day and that all potential purchasers are given the same opportunity to meet the advertised deadline. To elicit or take offers prior to auction day transforms the sale to a Private Treaty process, which requires a different understanding or how the process operates.
Sometimes, the Public Auction process either does not achieve the desired result (clearance rates in Sydney are currently in the order of 70 – 80%, meaning that between 20 and 30% of properties put to auction, need to go to the next level of marketing before a result is achieved) or the process is never adopted. Whilst on Sydney’s Northern Beaches auctions represent a sizable proportion of property sales, there remains a significant number of properties which are never tested at auction; they are sold by Private Treaty.
There is a clue as to the negotiation process in the name of each method of sale. Public Auction, which is by its name a relative public, open and transparent process. Private Treaty, which as its name suggests demands a private negotiation technique.
The problem when negotiating by Private Treaty becomes how to elicit a meaningful first offer, when no time deadline is in place; buyers have no incentive to be the first to make a bid.
The technique I use is 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 our price guide. If you are sitting, watching and waiting to see what happens or making low unsubstantial offers you are outside the tent and are not privy to what is actually happening in the negotiation process.
Many potential buyers ask me to keep them informed in the event there are any offers made; they are sitting outside the tent.
My answer to their request is an emphatic no; I will not advise you of other people’s Private Treaty offers if you are not an active participant in the process; I will not keep you abreast of any new developments. Other active participants who have made have made me a private offer, deserve the right to their privacy having stepped inside the tent. Only once you have also stepped across the threshold and have placed yourself inside the tent do you earn any right of knowledge as to what other people inside the tent are doing. Once inside the tent, your privacy is also protected from those sitting on the outside; only those people already inside the tent or those who may subsequently come along are privileged to know what other people including yourself have offered.
As a consequence, there is value in being inside the tent. You may be the only one there. You may give yourself an advantage over those waiting. At the very least you will know what is going on.
The counter argument is to ask, “why wouldn’t I just shop around someone else’s offer to other interested parties in order to see what else could be achieved”. To begin with, by promising everyone full disclosure of other people’s offers, means I have no leverage by which to encourage a first offer from anyone. Everyone will sit and wait for someone else to make a first offer. Secondly, it does not respect the privacy of the person who makes the first offer. Finally, if other people are to subsequent make offers off the back of some else’s effort, they will only make a marginally better offer, 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 firstname.lastname@example.org. For more details go to https://www.shanespencerealestate.com.au