Luxury real estate is a delicate balance of give and take, as both buyers and sellers strive for the best possible outcome. But sometimes market conditions strongly favor one side over the other, forcing accommodations that weren’t necessary before.
Right now we’re in a seller’s market and buyers are having to make more sacrifices. I’ve seen some buyers borrowing against investment accounts to make a competitive offer, then repaying those accounts and financing after the fact. I’ve seen first-time homebuyers turning to parents for help with a down payment or a cash offer. Everywhere you look, you see calculated compromises that wouldn’t have been considered two years ago.
So which of these compromises are acceptable in an unprecedented seller’s market, and which ones are unreasonable no matter what? Here are my top three deal breakers for both buyers and sellers.
Compromises your buyers should never make
Pacific Sotheby’s International Realty
- Don’t compromise on location. If there is an amazing home in an average location, and an average home in an amazing location, buyers should always choose the latter. Floors, windows, and paint can be replaced, but a lack of privacy or a noisy freeway cannot. Your clients should never be buying homes that they will lose money on; if they sell again in five years, it should be worth more than what they paid.
- Don’t forgo the investigation process. While clients could be comfortable waiving contingencies and appraisal, agents should not allow them to skip due process. The investigation may uncover health and safety issues, which are the ultimate deal breaker. If there are problems that could impact your clients’ wellbeing or the long-term value of the home, the seller needs to be held accountable to address them—and if they’re unwilling to remediate, draw the line and consider other options.
Compromises your sellers should never make
Pacific Sotheby’s International Realty
- Don’t over-price the home. Because of the seller’s market, many homeowners want to list at astronomical prices, but we need to advise them against that. An appropriately-priced property should sell within a week—but if it’s priced incorrectly, the listing will sit on the market and buyers may become wary of it. Help your sellers understand that if they list their $3 million dollar home at full price, they might end up settling for $2.8. But if they list at $2.7, the bidding process should ensure they receive the right amount, if not more.
- Don’t entertain surprise renegotiations. If a buyer makes an unwarranted play to renegotiate the price after the contract has been accepted, it may be better to walk away. Sometimes they suffer buyer’s remorse and worry that they overpaid; they then seek compensation in the form of a reduced price, or unrealistic repair or renovation requests. If that happens, consider restarting the process with a new buyer, because there are plenty to choose from.
- Don’t accept unnecessary discomfort. Sellers hold the balance of power in this market, so there’s no need for them to accept a compromise that will leave them in a precarious or uncomfortable position. Understand their needs, and use those to determine which offers they should and should not consider. You may meet a buyer who wants to bid high and move fast, forcing your client into a temporary housing situation. Are they amenable to that, or would they prefer a lower offer with more time and flexibility?
Have a conversation about your clients’ priorities
On that note, it’s so critical to communicate with clients and agents on both sides of the negotiating table. It’s natural to assume that price or cash payments are the top considerations for everyone, but that’s not necessarily the case. Engage with your stakeholders, and encourage them to tell you as much as possible about their hopes and goals so that you have complete context.
The primary focus is your client’s financial future
When considering compromises, agents have to be sure the deal is the right financial decision for the client and their family, as well as the right lifestyle decision. If those factors aren’t aligned, it’s time to help them reconsider their options.
Luxury real estate is never a one-and-done transaction—it’s an enduring relationship. We have the privilege of helping clients create the futures they’ve envisioned for themselves and their families, and to be trusted advisors in both the short and long term. That has always been the most rewarding part of my work—and in a competitive market, it’s more essential than ever.
This article was written by Sean Caddell from Inman News and was legally licensed through the Industry Dive publisher network. Please direct all licensing questions to firstname.lastname@example.org.