Technology TransactionsActing In The Buyer"s Best Interests
In your first conversations with buyers, ask them: How much are you comfortable spending? As they pause before they answer, you promise them you will never bump them up in price, never show them properties listed for more than the price they give you, and never even send them information on properties listed for sale at a price higher than the number they are about to provide.
In exchange, they promise never to “enter” a property priced for more than that amount. Visiting a property would include, of course, looking at the specific characteristics or virtual tours for homes on the Internet, as well as touring a property for sale without a broker involved (a for-sale-by-owner).
That’s the Two-part Promise. It makes sense for you and for your buyers.
You know instinctively some of the reasons the Two-Part Promise works. It"s a better way to sell.
Put their best interests first
As an industry, buyers don’t trust us. Agents push buyers up in price in order to sell them a more expensive home so the agents make more money.
This should be an obsolete practice, because it presumes making as much money as possible on each sale is smart. In most markets for most agents, the few extra dollars they earn from moving a buyer to the upper edge of his or her price range are reduced to pocket change compared to the amount of money these agents could earn when they serve a buyer well enough to earn three to four personal referrals from that buyer.
Earning another settlement or two from personal referrals is wise. Selling a house for a few dollars more is not. Differentiate yourself from other agents: do it differently, do it better.
Urge them to spend a comfortable amount of money rather than to stretch.
A buyer decides to make an offer on a property when they think it’s a good value. We teach them the market. The sooner they limit their search for the right house to a group of similar properties, the sooner they will learn the market and become comfortable deciding to make an offer. Helping them compare apples to apples is good for them and good for us.
Help them understand market value by setting a price cap for their search. Let them set the cap and then, should they wish to bump it up, increase it and help them learn what they can buy in this new, higher price range.
Two agents in my area told me about their success using the Two-part Promise with two couples interested in buying a home.
The first couple, Don and Sherry, wanted a home for about $300,000. They were qualified to purchase a property up to $350,000. He was just beginning his cardiology residency and she worked part-time at a nearby department store. They liked the Two-part Promise. The initial price range was set to a limit of $320,000.
At the time, the suburban Philadelphia market was a buyer’s market about a year away from changing to a market in equilibrium. She taught them the market for colonials, capes, bi-level and split-level homes with at least three bedrooms, gas or oil heat, and priced for less than $320,000.
Don and Sherry then decided to bump the price cap up to $350,000, but still hoped to buy around $300,000. This was not meant to be the house of their dreams, but a good starter home. They struggles trying to decide between two homes: one listed for $349,900 and one for $317,500. Sue told them she was confident she could help them buy either home at a price lower than the asking price. She reminded them of their interest in staying close to the $300,000 figure. She also mentioned that should they decide to sell the property after Don’s residency, the smarter move was probably to make an offer for the lower priced home.
The buyers agreed and bought it for $301,250. They were thrilled. Sue was invited to multiple parties at their home and closed two more sales with other doctors they referred to her within the next six months.
A similar, but more dramatic use of the Two-Part Promise demonstrates its effectiveness. A few years ago, Debi was the sales agent for a couple interested in buying a nice colonial in a good neighborhood for less than $300,000. He owned several greeting-card stores and his wife was a doctor.
Over the course of several weeks, Debi showed Tom and Lisa all the homes that met their criteria. They agreed to the Two-part Promise. One Sunday evening, Lisa called and said they had seen a house on the Internet that interested them. It was priced at $312,000.
Lisa: We’d like to go see it.
Debi: It’s priced above the limit you’ve set for yourselves of $300,000.
Lisa: Just set up the appointment for us, please. What’s your schedule like tomorrow?
Debi: O.K. What about tomorrow afternoon?
They toured the property Monday afternoon. Tom and Lisa fell in love with it.
Tom: Debi, we’d like to make an offer to buy the house.
Debi: If you want to write an offer, I would be glad to put it on paper for you. I’m your agent. I work for you and will do what you tell me to do. But I think you should hear me out on this, because you’ve seen everything in the market under $300,000. This is the first home you’ve seen priced for more than $300,000. I urge you to not make the offer today. Let me set up a tour for you and show you everything that meets your criteria up to an asking price of $330,000.
Lisa: What happens if we do not make the offer today?
Debi: You could lose the house if someone else makes an offer and the sellers accept it. It’s your decision. There’s risk involved either way. I just think that buying a house is a big deal. You’re spending a lot of money. You are about to put in a tremendous amount of time and effort to write the offer and to get the sale to settlement. It’s also a quality of life decision that will affect where you raise the children you’ve told me you hope to have, as well as where both of you will spend much of your lives over the next few years.
Tom: So what are you suggesting?
Debi: Hold off a day. I’ll clear my schedule and first thing tomorrow morning we’ll tour everything that meets your criteria in the $300,000 - $330,000 price range.
Should you still want to buy this house, we’ll write it up tomorrow night. I just think you need to know the market before you make such an important decision.
Tom and Lisa agreed. They toured eight more homes the next day, but nothing could shake the emotional crush they had developed on 417 Cherry Street. Debi wrote up the offer and negotiations led to a signed the contract for less than $312,000.
What had Debi done for Tom and Lisa? Think about your business. Would you have reacted the way Debi did?
Debi behaved according to the highest standards of a fiduciary relationship and stayed focused on her clients’ best interests. As some of you have figured out, she also behaved in the manner most suited to ensuring her success. Tom and Lisa told people they knew how amazing their agent was. They found the property to buy, but she didn’t want them to write the offer until they had seen the available homes in that range.
Is that a reputation you would like in your market?