Guerrilla Tactics for a Seller’s Market
Those that engage in guerrilla warfare are referred to as rebels, insurgents or mercenaries. The principal being that tactics utilized while engaging in guerrilla warfare are non-traditional or unorthodox. In a seller’s market, I see an opportunity to use guerrilla tactics to get the best deal for your buyer or seller. Before we get into the tactics, let’s review the battlefield.
In a tight market with limited inventory, sellers are interested in achieving the highest price possible as quickly as possible. The goal for the listing agent is to prevent delay resulting from a failed transaction. Buyers remain interested in getting a good deal, but are just as interested in beating out the competition to secure the house of their choice. Just as a listing agent, a selling agent want a closed deal and happy clients. The competing goals make every detail and term of purchase contract critical. Tip: When discussing contract terms with clients, try to always think several steps ahead and ask yourself whether there are any unintended consequences.
Ohio license law provides certain listing agent specific duties pertaining to offers. Among those are a duty to present an offer as soon as possible and notify the client of any forthcoming offers. These duties remain even if the property is in contract. Listing Agent Guerrilla Tactic: Consult with the seller on the pros and cons of disclosing to the buyer the existence of multiple offers. While it is lawful for a seller to request that you disclose the particulars of a competing offer, such may turn off other buyers that believe the offer they submitted is reasonable. Alternatively, the disclosure may result in a better price or terms. Selling Agent Guerrilla Tactic: Advise your buyer to consider a confidentiality agreement, which would preclude disclosure of the existence or terms of the buyer’s offer to others. Although such are commonplace in commercial real estate, confidentiality agreements are becoming more frequent in residential transactions.
When your clients have entered into a multiple offer negotiation, an escalation clause play a role in finalizing a deal. An escalation clause is a provision in an offer that provides that the proposed offer will escalate (or increase) over other offers. For example, “Purchase price to be $125,000.00 with buyer paying $1 over any competing bona fide offer.” Offers with escalation clauses are ripe for countering because they inherently communicate that the buyer is willing to pay more. Listing Agent Guerrilla Tactic: Counsel seller to reject escalation clauses and have the buyer submit their best offer. Remember, the best offer isn’t always the purchase price and may include other factors like absence of contingencies, closing time and seller pre-paids. Selling Agent Guerrilla Tactic: If your client wants to use an escalation clause, be sure to include a cap on the offer and a short deadline for acceptance. This will keep your client from paying more than they are willing for the property and may facilitate a quick commitment from the seller.
I find that counteroffers are one of the greatest sources of confusion in a transaction. Hopefully these general guerrilla tactics will aid a smooth negotiation. In practice, I realize agent operate on a theory that if it isn’t countered, it is part of the contract. Arguably this is technically incorrect, as a counter effectively wipes out the prior offer (or counter as the case may be). Another problem is the difficulty reviewing a contract with 4 counters back and forth; it is nearly impossible to figure out on what the parties did or didn’t agree. Guerrilla Tactic: Make sure the purchase contract clearly and concisely sets forth the agreements of the parties. If this means re-drafting a final signature copy, it is time well spent so there are no misunderstandings causing delay or jeopardizing the deal.
I also receive a lot of phone calls about withdrawing a counteroffer. Can’t do it. The rule is: once a counteroffer is made, the underlying offer is rejected and no longer open for acceptance. For example, buyer offers $125,000.00 and seller counters at $130,000.00. Upon reflection, seller has changed her mind and wants to go ahead and accept the $125,000.00 offer. Can’t do it. When the seller countered, the original offer is gone. The seller’s counteroffer cannot be withdrawn in order to accept the original purchase offer. Guerrilla Tactic: Make sure your client understands the consequences of countering in a negotiation. Are they willing to risk the deal to get the additional terms sought? If not, it is time to stop, accept the deal and move ahead.
It may feel like you’re at war negotiating a deal in a seller’s market, but while using guerrilla tactics with an eye toward unintended consequences, you’ll most definitely win the battle for your clients.