Kick the Tires: Know Your Inventory Part 2

In the previous post, I shared about the importance of being an expert. The following is the second part of the story: 

The sellers wanted us to reduce the price by $200,000. We countered with $35,000. Then they wanted us to drop the price to $150,000. We countered with $75,000. Finally, the sellers asked for a $100,000 price cut. They added that if we didn’t accept this last offer, they’d walk away from the deal. My client asked me what she should do, and I told her to hold firm to $75,000. She was hesitant but trusted my judgment. In the end, my discernment and advice proved to be right.

I recall a phone conversation that I had with the buyer’s agent.

“I can’t believe you’re being so tough,” he said.

“I’m not being tough, I’m being realistic. The deal was sealed at a $75,000 reduction,” I responded.

“You know that there are other listings that my clients have been looking at. Like the one on Whittier—it’s clearly in a better location.”

“You’re right. But if you think the roof’s a problem on this house, you’d better take a look at the plumbing and foundation on that one,” I answered.

“How about the house on Crescent? It’s on a bigger lot,” he said.

“But have you seen that floor plan? It’s terrible,” I said.

He went on to describe two more listings.

I finally told him, “Look. No listing gets by me. Everything you’ve seen, I’ve seen too.” He paused and said that he would speak with his client.

As much as he tried, he couldn’t intimidate me because I knew the inventory. I was aware of the value of the listings he had mentioned, their square footage, and their strengths and weaknesses.

The next day, I received a fax from the broker. His clients accepted our $75,000 offer. Upon hearing the news, my client remarked that my advice must have resulted from a real estate sixth sense. My decision, however, had less to do with the supernatural and more to do with observing the deal from the buyer’s perspective.

There were several factors that were in our favor. First, the buyers had locked themselves into a great loan that was looking even better because interest rates were climbing. Second, the buyers had spent thousands of dollars for the inspection and hours evaluating the results. If they walked away from the deal, they would have to start the entire process over again.

Finally, and probably most importantly, I knew the inventory. The other homes in the same price range would require considerable amounts of deferred maintenance. The buyers would find that any home they were looking for would need a similar investment to raise it to their standards.

Knowing your inventory is hard work. It won’t happen by logging on to the MLS and looking at listings from the screen of your computer. You have to attend Tuesday caravans, regularly communicate with your colleagues about listings, and know the latest information about the community you serve.

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