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18 March 2009

Unlock the Log Jam with Reverse Offers

In my blog from last week, “It’s Only a Buyer’s Market if you buy,” I talked about things that the real estate community can do to unlock buyer’s fears about buying at this time. Those who read that post will recall that I argued through all of the reasons why current conditions offer historically positive buying opportunities. Yet, there are other things that real estate professionals can also do to help sellers move properties, many of which have been for sale for many months, even years.

It is time to throw off traditional ideas about how offers should be made and contracts should be negotiated. Historically, buyers have always been the ones taking the first step in the “offering” process. That is, buyers spend time looking at homes and considering their options until that moment when everything comes together in their minds and they decide to put an offer in writing. This traditional process tends to follow fairly predictable steps as noted below.

TRADITIONAL OFFER SITUATION

  • Buyer “makes an offer.”
  • Buyer typically offers a lower-than-asking price
  • Sellers typically negotiates by counter-offering with a new price and the parties gradually come together

Over the past year, the problem has been that buyers have become indecisive to the point of inertia and this traditional offering process has become bogged down and even completely stalled in many cases. Fear does this and it is our job to combat this fear.

So why not take a different approach. Why not have motivated seller’s present offers to interested buyers? This may sound a bit bizarre but let’s follow the idea through. In the traditional model, buyers tend to present an offer, which in most cases is lower than a seller wants to accept. With the aid of real estate professionals, the parties negotiated terms and conditions, usually resulting in a higher price that was originally presented.

So why couldn’t we simply reverse the process?

REVERSE OFFER SITUATION

  • Seller’s agent presents an offer to a qualified buyer who has expressed interest in their property
  • The seller presents a price that is acceptable to them and, in all likelihood, one that is higher than the buyer ultimately wants to pay
  • The negotiations that follow simply take a reverse approach whereby the buyer then “counters” the offer with an adjusted and likely lower price and the negotiation is off to the races.
  • The end result is that a ‘ready willing and able buyer’ and a ‘motivated seller’ have come to a meeting of the minds and that is all that matters. The technique used in getting the results is purely incidental.

The advantages here are many, but reverse offers mostly help to unlock the log jam of indecision that buyers experience in economic times like these. Reverse offers show the buyer that the seller is serious about selling and captures the buyer’s curiosity.  It provides a “pattern interrupt” from an overused traditional method of negotiating and causes the buyer to look at negotiations differently. In markets like we now have, we need fresh ideas and novel approaches. It is the job of real estate professionals to innovated new methods and thereby assists buyers and sellers in getting what they really want, which is simply to move affordably.

8 thoughts on “Unlock the Log Jam with Reverse Offers

  1. This is a great post, Robert. Back in the days I used RO in a good and bad market. I just got done rolling out the RO program to our new homes and getting ready to roll it out to the general population of agents. The one key to a successful RO is to call the buyers agent and find out the true objections….. many times we assume the objection is the price. Find the real objections first then send a RO that addresses the real needs of the buyer.
    Its not about the market, its about what we do in the market…….

  2. Craig, Thank you for your comment. you clearly have a great attitude and maintain flexibility in changing sales approach when needed. This is absolutely essential to success in today’s business environment. I applaud your efforts and look forward to hearing more about your successes. Bob

  3. Robert,

    Nice idea but it is already being done. When a sellers lists their property for sale they are offering to buyers their property at a certain price and terms. So why would they want to re-offer a potential buyer something different?

  4. Marvin, I understand your perspective, but in most cases the “re-offer” makes a great deal of sense. In this climate, buyers can become consumed with fear over falling prices and changing market conditions. so when the seller makes an offer (the offer could be the asking price or even a newly reduced asking price) they help to unlock the inertia that is “out there.” Does that make sense to you?

    Bob

  5. “Re-Offer” sounds like a price reduction dressed in the king’s fabulous new invisible clothes. Why restrict the re-offer to one interested buyer. Why not offer the price reduction to everyone? Also, make sure that you call that “interested buyer” and make sure they (or their agent) knows about it.

  6. Re-offer is not a term that I used, so I am not sure as to the intent of that phrase. In any case, reverse offers are very different from price reductions and the two are not mutually exclusive activities. It is certainly possible that a seller could offer a price reduction to the general marketplace and still not receive any offers. However, when sellers make a targeted move and extend a reverse offer to a specific buyer, who has already expressed interest in the past, the odds of positive results increase dramatically.

  7. John, I disagree. The use of a reverse offer is a great way to get people to the negotiation table. Frequently, when buying any sizeable item, a call back from the seller with an “exclusive offer” for the buyer will result in a sale where simply reducing the public price would not have. I would argue that leaving the price up and working “private reverse offers” for a week or two is more likely to end up a successful strategy than simply dropping the public price. I think it is long overdue for real estate to become a two way proactive market. Greater transaction volume helps everyone and for too long sellers have relied on the “stand and sell approach”.

    1. Duncan, My thoughts exactly. The reverse offer not only targets a specific interested party, but it also makes a statement to those individuals. That statement is…”either prove your interest through engaging with us or take yourself out of the process.” Either answer is OK. At least the seller then knows what they are dealing with.

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