Insider’s View

What comes to mind when you hear the word ‘currency’?
Do you think of coins? Gold bricks? Dollar bills raining around you?

Currency is nothing more than a medium of exchange in the form of coins and banknotes. Although we typically associate currency with cash, we know that it can take on many different forms. Time, labor, risk and other abstract versions of value can be accepted as currency by a savvy buyer or seller as well.

Take advantage of the opportunity to strengthen a deal for yourself by introducing other potential forms of ‘currency’

People tend focus exclusively on price and ignore the other points where they can give and receive value. Take advantage of the opportunity to strengthen a deal for yourself by introducing other potential forms of ‘currency.’
So what counts as another form of ‘currency’ in a real estate transaction?

Let’s talk.

Time

The number one form of currency is time. We’ve all heard the phrase ‘time is money,’ and in real estate this is especially true.

It baffles me when I hear one side of a transaction pressing on a time issue when there is no need to. Obviously, if a seller is trying to sell their home and move into another they will be crunched for time. So when a buyer looking for a second home or someone else with a flexible time frame is unwilling to be flexible, they can cost themselves more money and even potentially lose the opportunity to purchase the home altogether.

Recognize what currency you can offer that means more to the other side than it does to you and you will come out on top

If you can offer a time-constrained seller the luxury of an early settlement with some sort of possession post-closing, you will have a far better chance of winning a competitive bid than losing it. Likewise, speeding up the inspection process to build a fully ratified contract or proposing a floating closing date — allowing ample time for the seller to find the home of their dreams — means everyone wins.

A buyer can either positively or negatively impact the seller’s next purchase, and the takeaway here is that sometimes an extra 30 days can mean the difference between winning and losing a bid. Recognize what currency you can offer that means more to the other side than it does to you and you will come out on top.

Risk

Just behind Time as a form of currency is Risk.

There are typically two sides to a real estate transaction. And while it may be easy to focus all of the attention on one side of the transaction, they are more often than not related — selling one home means buying another.

Because most transactions are two-sided, each side carries their own varying levels of potentially negative outcomes if the transaction fails. A buyer must spend money on loan fees, inspections, deposits and other items well in advance of closing. So if the closing falls through, that means sunken costs for the buyer. Similarly, a seller will be spending on these same costs, especially if they are looking to buy. So again (if the closing falls through) they will experience not only the loss of fees but also potential legal action for failure to uphold the terms of the contract for their next home.

It goes without saying, both sides of a real estate transaction carry their own risk. So when one party has the ability to mitigate a risk for the other side of the transaction, I see an opportunity to really strengthen the deal.

Pay attention to Days on Market — it can lend guidance on how to best structure offers

Comparing Offers

Imagine you are an owner with a home under contract and a builder who will be ready in ‘around 90 days.’ The home you currently live in is older and in good (not great) shape, so it probably needs some work done. You put up the For Sale sign, and within a few days you have three offers, all from buyers who are looking to purchase a vacation home:

• Offer One — Full price with the seller pre-approved by a local lender, putting 5% down and wants to close in 60 days. Asking for a response by 5 p.m. tomorrow.
• Offer Two — $10,000 less than asking price, but will close in 30 days and offer you a rent back for up to 120 days if needed. Have been pre-approved by a local lender and putting 10% down. They want a response in the next two days. Additionally, they will inspect the home within 7 days AND absorb the first $5,000 of any inspection items found.
• Offer Three — Full price with the seller putting 20% down. They have been pre-qualified by Quicken Loans, and want to close in 90 days, but needs 3 weeks for inspections due to travel. They have given you two days to respond.

Which one sounds the best to you? I know which one I’d recommend. Although the bid is below asking price, the second offer extends the most flexible terms to the seller (which they really needed) while simultaneously mitigating risk on both sides of the deal.

Win-Win is Important

‘Win-Win’ may seem cliche, but it really does provide the most durable framework for a contract.

Throughout the 20 pages of a typical real estate contract, only one paragraph is dedicated to price. The rest addresses the terms of the agreement, ranging from timing to personal property. Each of these additional clauses is designed to benefit both parties. ‘Win-Win’ may seem cliche, but it really does provide the most durable framework for a contract.

Take your time on each deal, recognize what currency each side can offer, and do NOT put all of your energy into price. Although price is undeniably important, don’t forget about the other terms. You will make a deal that is stronger, more likely to close on time as written, has lower risk, and will skyrocket.

What makes a home valuable?

This is the most subjective question that can be asked of anyone in the real estate industry and one that I am personally always happy to answer.

Obviously the answer is ‘it depends,’ but what really matters is understanding what it depends on. And the answer to that will vary across buyers and homes alike.

‘Express Yourself’

The purchase of a Bay River home is an expression of self. Clearly we all want to make a decision that is both smart and financially rewarding; however, we ultimately want to be excited when we come down the driveway and see our home away from home.

The agents at Bay Properties have worked with countless buyers, and the general consensus is that the best buyers are the ones who are the most self-aware. That is to say, the best buyers know not only what they are looking for, but why.

Ask the ‘Big Why?’ Before You Buy

When a buyer is struggling with their decision, it generally comes from a lack of vision or defined purpose.

Are you trying to find a peaceful place of isolation or is it for a growing family? Do you want to be on big water? Or a creek? Do you want a weekend getaway or do you plan on spending the majority of your time there? Is the commute important? Or proximity to a supermarket and restaurants? Is it an escape or for entertainment? Is the view the main thing? Or is it boating? Or fishing?

Everyone wants something a little different and it is up to the buyer — and their agent — to have an honest dialogue around purpose. Once the purpose becomes clear, making a decision becomes far easier.

Be Comfortable with Being a Little Uncomfortable

Being unsure about what type of home you are looking to invest in is perfectly normal. Every market is different, whether in a big city or the slower paced villages that populate our region. So no one has perfect knowledge when they get started.

Pricing is a subtle thing, especially along the waterways of the Chesapeake Bay, and thus the tools that work in bigger cities (Zillow, Trulia, tax assessments) are not nearly as effective here. As a result, we have seen many buyers struggle with valuations. Don’t worry though, everyone struggles to make sense of the nuance — it is why a good agent is so important here.

Be Honest

In essence, buyers need to spend time questioning their reasoning, questioning the data and looking at different style homes before ever pulling the trigger. Emotion is part of the home buying process, but an emotional decision rarely works out in the long run.

When you do your homework, knowing what to do is easy and stress free once the correct opportunity emerges.

Try to understand exactly why you want to purchase a second home and how you are going to benefit from it. Be honest with yourself and don’t be afraid to take a long hard look in the mirror. Starting the process confidently and with an understanding of what you want means a more defined search and a better recipe for success.

As real estate agents, a major part of our job consists of going into houses and being asked to pass my opinion. I get asked about water depth and number of bedrooms and anchorage and flood zones and location and elevation and acreage and porches and utilities and — well just about anything you can imagine.

Every single person has opinions and preferences when it comes to a home, but more importantly, everyone is going to have a budget. Most opinions are based off of a buyer’s priorities, because their budget is what’s driving them. Are they looking for a spectacular view or water that’s deep enough to dock a sailboat? Is having a pool more important than privacy?

Typically everyone is going to have a budget, and this is going to be the driving force behind what they want in a home. People will voice their opinion to you whether you ask for it or not, and when this happens, they key is to listen — because every opinion has value.

Here is some food for thought to help you digest each opinion along the way…

Focus on Topic, Not Tone

For anyone who has ever played a sport, you know that receiving constructive criticism from a coach can range anywhere from humbling to humiliating. And when you learn to listen to the message that your coach is delivering instead of the way in which it is delivered, you become a better player.

Everyone in the process — agents, buyers, sellers — tends to get offended and hear an insult when instead we should be recognizing a suggestion. When a buyer comes across what is, for them, a deal breaker in a house, they often deliver what is intended to be constructive criticism. Unfortunately, more often than not, the seller comes away from the conversation feeling rejected and hurt and loses the ability to draw anything valuable from the message.

Remembering to focus on what is being said rather than how someone is saying it allows you to gather important information on market preferences and not become caught up in the tone of a message.

Quality of Criticism

Some criticism can be incredibly helpful while some can be completely disregarded — knowing how to tell the difference is essential. It will be up to the agent to figure out how much importance to attach to each message.

Imagine you’re selling a waterfront property on the Rappahannock River and you receive criticism from a buyer who is new to the region, on their first day out, and has no idea what they’re looking for. How much credibility should you give the criticism? On the other hand, is the criticism from a buyer who looked at 5 waterfront properties in your area and bought the one down the street a cause for concern?

Unqualified criticism does little for anyone. Qualifying the criticism allows us to either gain insight about the market we are competing in or shrug off a message that may have otherwise caused us anxiety.

Be Patient and Observant

You can’t please everyone who comes through your house and it would be a waste of time and money to try — everyone has different tastes. That being said, if you begin to notice trends in complaints (3 people think the pier needs maintenance and wish there was a pool in the yard), it would behoove you to pay attention.

Take note of what people are saying — if you hear a critique once, it’s probably just a personal preference rather than a market expectation. However, if you start to hear the same critique over and over again, it’s probably in your best interest to tackle the problem head-on or adjust the price accordingly.

Price Almost Always Faces Criticism

Indistinct negative feedback is the worst type of feedback you can receive. When you receive criticism that is obviously negative but doesn’t point to anything concrete, it makes it hard to come up with a plan. Just the same, even obscure or vague feedback can have value, too.

Pay attention to when feedback begins to change from openly negative to balanced.
Buyer expectations have the biggest influence over the criticism you might receive regarding your home. So what factor really drives buyer expectations? Price.

If your home is blatantly overpriced, you will receive largely negative criticism because prospective buyers have come in with expectations that reflect a price higher than what your home delivers. Likewise, if your home delivers above and beyond what individuals expect at its listing price, you may hear nothing but high levels of interest and intrigue. The key is finding the middle ground – where your price matches market expectations in terms of amenities, acreage, location, etc. Focusing on the mood of criticism you receive will give you valuable insight into whether or not the quality of your home matches the price at which it is listed.

If you do find yourself having to go down on the price, pay attention to when feedback begins to change from openly negative to balanced. Remember, you still want some criticism, otherwise it may be a sign that you’ve under-priced your home! A balanced combination of positive and negative comments suggests your home is priced accordingly and can be competitive in the market.

Recap

Although housing, like stocks, bonds, or rare automobiles, is just an asset, it is an intimate one. The criticism we receive on even our vacation homes somehow seems to deal a heftier blow to our egos — but it shouldn’t.

We try to tell our clients that their homes are worth what the market says they are worth, not what the buyers say, nor Zillow, nor anyone else. The market is never forgiving, but it is always correct, and it holds the key to everything you need to know — you just have to be willing to listen. That being said, the number of people who receive feedback but draw the wrong conclusion from the message is astounding.

Remember, be objective, don’t overreact, and take notice of trends. If you do these things, the criticism you receive will be immensely helpful and you will maximize the value of your home.