“Round Robin” Buying System. Unearthing The Desperate Seller.
Frankly, buyers say they want a good deal, but oftentimes they aren’t willing to go through the emotional roller coaster the buying process can put them through. A good Realtor will try to shelter the buyer from stress, but inevitably it is up to the seller and their threshold for being aggressive.
For the most part I don’t really believe in the idea of a “Good Deal” (see post Buyer’s Market?” No Such Thing As a “Good Deal” ), but you can get a better deal if you are open to being flexible and buying with your mind (and agent) and not with emotions.
Too often I find buyers that want an aggressively low price, but then they fall in love with one place and they fold their cards rather quickly.
Reintroducing the non-patent pending “Round Robin” buying approach that I initially touched upon on 1/5/07 Tip #1 From Mom: Don’t Trust Realtors That “Sell” You On Buying.
I learned from my mother that you never know the situation or needs of the seller. Some might be pressed to sell quickly for they fear the market is getting worse, or are approaching a foreclosure. Meanwhile others might have the mentality of “If I don’t get what I want, I’ll just rent.”
How do you know which is which? Ask them (indirectly), one by one.
Round Robin System
- Be flexible. Find two or three homes that you like. Don’t think in terms of whether you like them at X price, think in terms of “I’d prefer house #1, but I’d consider ABC if it was $X off”
- Put in ONE offer. Let that agent know that you have 2 or 3 properties and you would like to first offer on their property. (Ethically you can only put in one offer at a time. Even if you have “outs,” your contract has to expire or be countered (a counter nullifies the initial offer) before you can move on.)
- Review counter or accepted contract. The seller can a) accept, b) reject or c) counter. If the counter is something you want to work with, keep it alive. Otherwise
- Move one, offer elsewhere. The negotiation isn’t over, but you tell the listing agent that you will now offer on another property. And since your client can’t make two open offers, the listing agent is still invited to re-submit. I like to end with a “we may or may not come back in a few days if the other houses don’t work out.”Sidenote: Why would I reveal my strategies? A listing agent might be reading… GREAT! Then they know I’m serious when I say we are offering elsewhere and may or may not
come back. - Repeat as necessary (are you really supposed to “shampoo, rinse and repeat?”) with a slightly higher price, until somebody bites.
Again, this technique isn’t for everyone. It might sound sexy to be aggressive and all your officemates might talk about “lowballing” and nobody wants to overpay, but if you want that extra $5k- $25k, be prepared to spend $5 on some sleep meds.
Love to get your comments. Do you do this? Do your clients have the stomach for it? Do you consider it unethical?
– Written by Frank Borges LL0SA- Broker/Owner FranklyRealty.com
703-827-4OO6 Please report all typos, I don’t like looking stupid. If you like this post, sign up for new blogs daily, use the form on the right of the page. Keywords: Negotiate, low-ball, purchase agreement, contract, offer, buying strategies
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Frank, In this market, Fort Myers Beach, Fl, we see many buyers narrow down to a ” short List ” of houses of interest. After that, we try to see which will offer common ground for us all to stand on.
I’m curious what is your success rate with your system?-Charles
Frank-
As long as you are honest and only have one active offer on the table at a time, I don’t see anything unethical about this plan. I’m not sure how many of my buyers would be willing, but it may be a great way to approach a seller if it is for the right buyers.
Charles- I would say that only 30-50% of my clients are up for the Round Robin approach. From that 65% get the first house, 25% get the second house and 10% get the 3rd house.
Jennifer- Yep, only one active contract offer out at a time. Many would rather just send three at once to speed up the process. Can’t do that!
Frank, great information. It always gets me when I have to tell my sellers that they have 3 houses. It does make them be serious. Can you tell I mostly list ?
This is a great way to help buyers diffuse some of the emotion when deciding which house to buy
Hey Frank, I have been known to put in more than one offer at the same time (I’ve personally done this and also had clients do this). shhhhhh! Don’t tell anyone =)
I know this strategy will upset some, but guess what, it works and in real life, sometimes you have to go out on a limb to get what you really want. I take calculated risks when needed.
I think your method is good and safe, I definitely don’t think it’s unethical. I hope the righteous don’t come out and condemn me.
Dear Anonymous
You better watch out for that. I’m no lawyer, but you might put BOTH of your contracts in default if they can prove that you could not perform on both contracts if both said yes.
Frank
Let’s say you got three pretty identical places (they’re in the same subdivision and are nearly identical, cookie-cutter homes, or three condos in the same building, same size, same floorplan, just different floors). Has anyone done an offer war? The opposite of a bidding war? Three sellers, one qualified buyer. Go!
I’ve done this with three car dealers (different brands). Gave them my specs and one chance to make me an offer I couldn’t refuse. The lowest wouldn’t necessarily take it… just the best value perceived.
You see what I mean? If buyers are expected to fight and bid all over each other and up the price in a hot market, can the reverse not be done in a cold market?
Great blog as usual Frank. I’ve been hearing of situations lately where sellers are actually making offers to buyers that they know are interested in their home. Interesting concept that got me thinking. Remember the days of multiple contracts, escalation clauses, etc.? Why not work it the other way? If your client has narrowed it down to two or three homes why not let those sellers know and invite them to make their best offer? They could even include a “de”-escalation clause if they wanted.
Cheryl! A “De-Escalation” clause! Hilarious!
As for having the seller make offers, I guess one could try that or you can informally get a reading on the 3 places before picking one.
But there is an amazing power of the written contract. Having your client put their offer on paper and putting it in front of the seller, that has power. Just a little initial-poo and the whole thing is over.
Frank
In regards to offering a substantial price drop as being being “unethical”
….I would say, “no price is too low to offer”. Let’s face it, as a seller I rather hear “any” amount than no amount.
I was/am renting a place in Arlington. At the end of July there was plenty of onlookers. For whatever reason, I was not able to tend to this, and I advertised last weekend (middle of August)….you bet that anyone coming in the door, offering whatever, I would choose, rather than have the house vacant for at least a month. “Bring in the offers!”
BTW…..the practice of offering “whatever” is what is being practiced with Priceline in the travel business.
It’s all about “timing” …..
I read this column before shopping for a new house and used the technique. Both houses that we made offers on were listed by the same realtor – so when we walked away from offer 1 and wrote a contract on house 2 – the sellers knew we would walk if things didn’t go our way.
Thanks Frank! Great Advice!
Hey Richmond,
Great to hear that. I’m undergoing a Round Robin right now.
Frank
Frank –
I agree with you AND with anonymous AND with Cheryl. Round Robin plus Seller’s war plus de-escalation. Oh, wait: does that reveal I’m a potential buyer???
We have tried to work with four different agents for buying. Not one is a hard worker. I do all the work and am not about to pay for that. I sleep well at night, because I’m a good negotiator. I know listing agents do not like this (buyers negotiating for themselves and handling all the buying checklist items), and frankly (!!) I don’t understand that. They get to sell the house faster, at a lower price, and still make pretty darn near what they would have with an extra (at least) 3 percent. It’s not unethical, and it’s not illegal. It is unconventional, but with your site, Redfin, Homegain, and places like Stafford County’s online real estate, I think it’s a trend. It does take homework and experience, but isn’t that what gray hair says? It sure doesn’t say “male model”…well, to my wife it does…maybe….
Hey Anonymous,
What is it with people not wanting to put a first name. No registration is required. Just call yourself Rex, or Jerry, or even Edward.
Anyhow, you will love my next blog post. We treat every purchase like an acquisition of a $1,000,000 corporation. You can be as good of a negotiator as you want, but wait until you see the data that we dig up. Even data that would encourage you to bid HIGHER. Yep, even the “best” negotiators, with the right data can and will understand that it is about VALUE, not about % off list.
Stay tuned (sign up in the upper right corner. Let me know if you have any problems since I just switched Blog to Email services)
Frank,
Man, o manoshevitz are you EVER right about the sleep aids. We were prepared to use a TNPPRRA (The Non Patent Pending Round Robin Approach). It was going to be textbook. Four houses. Experienced negotiators, we. Well, the first house gets our first offer (150 below asking), and they bite hard and come down 40K. Long story short, we have gone back and forth now four times. We are 40K apart, and I proposed we meet halfway and they have not yet responded. That last <10 percent apart is a tough nut to crack -- and the iterative counters get smaller and more nerve wracking. The round robin element of course has disappeared, but we may be near the target. The problem with a bite initially is that it sucks you in to continue the drill. So, here's a question: have you, or any of your readers, thought about putting numbers to TNPPRRA? That is, if the initial bid is x percent below, and the counter is at y percent, then do z. Or something like that. This is game theory and higher mathematics, but you're a smart fella and this looks to be right up your experienced alley. Cheers, Al...oh, and congratulations on your engagement!
Hey Aldo,
I’ll try and get a better response, but I can tell you that the other side loves the to play “Half-zies” where they cut the difference.
Nope there is no % off game. As I would rather pay 2% above list vs pay $50k off list for a place overpriced by $100k.
As for negotiation 101, it says that you should not make big jumps. If you make big same sized jumps then they are encouraged to try again for more.
Also round robin isn’t so much
1) Try one house, go back and forth and see what happens, and when dead go to the next one.
Instead it is more of a
2) Put in an offer, if they come back, and they dont come back enough, say in 1 or 2 days “no, we will pass for now, you can resubmit if you want.” And you go and offer on another place.
Also use the Frankly CRA system (hidden throughout my blog, but soon getting a monumental post itself), the Comparative Realtor Analysis (trademark pending). Where you do a background check on the Realtor to see what is the most % off list they have accepted in the past.
Also watch my video on low ball offers. Sometimes if you start TOO low, you don’t get any movement and you end up paying MORE. Also I have no problem countering the SAME offer. Nothing says you have to come up each time. And let them know that you might or might not come back in a week after you try another 2 places. (sometimes I even tell them which places!!)
Where are you buying.
Frank
I understand TNPPRRA. I practice it myself. But my question was this (and I think I will try to get a buddy of mine to build an agent-based model of this and sell it to you — I think you’d be interested): can I parameterize the variables in the TNPPRRA? In other words, can I build a model and run it on a PC that will help me understand, probabilistically, my chances for success based on a particular TNPPRRA strategy? What price, value, initial offer and counter offer are a function of one’s decision to continue negotiations on _that_ property and not move to number 2? TNPPRRA is sound. Adding this kind of math to it will make it pretty unbeatable. If you’re interested, maybe we should talk some more offline.
Well, they bit and we’re happy. House is in Stafford, just outside Fred’burg.
Interesting thing is that we were ready to move on after the first offer, because the selling agent had said no way would the sellers move to the region of our bid. Huh! imagine that: a realtor trying to get more money for his clients by predicting their comfort level….
Great job AlDO.
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What do you mean by “selling agent.” That has 2 definitions. Do you mean your buyer agent or the listing agent?
THanks for keeping us updated.
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