By John Engel
Today I am speaking on a panel on industry changes. I am noticing more pressure on buyer’s agents from a number of directions. Sellers are asking if they can eliminate or reduce offers of compensation, probing for a better deal. Buyers are approaching the listing agent directly. This is to be expected as both sides begin to explore cost savings and disintermediation. But is it wise?
Last week, and again this week, we had several dozen potential buyers visit a new listing in its opening weekend and several buyers made offers. Just like in the NFL we talk through every visit on Monday morning. Where are they from? How old are they? Are they starting their search? Are they represented? Is this their first house? Do they need a mortgage? How long did they stay? A greater percentage of the visits over this weekend came from unrepresented buyers. But, by Monday all the offers were coming in from buyers’ agents. Why? Because each sale is like a hand in a multi-year poker tournament. Each player is not arriving with equal chips, and some of them have been at it a lot longer. Everybody is trying to read the room, gain an advantage, calculate the percentages. “I think I am going to need to bid more than asking, but how many other bidders are out there and what can you tell me about them?” Buyers’ agents ask a lot of questions. My conclusion is: unrepresented buyers, with no history and less information, are feeling less confident and less likely to push in all their chips in a competitive situation.
Buyer’s agents impart confidence. They act like they’ve seen it all. Some have. There is one agent who never has anything nice to say about my listings. And yet her clients keep bidding on them. Is that her strategy, talk some trash, knock me down, make me feel like I mispriced it? That’s ok, I’ll play her from my back foot. The best buyer agents know the other agents and how they play the game, “I think she’s bluffing.” “Oh, she does her homework, expect 20 questions from her…” Good agents are intuitive, feeling the winds of change sooner, “This is school vacation week, so expect a slow weekend.” They’ve toured all the comparable properties and know when something is mispriced: “While the average sale in this category has been at 107% of asking price, this house is not at all similar, and this is not April, so yes we can offer less.”
Computer poker is a game of percentages, missing the psychological angle. You simply calculate the odds. But, when playing with people competitors believe they can control the outcome, seeking advantage by knowing the opponents and being able to read their tells, adjusting based on the strength and timing of the other bets. I am often asked “Is there an advantage to being the first to make an offer?” Or is there advantage in being last, knowing how many other offers are out there? What should I offer? Any history with those at the table is helpful at sniffing out the bluff. I remember a sale years ago where the buyer raised his bid half a million dollars because he was in competition. A year later he learned that his one competitor had withdrawn his offer earlier. The listing agent wasn’t asked and kept silent. Did he overpay? Many agents have a history of sharing; others reveal nothing. The buyer’s agent was seeking an advantage, asking about the other offers, and the listing agent was sharing right up until she wasn’t. The buyer missed the river card, the final bet.
Permit me to talk about some recent case studies as if they were poker games:
#1. Players use their two-hole cards in combination with the five community cards to create their best five-card hand. This is like eliminating contingencies and being more flexible on closing date in order to improve your hand at the last minute, when no more cards are coming.
#2. The flop in poker is the first three community cards dealt face up. This is like opening weekend, a broker open house on Thursday, appointments Saturday, and public open house Saturday Sunday. These three cards cause people to fold, or begin to engage. We should see two more cards before we have to commit, but we have a pretty good idea if we are playing this hand.
#3. The small blind. This is analogous to the listing agent reaching out to all those who showed interest over the weekend, asking, “Are you in?” It’s usually an opportunity for bidders to ask, “How much competition is out there?” and “When are you going to be making a decision?”
#4 The tells. And fake tells. Some agents say nothing. They tell you to submit your offer to the attorney. I have to wonder is she telling me something? Maybe she’s expecting an offer from her own office. There is an agent in town who I can count on to respond with profound disappointment to whatever offer I make, “Hmm, ok, well, uh, I’ll see what I can do.
#5. A seat at the table. My buyer, frustrated, insisted on a face-to-face meeting with the owner. He felt he could persuade more effectively himself. He didn’t. The meeting set him backwards, because it put the buyer on the spot. He gave away too much. The problem with disintermediation is there is no plausible deniability, no chance for, “That’s a good idea, let me take that back to my client.”
I think the secret to getting better at poker, or real estate, is be a better listener. Don’t play when you’re angry or sad. Practice your skills. It’s true of many things in life.
John Engel of The Engel Team at Douglas Elliman in New Canaan, was formerly a military intelligence officer, stationed in Stuttgart, defending Germany’s Fulda Gap from the possibility of a Soviet tank invasion in 1990. So glad to put that threat behind us. As the Colonel’s S2 I was to report on what we see and hear, and to predict enemy action. I think, in retrospect, this was a listening exercise. The Colonel had more experience and made his own predictions. But, gathering intelligence and listening is good training for so many things, including real estate.
