Hello fellow Realtors!

How many of us have heard our buyer client say something like, “I don’t want to overpay for my next house”? I’m willing to bet just about all of us! It’s a normal and valid concern for a buyer to have (I don’t want to overpay for anything, either!). At the time of writing this blog post, we are in a strong seller’s market, so we agents are hearing this objection more frequently than usual. 

Today, I want to unpack three strategies that can help you navigate this objection when discussing an offer with your buyer.

But I want to clarify upfront, when I share objection handlers, I’m not sharing them as manipulative tactics. Most objections we encounter are born of client ignorance or misinformation, and objection handlers are tools to help educate our clients and help get them into the right mindset to make informed decisions. 

Said another way: the objection handlers shared below are simply educational tools to help our clients better understand the complexities of the real estate market. As practitioners, we know that the price is a reflection of supply and demand, but our clients may be less familiar with these dynamics, especially when it comes to offering more than the asking price. So let’s jump into the techniques:

1. Understanding Market Dynamics

The first step is to explain to your clients the simple economics behind home pricing. Review with them the fact that price is simply a function of supply and demand. Right now, there are not enough homes on the market, so demand exceeds supply, and prices are consequently going up quickly. 

So once your client understands that, it’s time to look at how the market gives feedback to homes on the market. If a home is overpriced, it will not receive offers. If priced at market value, it may receive one, maybe two offers. However, when multiple people make an offer, it indicates that the house is undervalued.

In today’s market of undersupply, homes sell in multiple offers. Said another way: these listings are undervalued and we know so because multiple people are making offers. Under these conditions, it is only logical for a client to offer above the asking price, because the price offered above market value is essentially the actual market value. We must educate our clients and help them understand that paying above the asking price doesn’t necessarily mean overpaying; it’s simply paying a reflection of the property’s true current market value.

2. Addressing Market Contraction Concerns

One common fear among buyers is the potential decrease in property value. We all know no one can predict future market behavior accurately, and yes, it’s true, we may be closer to a market contraction than a continued surge. But we need to give our clients the bigger picture.

Most consumers don’t realize that during a recession or market contraction, home values usually don’t decrease by more than about 10%. Most consumers also don’t know that homes historically appreciate between 3-4% per year. So even if our economy went into recession and home values dropped 10%, within three to four years, the house value would return to its original value.

For instance, in Cincinnati, in 2005, the average sales price was $160,000, and it dropped by about ~30% during the Great Recession. But by the ninth year, the average sales price was back up to $162,000. So even during the worst economic crisis of our generation, home values recovered after 9 years. 

Why is this important? According to the National Association of Realtors, the average homeowner lives in their home for ten years. So, statistically, they’re unlikely to face a significant loss due to short-term market fluctuations.

3. Combatting Sticker Shock

In a booming market, the high prices can cause potential ‘sticker shock’ for buyers. But remember: while sellers care most about the final selling price (cash in their pocket after closing), buyers care more about their monthly cost of ownership (cash out of their pocket each month after closing). 

Reminding your client that the most important financial component to buying a home is staying within their budget – their monthly payment. Reminding clients to focus on the monthly cost of ownership can help them work through what can feel like ‘sticker shock’ in today’s market. 

How do you do that? 

Have loan officers prepare the monthly cost of ownership for potential properties that meet your client’s needs. When clients focus on the monthly cost rather than the overall price, it can help them process the high market prices more rationally. This technique can help your clients move past their initial emotional response and focus on their long-term homeownership plan.

“I Don’t Want to Overpay”

By addressing the valid concerns of overpayment using the three methods above, we’re not just handling objections. We are educating our clients about the realities of real estate market dynamics. We’re facilitating informed decisions by focusing on supply and demand, addressing short-term market dynamics risks, and helping make financial decisions grounded in staying in their housing budget. 

I hope these strategies will prove useful in your practice. Keep making the dream of homeownership a reality for your clients! 

Also, a quick disclaimer: we are not licensed to give financial advice, nor can we predict the future, so please do not cross either of those lines when you are discussing market dynamics or personal finances with your clients.