 Okay guys, how do you reply when a seller you're representing tells you they can't reduce the listing price anymore? Why are so many buyers backing out of contracts right now? And why is that a good thing? What's up everybody? Ricky Karuth here. Welcome back. Let's dive right into the question of the day here. This comes from Jeff Duncan on Instagram. He's at a boutique brokerage in New Zealand. He asked, Hey Ricky, what do you reply when a private seller asks, I've already dropped the list price and I can't afford to pay a commission. By the way, thanks for all you do. Jeff, thank you so much for your question. I really appreciate it. The answer is this. We are in the business of helping people do exactly what they are trying to do. We have to understand what's going on behind the scenes with our clients. Do they have to sell? Do they only want to sell? Will they only sell if certain things happen? So we really have to go deeper there. Based on the seller's response here that they can't afford a commission, it's either one of two things. They either owe too much on it and they literally can't afford it, or they have this profit margin in their mind that they don't want to eat into. If they can't hit that certain profit margin, then they're just not going to sell. So every situation is different and you're going to handle every situation differently based on what the situation is. So you have to dig deeper and find out what's going on behind the scenes. What are they thinking? Why are they thinking it? And what do they ultimately want to accomplish? Then we can actually create a game plan around that. Not every single listing is going to be a deal and we have to come to terms with that. More so, every possibility to build a relationship with this person, whether the deal happens or not, that's what we ultimately need to be looking at. So when I'm talking to sellers and we know that we're overpriced because it's been on the market for so long and we only have X amount of shows, haven't had any offers. The market is telling us that it's overpriced. All you can do is simply go to the seller and say, hey, here's the data. It's been shown this many times. No offers. Here's the feedback. What do you ultimately want to do here? We can reduce the price and increase activity. We can leave it like it is if you're happy with that keyword being happy. You see, guys, I'm not here in the business to try to talk people down or try to get them to do certain things. I'm trying to figure out what they want to do and I'm trying to let them know, listen, I'm just here to help you do exactly what you want to do. Jeff, I hope that helps. And if you have a question for me, feel free to send it to me on Instagram at Ricky Carruth. Now let's dive into why so many buyers are backing out of contracts right now. D.R. Horton, the biggest home builder in the U.S. at its cancellation rate in this most recent quarter was 24%. That's up 17% during the same quarter last year. Lenara, the second largest public builder in the country said last month's cancellation rate during the quarter ending May 31st was 11.8%. Tribe Point Homes, a smaller builder, also reported 16% cancellations. That's up from 7% one year ago. So people are walking away from all this new construction, but that's not all. Existing home sales are fighting a lot of cancellations as well. Redfin recently reported that home sales in June were canceled at the highest rate since March and April, 2020, when the pandemic halted activity. Now, the reason for all this is pretty clear as day, but I want to get into that. And also why I feel like this is a good thing. The reasons are simple as this inflationary problems causing construction costs to rise as well as real estate prices to increase. Now you have mortgage rates that are higher is causing higher payments. And you also have the buyers who are forced out of financing due to their debt to income ratio getting thrown out of whack because of all this. Now you also have a lot more inventory in the market, which gives buyers choices. They have choices now they didn't have last year. They have a little breathing room and sellers can't just ask any price they want anymore. So the buyers have a little better positioning in the market than they did last year. So they're able to get out there and they don't have to settle like they did last year. Last year, they had to pay way more than they wanted to for a house that they didn't actually love. So this year, they're being a little more choosy. They're being a little more selective, a little more careful. And they're actually going out there and trying to find the house that's even closer to that dream home. Now, why do I think this is a good thing? Well, let's just take the D or Horton situation. For example, 24% lost contracts backed out, canceled contracts. That tells me that over 75% of those buyers are still in the game. They didn't cancel their contracts. They're still moving forward, even though prices and interest rates are higher. To me, that's incredibly positive. Plus the homes that are getting canceled contracts, the builders are having no problem reselling them. The CFO of DR Horton, Bill Wheat, said that the company is reselling our cancellations rather smoothly thus far, which means guys, we're having no problem reselling these properties. And what I really like about this data, and this is the big punchline here, is that really these cancellation rates are about the same as our 2019 cancellation rates, which means what? Which means we're getting back to a normal market. I would consider 2019 a very normal market compared to what we just went through. And if you compare year over year right now, when you're comparing it to the crazy 2021, all the numbers are going to be out of whack. When you look at anything, foreclosures, they say foreclosures are up 300%. Yeah, they're up 300% from one. They went from one to four. Anything looks wild when you compare it to last year. So I think they were in this really incredibly healthy place in the market right now. Now, some of these builders, I was looking at some of the different interviews and all of them kind of across the board stated demand hasn't went anywhere. Increase rates didn't make demand disappear. The buyers are still there. They just had to take a step back. They had to put a bigger down payment down, maybe the weight a little longer, but they are still there and they are still solid. So all that tells me what the lack of transactions that we're having this year is that we have pent up demand brewing and guys, listen, the longer this goes with less transactions means the more pent up demand that's going to be sitting there caged, ready to be unleashed when the market does rebound. So I'm incredibly excited about where this is going. I think the biggest questions are is inflation peak, which many people think it has and where our interest rates really going to go from here. Only time will tell, but if you've been following me for a while now, you know that as interesting as it is to follow these micro movements in the market, it's never going to stop closings from happening every single day. Put your systems in place, keep it simple, fully commit to a routine long term and watch your business explode with that. Thank you guys for watching. Let me know if there's anything in the world that I can do for you. I'm here to do everything I can do to help you get out there and crush it. We'll talk to you guys on the next video. Let's go.