4 Steps to Delivering Bad News

Your loan is denied. The property did not appraise. Your lock expired. The seller won’t agree to do the required repairs.

I’m sure that you have had to deliver the bad news.

Some people were okay with it. Others went ballistic on you.

While there is no “best way” to deliver it, there are some steps you can take to communicate negative info with clients and real estate agents.

Instead of picking up the phone right away and blurting out the news, take about 10 minutes to “frame” an outline of what you are going to say and how you are going to say it.

Listed below are four steps to consider.

1. Anticipate the questions you will be asked. In order to do that, you have to be able to get into your client’s head – think and feel from their point of view. If you deliver the news and they ask you a dozen questions that you can’t answer, they will feel that you really don’t care and haven’t given any thought to a possible solution.

Sometimes you don’t have ALL the answers, so you may have to make a few calls, send a few emails to verify facts.

Example: The appraisal comes in lower than the sales price. Advise them about the process to reconsider the value. What’s the alternative if the value cannot be increased?


2. Be prepared to explain in a broader context. If the buyer decided to lock the interest rate and the rate expired through no fault of your own, you may need to explain how rate locks work and why you are not able to give them the same rate. If the new rate is higher, show them the difference in payment between 1/8% higher rate bases on their loan amount. Or they may have to pay a point to maintain the same rate.

If the lock expired due to processing or underwriting delays, you’ll need to explain (meaning, tell the truth) and see if there is some concession that you or the company can make to honor the commitment.


3. Understand your client’s frame of mind. Your clients have ways of looking at the world and interpreting information from their own perspectives. Some clients will react emotionally and some will be calm and pragmatic. Think about your client’s mindset as well as their situation. Has your buyer sold their home and were hoping for back-to-back closings? Do they have a moving deadline? Going back to step #1, determine if there are alternative resolutions to present to them.

For example: The title work shows a large judgment against the seller that needs to be cleared up and will delay the closing. Deliver the bad news with an estimated time frame for clearing it up. If it can’t be cleared up by the closing date on the contract, give them alternatives—extend the closing date or cancel the deal.


4. Have a plan for next steps. Let your client know that you are a professional who understands their situation – both the emotions involved and the practical issues. You need to convey that you have the experience and expertise to guide them through this difficult time. Even if you don’t have a plan for how to handle the situation right now, give them a time frame for when you will get back to them with a plan.

Last thoughts.

Deliver bad news as soon as you can. Don’t procrastinate, thinking that things will get better. The longer you wait, the worse it gets.

But, you do have time to ask questions and come up with a game plan. Put yourself in their shoes, because you want a satisfied client who realizes that you are looking out for their best interest — even if the problem is your fault. They will respect you for being honest.

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