Wednesday, October 8, 2014

What To Do About Low First Offers

One of the most frustrating situations for real estate agents is how to advise buyers and sellers about making or responding to the first offer on a home.  It doesn't come up all the time, because some homes are clearly going to move quickly, and some are so obviously priced to sell that buyers know that they cannot play around.  However, it happens more than one might think, that the buyers put in (usually with advice from outsiders and not from real estate professionals) an offer so far below the asking price that sellers are insulted, and often do not even counter it.

It's a little baffling as to why this should be so common, because I've written many times about buyers knowing what homes are worth, from doing their internet research and seeing so many that are for sale.  The buyers should have a pretty good idea, in many cases, about not only what the property is worth, but about what it will fetch on the open market (although those numbers are arguably the same, we all know exceptions).  Yet somehow, they frequently come in with a first offer twenty or more percent below that figure.  Sometimes, it's because they like the house, but can't really afford it, so they are taking a flyer, much like applying to a "reach" college.  Lot of times, though, they are hoping that they can reap the benefit of a still-depressed market, and get a bargain.

While bargains do occur, sellers also know, in many cases, what they think their home will bring.  Putting in a very low offer insults them, both from the point of view that they think their home is desirable, and should be appreciated as such, and also because they think buyers are trying to take advantage of them.  Our job then is to get them to look beyond those feelings, and deal with what's on the table.

 So many people think that the price ultimately paid will fall in the middle between the asking price and the first offer that we wonder why--how is real estate different from any other field in that regard?  Plenty of other things sell at the asking price, or near it.  However, there is a common perception that, if you lower your price up front, you will get less in the end. Again, why?  No one forces a seller to take a particular offer.  While you can always hold firm, holding firm at the asking price means that you think it will sell for that.  Unless you are confident, and your Realtor agrees, you should counter at some number--it doesn't have to be far below asking, just enough to keep the ball rolling.  We need something to work with, and we need the buyer to stay interested.  It's just the fact, unfortunately, that you can't make the buyers' first offer for them.  Remember, though, that it's often the second round that indicates what they really think, and how high they can really go.  And it's easier to get another offer, if other agents and clients know that someone is serious enough to bid.  It deals with the current problem that buyers think everything will still be for sale when they are ready to act.  Wouldn't it be nice for sellers if that weren't true?