The Return of Multiple Offers

Though we are sadly aware that prices are still falling in Connecticut, even as they keep rising just about everywhere else, we see signs of hope in the return of the multiple offer.  Well-priced homes, especially during the spring "rush", attract lots of attention, and can go for higher prices if they can spark a bidding war.  Bidding wars are great for sellers, while they are nerve-wracking and often frustrating for buyers.  It doesn't mean that houses will sell for more than they are worth (and, in any case, financing contingencies would mitigate against that), but they do stop bottom-fishers from getting exceptional bargains from avid sellers.  Nor does it mean that the home was priced too low, as sellers may inevitably think.

Their appearance in our market should alert buyers, however, that putting in really low offers on homes that haven't sold, or even new listings, on the theory that "nothing is selling", can really backfire.  Make a fair offer, and be prepared for the fact that you may not be the only buyers in the picture.  Think about what it's worth to you, and make the highest offer that you would be unhappy to hear that someone else paid; i.e., the price that you would have paid, had you known that you could get it for that amount.  And be glad that your taste is shared by others, because that will help you when you go to sell it someday!

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?

Listing Prices and Offers

This morning at our New Haven office sales meeting, agents were saying that people still want to price their properties too high for the current market. We went on to recount numerous stories both good and bad; people who priced too high and ended up with very low offers, and people who went lower and got multiple bids over the asking price. We believe that buyers know the market conditions, and that they will correctly gauge where offers should be. When it looks like a bargain, they know to bid high. When it looks too high, however, most people deduct too much, figuring that they are in for a long round of negotiations. And, of course, that's exactly what that seller was thinking when he listed too high--a self-fulfilling prophecy all around. Agents told stories of people who ended up selling for too little by using this latter method.

We agreed that sellers don't realize that most buyers search by price. That is, they go onto the internet, our website, or Realtor.com, and they enter the sales price they want to pay. Therefore, if you list your property at $400,000, hoping to get around $350,000, a person who can pay $350,000 may never see your home, because they would be searching in a range that would not include your asking price. So, even though you might be willing to bargain, you may never get that chance, because the above buyer will be out looking at houses listed in his price range. Once you realize the way the process usually works, you will understand why Realtors push so hard to get you into the range that will give your property the maximum exposure, and therefore the greatest chance of selling.