In the last couple of weeks I’ve written offers for two different buyers. Both offers were on non-shortsale properties and in both cases we went in low. The offers weren’t crazy-low, but in at least one of the two I was expecting a counter-offer. In both cases, however, the offers were accepted.
This is one of those ‘Yay!… ish… right?’ situations. While we were excited to have the offers accepted, the distinct lack of haggling made us feel like maybe we’d left money on the table. As the agent, I know I should just be thrilled that I obtained the property for my client at a price they found acceptable, but I’m kind of a cheapskate perfectionist, so the idea that we *might* have gotten it for even less gives me a little bit of an eyelid twitch.
When I go back through the information we had leading up to the offer, though, I know we made the best choice we could have. We accounted for the variables and played the odds. Could we have gotten the properties for a bit less? It’s impossible to know. We might have gone in lower and not gotten them at all.
I often have clients come to me with an offering strategy they want to use to obtain a property. Inevitably these are the clients who’ve seen 73 houses and this is THE ONLY ONE they can see themselves living in and being happy about. They then proceed to tell me we need to offer 20% under list price because they saw on the news the market is still sliding and they’ll be underneath the house if we don’t buy it for 20% under market value.
This is, of course, ridiculous for about 11 reasons that will make my head explode to detail out here (not the least of which is that 20% under ASKING isn’t the same as 20% under MARKET VALUE, you dummies) but it leads me to the six factors that come together to form a non-batshit-crazy offering strategy. These are the variables you need to take into consideration on each individual property in order to come up with a smart offer that will give you the greatest chance of acceptance at the lowest price:
1. Days on market – If the property has been on the market less than a week, it’s unlikely the seller is going to go for a lowball offer. Period. End of story. Don’t argue with me, sshhhh, no really, ssshhhhhhhh. We can wait a month and if it’s still on the market, try for a low offer, but as of right now, they’re going to tell us to ‘eff off.’
2. Comps – We’ve determined that YOU like this house and the pricing they had it at got us in the door, so it’s pretty likely it’s not radically off the market value, but you never know. We really need to see what other houses in the area have sold for recently to make sure what we’re offering is neither too high, nor too low. This can also give us a decent idea of the competition involved. If it’s priced at $220K and the same model down the block sold for $250K 2 weeks ago, this one is going to go quick, and it’s likely going to take an over-list offer. Conversely, if it’s a lovely house, but super over priced, you might not even be getting a decent deal with a lowball offer. It’s possible these sellers need educating.
3. Other offers – Just because a house shows ‘Active’ on the MLS, that doesn’t mean it has no offers submitted. A decent listing agent waits until the offer is signed, accepted and in escrow to put the listing pending. Before we even begin discussions about a price, I want as much info as I can get from the agent about offers. Sometimes an agent will tell me he has an offer but it’s not full price and sometimes he won’t even tell me how many offers he has, just that he has at least one on the table.
4. How bad do we want it – Are you going to be utterly devastated if we lose this house? Is this the one and only house you will ever be happy raising your farm of Pomeranians and cuddling with your Star Wars action figures in? Or is it only ‘right’ at the right price? If you have to have it, we don’t have the luxury of taking a risk on price. We need to go in with an offer we’re pretty sure will be accepted. If you’re ‘meh’ about the whole thing, then a bit more risk is suitable.
5. Market conditions – In 2005, you couldn’t expect to close a deal for less than 10% over asking price and an appraisal waiver. That was an extreme case, but what’s going on in the market is always relevant and factors into an offer.
6. Overall strength of our offer – If you are giving the seller everything else they could possibly want (quick close of escrow, no seller concessions, cash, etc) you can expect to wring the very best price out of them. If you’re FHA financing, with a tiny earnest deposit, a 60 day close of escrow and you write in that their fancy stainless steel front-loading washer and dryer convey, they’re going to be less likely to accept your $50K under offer.
If HGTV tells you differently on a show called, “Only Suckers Pay Anywhere Close To Full Price” please take a deep breath and repeat the mantra, “I will not make my real estate agent loony with unrealistic expectations.” 10 times before calling me.