Low Ball Offer: A Seller's Perspective

I was networking with some agents from around this great country of ours the other day and one was wondering about lowball offers on our listings and how we react to it. I don't. I'm usually quite confident in my pricing. I have a good history of selling homes at the price range I've told sellers they should sell in. However, a home is only worth what someone is willing to pay for it! Sellers need to realize this. Everyone is out for a deal, now, more than ever.

By law we as REALTORS have to present the offer to the you, the seller. If someone offers 50 bucks on your million dollar estate, I've got to let you know. Here's the deal: it doesn't bother me. If I'm confident on our pricing and the offer is significantly lower, I'm disappointed- but WE'RE ONLY JUST BEGINNING! No one says a seller must take it.

Sellers need to find the positives in an offer. Is the buyer well approved? Does the buyer want to close the property in a time frame that works for you? ETC. Often times, the rest of the contract will be largely agreeable (or easily negotiated)- leaving price as the only hurdle. One thing I'll always tell a disappointed seller, "You are X dollars closer to where you wanted to be than you were an hour ago."

It sounds a little hokey, but it is absolutely true. There's a couple of things going on in a buyers mind when making that low offer.

• Let's just see how motivated/ desperate they are to sell.
• I'll kick myself if I could have got this house cheaper- so let's go in a little low
• They're so overpriced we have to come in somewhere

These are some of the many rationales used for low offer price. They are ALL VALID. So your house is listed at $200,000 and they came in at $160,000. Maybe they only feel that it's worth 180k and just want you each to split the difference. COUNTER THEM!!!!! Worst case scenario is you never get a deal put together- best case; you sell your home= GOAL ACHIEVED!

I'm earnest....honest

One thing in real estate that is often unspoken of until needed is earnest money. Often times buyers of real estate don't remember about it and most times, first-time buyers have never heard of it. So what is it? It is money that accompanies the purchase agreement to show that the buyer is serious about buying the property; earnest being synonymous with honest....in lay man's terms- it's money that shows you're not going to flake on the deal. These funds are not in addition to the purchase price, they end up being put toward the purchase. For example, if the purchase price is $200,000 with $2,000 in earnest money, the buyer need only come up with an additional $198,000 to fulfill his/her/their commitment.

In my market area, one to two thousand is usually enough earnest money to be considered acceptable- but keep in mind every seller can hold a buyer to whatever he/she/they want. 1% of the purchase price would be nice to see and it would be great if it became an industry standard- it could take all the guess-work out of it. "How much will we need in earnest money?" "2 grand? Yikes- think they'd settle for one?" "Can I get away with 500 bucks, ya think?"

General rule of thumb, the more the better. Think of it as a collateral. If you let me borrow your car and asked me to be earnest (honest) and leave something to assure that I'd be back with it and I offered you a pack of bubble gum or one of my kids- you'd want the kid right? Sure! I'll steal your car and buy a new pack of Big Red as I fill up the tank- I'm certain to come back for my kid.....................even if you've got a cherried out '69 Camaro! Bottom line is- the more you put up, the more it shows you're serious about a house.

Buyers can lose their earnest money by backing out of the deal after the purchase agreement has been accepted by both parties. Once a seller accepts an offer on the property, showings will often dwindle or cease altogether, so if a buyer backs out, at least they have something to show for that time wasted.

Inspection Credit

When one is purchasing a home, it is ALWAYS strongly advised that he/she/they have a home inspection. Once the contract is negotiated and accepted, a buyer will have a specific number of days to have both a home inspection and attorney modification- it's negotiable, so the the number of days can change.

I'll go into specifics of home inspections in future blogs- this one jumps the gun and talk about what to do once said inspection is complete. A buyer has a right to ask the seller to repair or give credit for issues found in the home.

BUT a provision in the contract that is OFTEN overlooked is: The Parties agree that repairs which do not exceed $500 in the aggregate to remedy,shall be considered minor deficiencies for the purpose of this Paragraph, and buyer agrees to assume those repairs with no allowance from Seller.

This is my blog for today because I have a buyer purchasing a listing of mine for a good $10,000 under it's market value and nit-picking over $100 in menial repairs. Uggh. It really should be your REALTOR's job to explain that provision on either side of a deal (buyer or seller). Houses aren't perfect- NONE. A 50 year old house has flaws. A 5 year old house has flaws. A brand-spankin' new house has flaws. There's a little bit of buyer beware to be had, and that's why a great home inspector should NEVER be overlooked.

Where I go I just don't know, I might end up somewhere in Mexico.

Market Time Myth

When showing houses, one of the big questions that is almost certain to join "What's the square footage" is "How long has it been on the market?" You'd think it's a viable question but it many aspects it is not. A home might have a market time of 30 days or one of 300....does that impact its value? NOPE. That house is worth, call it, $200,000 either way.

Now I'm not oblivious to the wheeling and dealing in real estate by any means- I'm quite the established negotiator. I understand a buyers thought that 'If it's been for sale a long time, we might be able to low-ball them and get a great deal." It's possible- though usually not likely.

But the notion that a house becomes worth less money because it's been on the market a long time slays me. A house has an extended market time because the BIG 3 have not been satisfied to procure a buyer....but most importantly because of its price. If that same $200,000 house hit the market at $240,000- there's no wonder why it's been on for a long time.

There are plenty of reasons why houses become worth more or less money- but market time really is not one of them.


Since I missed yesterday's post you get two Rocktober quotes today:

Are you gonna take me home tonight? Ah down beside that red firelight?

He said, "Hey there, fellow with the hair colored yellow whatcha tryin' to prove?