We hear this over and over as professionals. The first offer is the best offer – especially when there are no other offers on the table. This viewpoint has withheld the test of time. What remains to be proven is whether this perception is the truth or a tale that we have all accepted as true.
Not Taking The First Offer Cost The Seller $10,000
Your listing becomes active in your market and a few days later, an offer is received. You, as the agent, are excited about presenting it to the seller after thoroughly reviewing it. “Wow, that was fast,” says the seller, “Why don’t we wait, since this came so quickly, and see if we get a higher offer from another buyer. Someone else will also want my home and be willing to pay more.” But does another offer come? Nope. When this property finally did sell, it was 3 months later. The offer was less, and the seller accepted it. She ended up netting $10,000 less than had she accepted the first offer. Ouch!
Sound familiar? Many sellers think that the Realtor just wants to sell the property fast and make their commission. But while that may be true of some, most Realtors have the sellers’ best interests at heart.
The Importance Of Pricing Right The First Time
When a home first hits the market, that is when all the excitement begins and there are many agents and buyers who are eager to see what the home has to offer. Is price important? Yes! A home that is priced at market value or below will receive multiple showings and hopefully more than one offer. In a buyer’s market, a home that is over-priced will sit until a price reduction takes place. (A buyers’ market is more than 6 months of inventory based on closed sales. A sellers’ market is less than 3 months of inventory based on closed sales. In a seller’s market, when inventory is low, properties can be priced over market and sold at a higher value, but condition and other factors do apply.)
A home that has been sitting on the market for an extended period of time raises questions. What is an extended period of time? Let’s say that the average days on market in a particular subdivision is 30 days. If the home that is for sale has been on the market for 90 days, that puts an alarm in both the buyers’ and real agent’s head. “Why has it been sitting on the market so long?” Buyers are thinking, “What is the problem?” When the home has been on the market longer than the average days on market, that can cause a problem. Buyers see this as an opportunity to make a lower offer.
Examples of missed opportunities.
The biggest missed opportunities I have seen in the last couple of months involved two listings:
The Seller’s agent put her listing on the market and received an offer within the first 30 days. The seller was willing to work with the offer. The problem was that the buyer’s agent was unwilling to negotiate the terms and said take it or leave it. This did not sit well with the seller. So the seller chose not to move forward with the offer. Did emotions play a role in this decision? Yes! Sellers can get very insulted and take it personally when an offer is received that they perceived is way under the market value of their home.
What happened next? Nothing. The home has been sitting on the market now for over 6 months. Is there a problem with the home? No. The initial blast onto the market was met with fervor, but then that fervor died. Why? Summer turned into fall and the market went into holiday mode and slowed down. How many price reductions have there been since the initial offer was turned down? 3 price reductions. Why? More and more properties came on the market and now there are many properties for buyers to choose from and everyone wants a good deal. The first offer that was turned down has now turned into seller remorse. Hindsight seems to have all the answers. Unfortunately, it is too late.
An investment property
Then there is the case of the investor who renovated a waterfront property, and it was gorgeous! But it did not sell or receive any offers. Why? It was totally overpriced. When I asked him, what he thought his property was worth, he gave me the price of another unit in the building that had sold for that price. He naturally thought he would receive a similar offer. He never did. Why? Because his unit was on the first floor and the other unit that sold at top price was a penthouse unit.
When the property sold at the higher price is an important factor also. It may have sold when the real estate market was more of a sellers’ market and the inventory wasn’t so high. Or maybe that perfect buyer was available for that property at that time.
Months later, market conditions or buyers wanting the property have changed. So should the seller sit and wait for the perfect price? They can, and that may hurt them in the end when they add up the costs of staying and not selling. Sometimes it is better to move on with life.
Use Market Statistics To Help Sellers Understand
There is a natural rhythm to the real estate market that agents who study local market statistics know to be accurate. Hiring a professional real estate agent can make a BIG difference if we are those agents who understand statistics and have incredible negotiating skills for our clients. It’s also important we communicate to our clients that negotiating is not just about price, it is also about terms.
The primary statistics and trends a professional real estate agent knows include:
- How many homes are for sale in the local market? By city, county and zip code.
- How many homes are for sale in your subdivision?
- How long does the average home stay on the market until it is sold?
All this information is available in your local MLS, and some brokerages also invest in companies that specialize in compiling this information for their agents.
Use this information to help your clients make informed decisions. The reality between life and real estate is that you can look back, yet it will not do you any good. The real estate market is finicky. One must always live in the present moment. Moral of the story: grab that first good offer and work with it.
Written for Form Simplicity by Janice Zaltman, a a Realtor, LEED AP, Marketing Coach and Writer with more than 20 years of experience in the sales, marketing and media fields.