Preface: This post isn't so much about a seller not accepting the "first offer" or them wanting to hold out for something better. It is more about how getting a good offer, too quickly, or one that is unnaturally too high, which later falls apart can have a disasterous impact on the rest of the transaction.
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In today's market, getting an offer the first week a listing is on the market can either be a blessing or a curse, especially if the offer price is TOO high!
Allow me to explain.
You take a new listing. You work very hard to have the seller understand the closed comparable sales, active competition on the market, as well as where the market is trending. Of course they want to list high (it is to die for you know) and you want an aggressive list price. Eventually, although begrudgingly, you agree to try at the higher end of your listing range.
The first weekend the listing is active, you get 8 showings! Your seller is beaming and ready to start packing because they can tell how much each and every one of those prospective buyers loved their house!
Monday morning you get a call from a buyer's agent, who coincidentally doesn't do much business in this town and has no real insight into what homes sell for in this neighborhood. Her clients are relocating from Saskatchewan. They are offering just under list price and need the sellers to get out in 30 days.
These sellers cannot possibly accomodate that timeframe. They still need to find a house and their kids are in school, they haven't thought about packing and 30 days is way too much an inconvenience and....
Here comes the worst part...
"If these buyers loved the home and are offering near full price, there will be many, many more buyers standing in line right behind them. Perhaps the home is listed too low? Maybe we should consider raising the asking price!"
The story above is slightly embellished to make this blog more impactful, but it is based in truth. The Sellers didn't raise their asking price, but they did end up selling their home, more than 6 months later, for well over $50k less than their original offer!
If an offer comes in too fast or too high and doesn't result in an executed contract this situation can, and often does, create a huge stumbling block for the future progression of the sale process.
- It skews a seller's expectation. These fast and furious offers are often more personal value driven and shouldn't be perceived as true indications of market value;
- It can potentially create a sense of distrust between seller and their agent, especially if the offer is at or higher than the selling agent's suggested list price. In turn, the seller's agent will have an even more difficult time trying to get the price reduced;
I've shared this with my sellers, up front. I've told them to be careful what you wish for!
Jo
JoAnna Siminerio
Weichert Realtors - Marlboro / Manalapan
JoSiminerio@optonline.net
www.JoTheRealtor.com
732-598-6823
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JoAnna Siminerio
Weichert Realtors - Marlboro / Manalapan
732-598-6823 cell 732-536-4400 x116 (office)
JoAnna@JoTheRealtor.com
www.JoTheRealtor.com
Let's Connect!
JoAnna - I can't tell you how many sellers have rejected a first offer, only to sell lower later. It's so easy to feel they've underpriced it and that there will be lots more offers.
JoAnna - I always tell my seller's that the first offer is the best offer, and it always is :)
I learned the phrase that your first offer is usually your best offer in my first week of being a Realtor and 10 years later it is amazing how true it turned out to be. I can't tell you how many listings I've seen sell for less months later when the seller had a great offer in the begining.
Only three comments before me? This is a great post. Where are the "Pros"?
Now just to look at the "other" side of the business. My experience (I admit only 4 years as a Realtor) has been different. Most of my listings have sold after the third or fourth offer. At a higher price, and in a down market. What do make of that? Very desirable area? Excellent marketing on my part? Or just luck? It would be interesting to see what you think.
lol Ken, thanks for the compliment.
I've had very little time for posting on Active Rain these days. Perhaps others are busy as well.
The think the first responders were missing my point.
There is a separate post in the concept of a first offer being a best offer and why a seller should give it serious consideration.
However, what I wanted to talk about is when a Seller has the unfortunate experience of getting an initial strong offer that never comes to fruition. Maybe the buyer reconsiders, maybe terms can't be met, maybe the buyer isn't qualified enough to make the seller want to accept their offer. In any case, the Seller gets an idea of value in their mind and it becomes VERY difficult to make them see otherwise from that point forward. Thus, throwing a huge wrench into the works.
As for your experience, I've been encountering the same more recently as well. Mostly because the first few offers are not real. They are lowball offers made by buyers who are only in the market to steal homes.
Very true Joanna. I have seen this happen over the years on a few occasions. Once the seller gets that high bid they think it will just happen again a short time later. Most of the time that never happens.
EXACTLY Bill... because they had an unnatural affirmation of THEIR perceived value, it takes forever to make them see reason.
Hi JoAnna, Great Post! Very well said.....and Bill's comment is right on!
Hey Jo,
Excellent points! I hope this didn't happen to you.
How about when this happens:
There are times when Buyers will make very low offers on various homes in a bad market, and for whatever reasons, the Sellers accept, thus producing a false impression of overall market value in that area.
This exact thing is happening in my area and people are forced to list at lower prices (if they need to sell). I think Richard wrote something akin to this.
JoAnna: I've not been posting either. Too busy. Thank God. More later. I've plenty to say.
Thanks Essie!
Tony, It didn't exactly "happen" to me, but I was involved... long story! You are exactly right. For exactly the reason you mention... foreclosures and short sales are unnaturally bringing down market value. Because there is no emotional value when negotiating with a bank, home prices in some neighborhoods are really taking a licking due to what a bank is willing to let a property sell for.
Kenneth, I'm glad you are busy. Any of your sellers looking to come over the bridge? Here in Monmouth County, there is still a strong belief that the Staten Island market drives the New Jersey market. As such, I'm glad YOU have no time to post!