So you’ve received an offer on your home. That’s good news, right? Well, not always, some sellers might think.
It seems that in this market, where buyers perceive they have the upper hand, low-ball offers are quite common. In some situations it might be from an investor who has never even seen the home but decided to throw an offer at it anyway. Other times it might be a first-time home buyer who really is just hoping to get a good deal.
Either way, sellers need to realize not all offers are alike and to treat them accordingly.
The first step is always to set aside an emotion. While the seller certainly has emotions tied to his/her home, the buyer doesn’t. Even first-time home buyers typically haven’t attached themselves to the home yet. The good news is that there is an offer. An experienced listing agent will be able to counsel the seller as to their response options.
Understand that any buyer is concerned with overpaying, so they’re going to make an offer less than the asking price. It’s not a reflection on the seller or the home at all. The best strategy in almost all cases is to counter-offer. The buyer wants to know the seller is willing to compromise some.
One strategy is for each party to slowly inch their way to a center point; that is, each side gives a thousand dollars or two to compromise until a final dollar amount is reached. More recently, though, one side will counter back with their final offer, a “take it or leave” amount. This is usually a response to a ridiculously low offer. It’s not worth the seller’s time or the agent’s to bother with it much more than that. Be aware, however, that many homes have gone under contract in this fashion. The buyer might come all the way up to the seller’s bottom line.
Another thing to consider is that price isn’t the only term offered in the contract. The contingencies are often almost equally important as the actually agreed upon price. Terms such as mortgage financing, attorney approval, home inspection approval, home sale approval, earnest money and even closing dates are all worthy of consideration and may mean more to the buyer than someone might think.
So when a low-ball offer comes in, check out the rest of the terms. Perhaps the buyer is willing to waive everything else. A cash deal that closes in two weeks with no home inspection approval may be worth thousands of dollars difference in price. A quick closing can save the seller and one or two mortgage payments. How much is that worth to a seller who has already moved out?
Should a low offer be presented, consider asking your agent to ask the buyer why he feels the price is justified. Find out what they’re thinking. Maybe they’re basing it off bad information, or possibly the market has changed and the seller’s home is now worth less than it was when it was listed nine months ago. Asking such questions can sometimes clarify the situation. Occasionally, the buyer’s real estate agent will send over copies of comparable properties to support their offer. The listing agent will need to verify these are good “comps” and perhaps have a discussion with the other agent about what the best “comps” really are.
Asking more questions about the buyer could be important, too. See if he's willing to offer information about himself that might be helpful to the seller. Did the buyer live in the neighborhood growing up and they want back in but can’t quite afford full price? Perhaps the buyer is a military veteran who is on a fixed income. These factors might help a seller to consider a slightly lower offer than was previously considered.
Often, when the buyer’s agent and the listing agent talk, they are able to, with their client’s permission, reduce the price gap. Perhaps the seller comes down a bit and the buyer comes up a bit. This may be done verbally between the parties but be aware that even counter offers should be reduced to writing and signed by the parties to protect everyone involved.
Finally, a seller needs to consider how the property is perceived. Is he knowingly or not asking for low-ball offers? Does the listing say “bring all offers,” “motivated seller," or “short sale?” These are all tips of desperation and may actually be initiating low offers.
An offer is a good thing, even if it is lower than hoped for. Talk with the listing agent to get recommendations as to how to proceed and know that it usually isn’t personal.
• Jim Haisler is CEO of Heartland Realtor Organization, a nonprofit trade organization providing products, services and education to the public and more than 700 real estate professionals throughout northern Illinois. He can be reached at 815-459-0600.