Posts Tagged ‘Price’

Home Sellers: Offers & What to Look For

After I wrote the post on Home Buyers and Purchase Offers, a few people have asked me what the seller is supposed to do when an offer comes his way. In other words, in addition to the efforts of the two real estate agents to get the buyer to write a fair price offer, is there anything the seller can do to encourage the potential home buyer to come up with a price everyone can agree on and lead to a successful transaction that leaves everyone happy? The answer of course is yes.

Firstly, Encourage an Offer

If you are a seller in this market, I don’t have to tell you that it is tough out there. As a seller you are competing against short sales and bank owned properties. The most important thing you can do today is to distinguish your house from the REOs and short sales. I will deal with this aspect of selling a home in another post, but for now remember that you must price your home right. It might seem a little like you are gifting your home to a buyer, but you cannot argue with the market. Obviously, you wouldn’t be selling right now if you didn’t have to, so do everything you can to encourage an offer. Ensure that your Realtor® is letting every buyer inquiry know that all reasonable offers will be considered.

Now that the basic assumption is out of the way, let’s see what you can do with the various offers that might come your way:

The Lowball Offer

Don’t be too disappointed if you get a lowball offer. As I said in the post regarding buyers and the offers they write, you might see more low offers in this market than you will be prepared for. Most sellers think they are ready for the home selling process until they see two or three lowball offers. This might be hard, but try not to take it personally. Sometimes, all the home buyer is trying to do is get an idea of the seller’s rock bottom price. This is the buyer’s market’s counter point to the multiple offers of the seller’s market. So play along. Counter the buyer’s lowball offer with what you’re willing to accept and send it off. If the home buyers really liked the home and were serious enough, they might come back with a more reasonable offer. If they were merely tire kickers, hoping to buy the home for a song, you will never hear from them again. Either way, you’ll know. What you absolutely do not want to do is get offended and never get back to them. While you might be upset by the offer, remember it is ultimately a business transaction. Everyone is trying to get the best deal that works for them and getting angry could cost you a home buyer, albeit a clueless one.

The Asking Price Offer

Before you hurry to sign it – in case the buyers change their mind – be sure to go over all the eight pages with your Realtor®. In particular, you want to check how long the escrow will be (anything over 60 days merits a counter to reduce the amount of days), if the buyers need any money back for closing costs since that will reduce your net amount and how the escrow costs are divided. That being said, in today’s market, if you do receive an offer at asking price, remember that the buyers will expect you to pick up some or all of the escrow and closing costs. This is a reasonable expectation, no matter how many price reductions you have had. If you do wish to make any changes to this, be sure to have a verbal agreement before you send out a written counter. While verbal agreements are not dependable and definitely cannot be used instead of written contracts, it does seem to send out a message of wanting to work it out and fair negotiation.

The Over Asking Price Offer

Before you do anything, try not to faint when your Realtor® announces that your house has received an over asking price offer. Chances are, you have done a great job pricing the home and it shows extremely well. The potential home buyers have made an over asking price offer because they are concerned there are other offers on the table or they are coming. When you receive an over asking price offer, be sure to go over with your Realtor® – in addition to the points discussed above – if the home buyer has asked for any cash back for closing costs. That is common with offers over asking because the loan amount is increased by that amount. Remember that appraisals are tougher in today’s market and offers over asking might not always be a boon. Also ensure that closing costs above 5% of the purchase price are approved by the buyer’s lender.

And With All Offers…

Make sure the home buyers have a letter of preapproval for the entire amount of the purchase. Have your Realtor® talk to the lender before you sign the offer. This is perhaps the most important part. Follow all these rules and you should be just fine!

Ask the Broker: Why has that house been on the market so long?

My recent video about how to sell a home fast in any market was driven home today by a question I got from a buyer who previewed some homes with me yesterday.

The home they asked me about was an absolute keeper, at a price that beat out all the comps not only for its neighborhood, but for any other comparable neighborhood in Sacramento County.

In fact, this was one of a few homes that was such a screaming good bargain that two buyers had asked me about it, and I was really thinking I should post it here but didn’t want to have a conflict of interest with those buyers.

Their question was about whether I could call the agent to find out why it had been on the market so long. Well, I was happy to do that, and knew that while I was looking up her number I could look up the listing history, knowing that the price change would probably tell the tale.

Here’s what I found:

image

If You Don’t Understand Why The Price Is So Low, Blink

Darn, pending sale — I’d have to tell the buyers that. But there’s more of a tale here.

Of course, the buyer doesn’t have this info readily available, so their question was perfectly natural, “Why has it been on the market approximately six months?” From a Realtor® point of view, however, this isn’t a $299,000 home that’s been on the market for six months, but a $299,000 home that sold after ten days.

In the MLS, the actual pending date is 10/3, but it was entered on 10/4 as you can see above. The price was dropped from $325,000 to $299,000 on 9/24, and now there are three offers on it. 9/24 to 10/3 is ten days.

The price it started at, $395,000, is actually almost justified by the current sold comparable sales. But $299,000 is where it needed to be to finally get it done, in a slow Fall with few buyers.

Fortunately for my buyer, it turns out that there is still a possibility of making an offer on this one, so I let them know that — we even have a pretty good idea about what we need to offer.

The Market Within The Market: What’s Being Sold Here, Anyway?

There are several morals to this story:

  • Some buyers are waiting for market prices to come down another 25% or so, and some buyers are out there buying homes that are already reduced 25% or so.
  • If you wait until the market comes down, then you get to compete with a lot of buyers. If you wait until there’s a good bargain on a house you want now, you get to compete with fewer buyers. If you think sellers won’t see you coming ten minutes after all the buyers come back and start adjusting prices upward, then you make the classic mistake of thinking yourself the only greedy party to the transaction.
  • A lot of people are selling you the market, and if you’re buying a market, then you shouldn’t buy a house. The question a smart buyer asks is “am I buying a market, or am I buying a house?” There are great buys in bad markets, and dumb buys in great markets.

I’ve actually been counseling my buyers to consider some other homes that are lower priced than this, because in their situation it makes more sense and I don’t want them to get overextended. Now the trick is to find them the perfect $340,000 home that’s priced at $260,000.

In fact, instead of writing about the market, which is kind of depressing, I think a really good article series would be “bargain of the day” (or week, or whatever). In his response to Jim Kramer, Gary Keller notes that there is a “market within a market”. As I say above, there are great buys in bad markets, and dumb buys in great markets. Keller makes a similar point.

Whether you’re buying now or later, buy well. If you’re not buying at all, that’s cool, too. If you are, call, and we’ll go bargain shopping.

How to Sell A Home Fast In Any Market

image

Click the Youtube above video to begin, or here’s the link to The Price Song video.