Sellers, pay attention to lowball offers
If home's been on market awhile, it's time to rethink strategy
By Dian Hymer, Sunday, May 18, 2008.Selling a home can be an emotional experience because most sellers have a lot more than money invested in their homes. So, it's understandable that sellers might be reluctant to respond to an offer that is for less than the asking price.
Most sellers have a difficult time being objective about their homes. But, detachment is something sellers should strive for, particularly when the market favors buyers. To be a successful seller in a buyer's market, you need to be able to put yourself in the buyer's shoes. Ask yourself if you were a buyer if you would pay the price you would like to ask for your home.
In a soft market, like we are currently experiencing in many parts of the country, buyers are prone to make a low offer on any listing that doesn't receive offers from more than one buyer. The exception is when a listing is priced so competitively that a buyer recognizes a good deal and buys the property before others have a chance.
Some sellers might be inclined to inflate their asking price so that they will have room to bargain with a buyer. This is a risky strategy for serious sellers. In a buyers' market where there are a lot of homes for sale, the best listings at the best prices sell.
The listings that don't sell usually need price reductions to get them to a marketable range. If the market is trending downwards, this could mean selling for a lower price than might have been possible if the listing had been priced competitively to begin with.
HOUSE HUNTING TIP: Sellers whose homes are not competitively priced are prime targets for low offers. Even if your home is not badly priced, you could receive a lower-than-asking-price offer if market conditions are uncertain. Rather than being insulted by a low offer, sellers should view it as the beginning of a dialogue that could result in a sale.
Pay close attention to the buyer's financial capability. Gone are the days where buyers could buy a home with little or no cash down, and without verifiable income. Today's buyers are subjected to far more financial scrutiny by lenders than they were a year ago.
Ideally, buyers should be preapproved for the financing they need before they make an offer. If they are not, make sure there is a clause in the purchase contract that requires the buyers to apply for financing within a several days of acceptance.
Find out what kind of financing the buyers are applying for and which lender they intend to use. Some mortgage lenders recently failed to fund buyers' loans at the last minute. Make sure your buyers receive underwriting approval from a bona fide lender. The number of days for lender approval should also be included in the contract.
Sellers who receive an offer that is unacceptable regarding any of its terms and conditions -- not just the price -- should have their agent draft a counteroffer. Buyers and sellers often don't know in advance what price they'll accept until they're in the midst of a negotiation.
For example, a seller who bought another home before selling might accept a lower price if his house has been on the market awhile and the buyer's offer is not contingent on the sale of another property, and if the transaction will close quickly. Likewise, a buyer could agree to pay more than he thought he would if interest rates were to drop.
THE CLOSING: The counteroffer process can happen quickly or it can be long and tedious. Be prepared to explore all options before letting a negotiation fail.
Dian Hymer is author of "House Hunting, The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide," Chronicle Books.
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Submitted by Wenceslao Fernandez Jr, BS, Realtor, CDPE on May 19, 2008 - 1:20pm.
The above is great advice. However, I caution that "Sellers whose homes are not competitively priced are prime targets for low offers", may find that in fact, are targets for non-inclusion in a buyer's tour!
Improperly priced homes today get seen last, if at all.
When I'm working with a buyer, I will show him/her properties within their range of financial comfort. Obviously, these buyers have been prequalified, interviewed by me and we have built a certain amount of rappor.
If we have norrowed the search to a neighborhood that fits the buyer's price range, I'm likely to be showing properties on the upper end of the range, dead last.
Why start negotiating from the top when there are so many alternatives at the bottom or even the middle range of their price comfort zone?
If I'm able to show them their dream home at the bottom or middle point in their price range, from which we can begin negotiating...those sellers at the upper levels of the price range just priced themselves out of the market.
By the time they figure it out, my buyer will be enjoying their BBQ and/or pool in their new home, while the seller is still chasing the market with price reductions that by then, may not even be enough.
This is why properly pricing your home from the time you decide to sell in TODAY's market (not in 2004 or 2005's market price levels while living in 2008), is crucial.
Sellers need to pick their Realtors like they'd pick their brain or heart surgeon, or attorney who's about to defend them for a crime they didn't commit (or even one they did commit).
Don't pick the one who tells you what you wanted to hear. Pick the professional who can SHOW YOU why you should follow their pricing advise.
The days of "let's start from the top...there's always time to negotiate down" are over.
Price too high...and you may never see a buyer come through your door, let alone hear an offer to begin to negotiate.
When this happens, and if you went against your Realtor's advice at the time of the listing presentation, shame on the Realtor for taking the listing, causing you so much frustration, stress and waste.
Next time, pick a strong Realtor who will get you to the closing table, not one who will use your home to sell the neighbor's better priced, similar home.
More than ever, buying right today, matters more than a seller's extras in their home. This ensures buyers a smart investment when the market recovers.
As a matter of fact, many buyers are not interested in the extras. They want the best house at the best price. They want value. Everything else is icing on the cake. Many don't even eat it, but take it with the slice.
Moreover, sellers should see themselves not as loosers for selling so low, but as smart buyers instead, who are about to take as much advantage of the same market conditions when selecting their new home.
If the seller feels they cannot afford to drop the price...they'd be considered either short sale candidates (if their hardship story is there), or simply upset homeowners.
For those who turn out to qualify for short sale, worrying about the price should be the last thing in their mind if their finances are in a dive situation.
For those who are simply upset homeowners, the best thing is to stop freting, wait it out, and control their stress, ulcers and frustrations by simply relisting when things recover some.
The danger with this last approach is that, NOBODY knows the future. Elections or no elections, nobody knows where the market will be this time next year.
Therefore, waiting may only mean, finding yourself in a side market a year from now in May, 2009, wishing you had taken that price reduction or listed at the price your Realtor recommended and sold back in May, 2008.
www.MiamiRealEstateKing.com
Certified Distressed Property Expert
Miami-Dade County, Florida.