This Offer is Lower Than The Seller’s Expectation.
Despite all we hear in the media about multiple offers and the hot Toronto Market, there are still lots of houses that aren’t flying off the shelves. In fact there are plenty of properties, condos excluded, that seem to be just sitting around. We have one great listing in our office that is a total surprise with 36 showings in 2 weeks but no offers. Now it may be a tad overpriced but it is at least within spitting distance. So apparently it’s not just the sellers who are frustrated. Agents are feeling it too. Well last week’s Mastermind touched on the interesting topic of submitting an offer that is lower than a Seller’s expectation, also known as a “low ball” offer. First of all, how low does an offer have to be before you consider it a lowball? As an example, lets say we are talking about a $600,000 house. Is a low ball $580k or is it $520K? The short answer, of course, is that it depends. If every house on the street has sold for $525-530K then a $520K offer is not far off the mark, but if those houses are selling for $599-625k then yes, $520k is a bit of a stinker (presuming the market has not changed). So I wonder if low ball offers are really about perception.
The reality is that during the course of your career you will inevitably either show up at an offer table with what will be perceived as a “low ball” offer or you will be on the receiving end of one. How you play out the offer will determine if you win or lose. Here’s the thing. We are all capable of coming up with a fair price. There are a lot of tools at our disposal. But generally homes are priced too high because eith the seller assumes his home has more value than a similar home or the agent has priced it high in order to get the listing. As a listing agent you have to decide; A. Is this a listing worth taking in the first place? B. How much over market value does the Seller want to list for? C. Can I convince agents to submit an offer on this over priced listing? D. Will I be able to convince the Seller after a few weeks on the market that the house is overpriced? E. If someone submits a low offer (actually a good offer) am I capable of convincing the Seller that it is worth accepting? F. How much is this listing going to cost me in terms of time and money? These are all serious questions to consider at your initial Seller interview.
On the buy side, you have done your homework. You have looked at all the comparable homes, in fact you have the experience of actually touring previous sold homes and had even sold one just a few houses away. If anyone knows the true value of this listing it is you and the buyer has hired you to get him that house at fair market value. The only problem is that the house is listed $100K over the previous sale and it has been on the market for two and a half months. The Sellers paid to much in a bidding war last year, they renovated a bathroom and put on a new roof and now they are getting divorced. It’s time to put your skills to the test. There is no question that you face an uphill battle. The Sellers are not willing to be the only couple in the city (in the past 15 years) to lose money in real estate. Is there a solution to this insurmountable problem?
As Joe Friday said, all you can do is present the facts, “just the facts”. Here is the market, here is the buyer, and here is the money. There is no room to interpret it any differently yet there are a few things you can do to cushion the obvious blow to the Seller’s ego.
1. Try to present the offer in person. A low offer delivered by fax is just not going to work in your favour.
2. Be empathetic. Understand the Seller’s pain without seeming contrite.
3. Offer a long irrevocable time to let the Sellers come to grips with your offer on their own terms.
4. Talk about the appraisal function and how the sale might not meet financing conditions at their price.
5. Convince the Sellers that the Buyers are willing to make concessions on certain items in the house.
6. Be willing to let the offer lapse and try again later.
Hopefully a little time to digest the offer is all a stubborn Seller needs. What is it they say….time heals all wounds? If you have been in real estate over 20 years then you know that it IS possible to lose money in real estate and losing money is likely to stir a bigger emotional response than making money.
The opinions of this Blog do not neccessarily represent the opinions of Bosley Real Estate.