There are a few inextricable truths in life. It’s a bad idea to have a “stare into the sun” contest. It’s a bad idea to date your best friend and it’s a really bad idea to get into a car with a stranger to help find a lost puppy….even if the driver offers you candy. Likewise, it’s a bad idea, if you are a home seller, to turn down your first offer.
If you’ve been in real estate for any length of time than you have probably heard the term “the first offer is the best offer”. There is a reason why it’s a familiar phrase….BECAUSE IT’s TRUE!! If I were taking a cross-country poll, I would say, the first offer is the best offer, 9.9 times out of 10, with a margin of error of +/- .1%. But still…you can take that to the bank. Every agent who has been in the business long enough has either lived it personally or has heard a story of a seller refusing a really good offer and then eventually having to sell for a lot less some time later. This is the inextricable truth of real estate.
Case in point. Agent Bob lists a fairly decent house in a good area. There is one problem with the house. It has settled unevenly over time and is a little crooked. Okay, it’s a lot crooked. It’s not going to fall down or anything but you need to rest a brick against every door to keep them from slamming shut. Given its slight tilt, the Agent Bob priced it accordingly and within the first week received a pretty decent offer. Not over asking, but pretty close. Let’s say within 1% of ask. The Seller flatly refused the offer and in fact cancelled the listing and relisted for more than the first asking price. This is, after all, the Toronto market where it is our inalienable right to expect multiple offers over asking on every property we list. Well, that was 40 days ago and the house was just reduced to the original price. I guarantee it will be around for a more weeks before it eventually sells for much less than the first offer. There are only three possible reasons why the seller refused the first offer. Either they are just plain greedy, they thought they knew more than the listing agent or they actually knew that one person who turned down the first offer only to get a higher offer later. Dear Mr. seller, how are you feeling now?
I asked the question to a Realtor Facebook group and sat back to take in the plethora of stories. Everyone had an anecdote including one agent who said her parent Realtors used this talking point back in the 60’s. Ok so it’s not just me….IT’S EVERY REALTOR ON THE PLANET. So why don’t Sellers listen? Often it is as simple as the first offer happening too quickly. Hey, that means that you have done your job by pricing the house just right. The stars are aligned and a Buyer is ready to go.
Knowing what to say to a Seller starts well before the first offer arrives. You need to give every offer its full consideration and attention. This is not the time to be cocky. Afterall, you only need ONE qualified buyer and you can’t sell it more than once.
There used to be an old saying that the toughest sellers were real estate agents. I’m not really sure why, maybe it is because they are so close to the daily minutia of the market that they can easily pick apart the competition. But lately I’m not so sure. This week I came across two interesting situations. In the first, A client called the agent crazy for suggesting a list price that was $80,000 lower than what he expected. The agent, a seasoned veteran with lots of experience in the neighbourhood under is belt was nearly shown the door. In the second situation a Seller was distraught that her house only sold for full asking price, with one offer. How did things get out of whack so quickly? When did the public stop trusting an agent’s research? For starters, Toronto has enjoyed one of the longest periods of sustained property appreciation ever. That has led to the belief that prices will never come down. Clearly there is a disconnect in place. On one side, the media is hitting everyone over the head with reports saying the market is cooling rapidly but on the other side, some sellers are refusing to believe that news has anything to do with them or their property. So I question whether we, as agents, are doing our job?
The truth is that when we are called in to evaluate a home, our job is to 1. Provide a range that the property should sell for given current market conditions and based on historical data of past sales. 2. Determine a strategy to employ that would best suit the situation in order to provide the maximum exposure to buyers. As easy as it seems, it’s not. Subtle nuances in the market play a huge role in the evaluation process. Property assessment roles may tell you what the house down the street sold for, but it doesn’t mention the Wolf stove and custom kitchen or that the house’s foundation is collapsing. More importantly, assessment roles don’t tell you that one house sold in a Buyer’s market and another sold in a Seller’s market. All that critically important information comes from the grunt work an agent does as part of their daily routine. It cannot be replaced.
A while back I wrote about market value, you can read it here http://bit.ly/Quk3S0 So the question we should be asking our clients is Do you want me to tell you what you want to hear or do you want the truth? Setting expectations ahead of time should be our primary goal. In the case of the “only one offer” the agent did a great job of telling the client not to expect multiple offers in the first place. If it happens it is a gift. She also came prepared with a full competitive analysis of the neighbourhood and showed the client, after the sale, that they should take comfort in the fact that they set a new “high water mark” on the street. For the client who wanted to list at a higher price, the agent was able to clearly demonstrate how he arrived at his price in a way that left his client’s emotional attachment at the door.
It reminds me of the story one of our agents told about an agent who booked an appointment for 7pm on a house that was vacant and had no power. Our agent told her she couldn’t go in after 5pm because it was too dangerous, to which she said she only worked after 6pm because she had, what she called, “a regular job”. Am I the only person out there that believes you can’t do this job part-time?