What should you do if you get early offers?
It’s a scenario I’ve seen what feels like a million times – A property hits the market, an eager buyer who quite often has been looking for quite some time and suffered numerous disappointments, makes a strong offer early on and the owner refuses to accept it. Much of the time, a property owner’s reaction to an early offer will be to assume the asking price must be too low, or that if they hold out they are likely to get more. Any good real estate agent will tell you this is normally not true. When your property first hits the market, it is likely to attract the most interest in the early stages of the campaign, while the property is still fresh and new to the marketplace. Contrary to what many people think, as the seller this is the ideal time to go to contract – The home is still new and exciting, interest is at its peak, and buyers are likely to have much more urgency for fear of missing out. You as the seller have the upper hand in the negotiation.
The problem you will soon face is this: As each day passes by, that interest will start to wane. The volume of enquiry will gradually drop off. You will notice less and less traffic through your weekly open houses and the listing will, if allowed to sit for too long, go stale. Your internet placements will be pushed further and further down the portal indexes as they are usurped by newer listings. Eventually, your property will become a lemon. New buyers to the marketplace will be aware that the property has been on the market for a long time and will naturally assume that something must be wrong with it. Nobody wants what nobody else wants. This is the worst possible scenario – Even if you do get someone interested, they have the upper hand in the negotiation. They have little or no competition and will use the property’s lemon status as leverage to drive your price down.
And it gets worse. Eventually, the “trolls” will come out of the woodwork – The junkyard shoppers and bargain hunters who are trawling through the forgotten pages of realestate.com, looking for properties they might be able to secure for less than market value. The lowball offers will start rolling in and the only way out is to either take the property off the market, or accept a significantly price reduction. So herein lies the problem; I have heard so many owners say to me, “It’s ok, we’re not in a hurry to sell”. Which is fine, except for one simple fact: There is basically nothing to be gained by waiting. Every study done on this has concluded that in the majority of instances, the longer your home is on the market, the less you’re likely to get for it. The best offers almost always come early in the campaign, and far too often property owners hastily dismiss such offers because of their misguided expectations. But let’s be clear about one thing here – While the best offers usually come early, just because it comes early doesn’t automatically mean it’s a good one either.
Eventually, your property will become a lemon. New buyers to the marketplace will be aware that the property has been on the market for a long time and will naturally assume that something must be wrong with it. Nobody wants what nobody else wants. This is the worst possible scenario – Even if you do get someone interested, they have the upper hand in the negotiation. They have little or no competition and will use the property’s lemon status as leverage to drive your price down.
WHAT TO DO
If you’re lucky enough to get an early offer, don’t dismiss it simply because you were hoping for more. You may not get more, and if you let this one go you may have to settle for less. Instead, first ensure that it is the highest offer this particular buyer is willing to make. Counter-offer if need be, but make sure it’s their best offer. Some agents use a signed Buyer’s Declaration stating it is their highest offer, which can be helpful in determining if the buyer is willing to pay more.
Then be prepared to look at it objectively; Sure, of course you were hoping to get more, but does this offer represent a realistically good price for the property? Don’t concern yourself too much about what else is on the market that might be similar to your, but instead focus on what has actually sold and what they sold for. The price you were hoping for may never happen. Does this offer allow you to do what you want to do and move on to the next stage of your life? I have personally witnessed people lose tens of thousands of dollars because they rejected offers which came early and then were forced to wait for months for another one – Only to find it is significantly less than the first.
AVOID GETTING A PRICE FIXATION COMPLEX
Some property owners (and buyers, too) seem to get completely hung up on the price while ignoring the bigger picture. Often, they will convince themselves that they just have to have a certain price, despite the fact they have no valid reason as to why they have to have that price. This is known in the industry as “price fixation” and can be a barrier to achieving a sale if not remedied. I quite regularly come across prospective sellers who want to move but are holding out for the market to meet their price expectations, without even considering that the price of property where they are looking to move to is rising also. Hold out for an extra twenty or thirty thousand, and you could end up paying an extra fifty or sixty at the other end – Either that or you might be forced to settle for a lesser property.
TIP: Remember, when you are trading inside the same market, prices are relative. This means that prices are rising and falling both where you currently live and also where you are looking to move. There’s no point holding out for a higher price for your property if it’s going to cost you that and more on your next purchase. And if you want to wait for your dream home to come down in price, then be prepared for the fact that your existing property will have dropped in value also.
Til next time, ciao ☺