Thursday, October 22, 2009
Dealing With an Offer
Unless it's a very strong seller's market, sellers should be careful when responding to an offer on their house. Some sellers still think they can dictate what they'll take for their home, using the "take it or leave it" approach.
This is not the time to use that strategy. Unfortunately, many buyers are 'low-balling' the house in their offers and want everything in the world with the house - refrigerator, washer, dryer, etc. And they also want a seller-paid home warranty, seller-paid closing costs and sometimes more.
A house that needs significant repairs and/or updating will never command it's highest potential price. However, a house that is in pristine condition will always command top dollar. You may wait a little longer for an offer, but any house that is priced "right" will sell within a very reasonable period of time.
If the house is in great condition, and is priced within the parameters of area comparables, then the seller should stick to his/her guns on price, terms and conditions. However, to respond back at full list price, paying no closing costs, not furnishing a home warranty - the major things buyers want to negotiate - will mean buyers will probably walk away from the potential deal.
If the house is in poor condition, concessions should be made at the listing time for those items. If not, then an offer will probably not be realized.
When responding to an offer, sellers should be willing to work with whatever has been submitted. Just because an offer is lower does not mean that the buyer expects to walk away paying that price. Sometimes the buyer may submit a lower offer to see what the seller will actually be willing to do.
Real estate transactions have to be "win-win" for everyone. A good real estate agent can help a seller negotiate the contract out to become a winning situation for everyone. Giving a little on end will cause the buyer to give a little. If the buyer is unwilling to give anything at all in the negotiations, then the buyer is not a serious buyer. A seller who has the same mentality is also not a serious seller.
Let's say that house is priced at $210,000. The buyer offers the following: $195,000 sale price, asks the seller to pay up to $6000 toward buyer's closing costs, asks the seller to pay a home warranty, asks the seller to pay for the termite letter but the buyer will pick the termite company, and the closing will be in 45 days. In this example, the seller really needs a higher sale price, thinks the closing costs are too high, doesn't have a problem with paying for the warranty, and really wants to close in 21 days. How should the seller respond?
If a seller wants a higher price, then he/she can pay more buyer's closing costs and/or agree to a longer closing time. If closing quicker is more important to the seller, then the seller can agree to a lower sale price. The seller would not necessarily have to accept the $195,000 as a sale price, but could possibly agree to $202,000. The seller could also counter back with $4000 in closing.
In any offer situation, the seller needs to weigh things very cautiously in the current Middle Tennessee market. With the $8,000 tax credit coming to an end, the seller needs to understand that first time buyers in the $200,000 price range may actually disappear from the radar. If the seller will not negotiate a win-win situation, there may not be another offer for a long time and they may not see a reasonable price for a while, either.
General rule of thumb: The first offer is the best offer.
If you're looking for a real estate agent who knows and understand the current real estate market in the Nashville area, give me a call. I'd love to help you with all of your real estate needs.