I heard about someone who made a full-price offer over the weekend, and is still waiting for a response. It makes you wonder what it will take to buy a house these days!
In this case there were other offers already on the table, so it was a smart attempt to try and blow out anyone lower. But the sellers don’t have to accept any offer, full-price or higher. They are only contractually obligated to pay a commission.
What is the best strategy? Get the sellers to counter-offer.
Once you know that is the goal, then you can work it backwards – what price and terms would be tempting enough to get the sellers to respond with something?
Because once they issue a counter-offer, you can sign it and buy yourself a house.
There is a secondary paragraph that the other agent has to acknowledge receipt of your signed counter-offer. To protect yourself, you would want to find the agent and have a witness verify that you handed them the signed counter, and hopefully got them to initial it.
(But I am unconvinced that a judge would insist that the agent’s receipt is required – I think that once a buyer and seller have agreed in writing, you have a deal.)
What price and terms do you offer, in order to tempt the sellers into making a counter-offer?
First, you have to get the listing agent to do two things:
- Verify if there are any other offers, and if so, how many.
- Verify what it would take to buy the house.
There are no rules or guidelines, so it helps to get the listing agent to commit to something. Usually when asked, agents give this lame, noncommittal answer, “We will just look at each offer and make a decision.” But if there are multiple offers, you want to know if the sellers will just take the best offer, or ask all contenders to make their highest-and-best offer.
Banks will almost always request that all bidders submit their highest-and-best offers, because that it the fairest way to handle it, and you don’t know how much someone might pay unless you give them a chance.
But inexperienced listing agents are known to panic, and because they might jump on the highest offer and ignore the rest, you must get them to commit to their rules of engagement if possible.
To know more about the agent, you can check their recent sales history at this website:
Their extra data and graphs are mostly inaccurate, but neighborcity has the right sales counts from the last year, which is the best indicator of how well the agent can navigate a successful sale for you. A reasonable level of agent competency is one sale per month.
At this point you know a little about the listing agent, and how many offers are competing.
A. If there are multiple offers, have your agent utilize a strategy that puts you in position to win.
B. If there are no other offers, then gauge your offer price by how long the house has been for sale.
If it has been on the market for 1-2 weeks, you can bet that the sellers want within 5% of list price. Remember, your goal is to get them to counter, NOT make an offer that they will sign outright, because they rarely do anyway. So offer 5% below list price, and hopefully they will counter somewhere in between.
If the house has been for sale longer than 2 weeks, then it is tougher. We know that price expectations for buyers are dropping about 1% per week, but seller exuberance is high – they will resist the thought of more than 5% off no matter how long they have been flailing.
Offer between 5% and offensive, which is usually more than 10% off.
If the listing agent has only sold 1-2 properties in the last year, it will take a miracle for you to buy the property. Swing by church and say your prayers while you are at it.