Part of a realtor’s job is to help manage expectations – not only those of their own clients, but expectations of the other agents and their clients too.
Recently I received an offer on a listing that was 25% under the list price. They also wanted my seller to carry the financing for 30 years – which is unheard of – and oh yeah, it was contingent upon the sale of the buyers’ home too.
I told the agent (whose email-signature noted they were in the Top 10 statewide for their company) that if I was the seller and that offer was presented, I’d fire my agent.
Just like when we’ve seen a home with range-pricing that is too wide, it becomes impossible to bridge the gap – for three reasons:
- Once a buyer puts a number on paper, their mind starts believing it’s real.
- Buyer’s remorse is real too, and they cool off quickly.
- Sellers are skeptical, and don’t feel like negotiating much.
It may be discussed as just a place to start, but once a buyer submits their price in writing, it becomes a comfortable number. Going much higher than where they start is usually a function of how fast agents respond. My rule-of-thumb is two counters max for each side, in less than four days.
In this case, my sellers weren’t desperate, they had already determined that they wanted to sell for at least 93% of list and were willing to wait for it. I told the buyer’s agent that our price gap was too big, and I nicely asked the agent and buyers to go back to the drawing board.
Three days later, I received a new offer with bank financing, instead of seller-carry, but it still had the original price of 25% under list. It came with the buyers’ love letter; a full-page of reasons why my listing was the perfect fit for the buyers.
Was the love going to make the looming price gap surmountable?
In spite of houses around the county selling for 99% of list this year, we countered with a price that is 4% under our list – not bad, considering the original offer price. On their counter, the buyers came up to 82% of list, but it took two days to arrive. I knew the remaining price gap and time left wasn’t looking good.
I always want to respond promptly, because of #2 above – buyers cool off quickly. We dropped another 2% within a few hours, but it wasn’t enough. Two days later, the agent emailed that they lost interest – no counter, no love.
Five days gone by (seven days since the original offer), and the initial 25% gap killed our chances. They knew before writing the offer that it would take at least 93% of list to buy the property, and they still offered – so initially there was some willingness to pay that or close.
If they would have started at 82% of list, and trimmed the time spent to 3-4 days, could we have made it to escrow? I think so!
I got numerous offers for my home a year ago. Many were low-ball. My favorite one (within only a couple days of first listing). The buyer was a single male. His agent asked mine if I was willing to do a lease, and if so, the buyer would come look. I said yes, curious what any offer would look like. The buyer absolutely loved the house. The offer was made by phone:
1. List price: $324K. Offered $309K.
2. Lease for one year: $1,700/month rent
3. Moving from out-of-state
4. Just hired at company
5. Commission only sales job
6. $8,000 to be put in escrow account during lease period
7. After year lease, buyer would buy the house
8. His agent wanted 25% of escrow amount because “she had been burned before with a lease agreement”.
My agent said (rhetorically to me) what would happen if buyer decided to not buy in year’s time or new girlfriend didn’t like the house. My concern was the prospective buyer was newly employed with a company and commission only. I also didn’t like the agent taking 25% of the escrow account, and the amount of the escrow.
“I told the agent … that if I was the seller and that offer was presented, I’d fire my agent.”
Don’t you have a fiduciary requirement to present all offers?
According to Gov Hutchinson, lead attorney for C.A.R., listing agents are not required to present frivolous offers.
I suspect a frivolous offer could be defined by reference to the length of a piece of string 🙂