Zillow and other internet tools are helping to generate maximum urgency early in the listing period (the Stratford buyer saw it on Zillow).
But sellers can be surprised to see an offer in the first day or two on the market, and may not be prepared mentally, physically, or emotionally to sell their house. There is temptation to wait for the two in the bush – and it almost always goes that route, even when a full-price offer is presented.
There is an old adage that the first offer is the best offer. But that sounds like sales talk, and is easy to shrug off.
Let’s change it to the first BUYER is the best BUYER.
Sellers should recognize that anyone who makes an offer in the first day or two must be on high alert, and is ready to buy. They have probably made offers on others, and lost out or couldn’t come to terms. Frustration is creeping in, and they want to get it done – these are the folks who pay top dollar.
Most importantly, all buyers are looking the same comps – and will usually come to the same conclusion on price. Yes, you may get other offers, but will they be any better, later?
Are you going to turn down a full-price offer on a $2,000,000+ property in hopes that two in the bush might pay an extra what? $25,000? $50,000?
Part of what got you here is putting the right price on it from the beginning. Motivated buyers will pay the right price, but balk at the wrong price.
Could you be giving it away?
Maybe – but you have to live with that thought no matter what price you take. There’s no way to tell, because you can’t predict the future.
Until we go to an auction format, sellers will be faced with these prickly decisions. Be prepared for the early action, and don’t be surprised if someone wants to buy your house right away!
Oh the headaches sellers have to endure these days! It must be so hard emotionally to deal with a full price offer on day 1. To avoid this nightmare scenario, don’t hire an agent that knows what he’s doing. Get bad help!
Do you get escalating offers now in San Diego? I got an offer that had in the contract that they would beat any other offer (I could document) by $5000.
Later, when I put in an offer on a house myself, I asked my broker about that kind of clause. She said, while she hasn’t seen it in a while, her experience was that Sellers are actually offended. “What, you don’t think my house is worth it so you’re putting in a low bid to start with?”
Something like that. It made no sense to me, but I figured she knew better… (Lost the house. I offered all cash, $37K over asking. Beat by $50k over asking – in Portland, OR)
Yes, the escalating offers still pop up occasionally. As the listing agent, I tell the buyer’s agent not to bother, and submit their highest and best.
My position on bidding wars/escalating offers:
1. Let’s define the job. I am administering a selection process to determine the winner (buyer). The instruction is to submit your highest-and-best offer, and specifically the best offer will be chosen by the sellers.
2. Most every buyer would pay the $1,000-over, or $5,000-over – so it’s not a fair way to determine the winner. I want to be fair to everyone (buyers and agents) and let them determine the winner by submitting their best offer – not by who has the best trickery.
3. If you want to tilt the table to win a bidding war, what else are you going to pull once in escrow?
Another reason to go with the auction format – eliminate the trickery.
Every situation is different, and having a well-rounded agent who can advise based on what’s best for each particular seller is important – it’s not a one-size-fits-all environment. It’s probably the best hope for realtors to keep existing, rather than internet processing centers doing the deals.
1. Selling your house is inconvenient. You need to keep it immaculate, and be ready to show any time….to complete strangers. While us agents are comfortable looking around someone’s home, the sellers who enjoy their privacy can feel like they are being invaded.
2. Selling your house early helps to end the uncertainty on the buy side. If the sellers haven’t moved yet – or haven’t determined a specific house yet – the agony of not selling can add more stress on the other end.
In my case, for the house I was selling, the person with the escalation clause was also the highest offer.
For the house I was trying to buy, I thought nearly $40k over asking (cash) was a damn good offer, and would have tossed in the escalation clause as a sort of insurance for myself. As the Seller’s agent, if I had an escalation clause, wouldn’t that look better to you than an offer that was $50k over? (I would’ve been at 55k over in that case).
In the end, I saw the house just closed and they ended up at $40k over anyway. I guess there were some adjustments, even though it was supposed to be “as is.”
The problem with the escalating offer is the same as at an auction, the “shill” bidder.
In the end, I saw the house just closed and they ended up at $40k over anyway. I guess there were some adjustments, even though it was supposed to be “as is.”
It goes to show you that there are many variables that go into determining the ‘best’ offer.
Did you have any other contingencies? You weren’t represented by Redfin, were you?
The problem with the escalating offer is the same as at an auction, the “shill” bidder.
If we were to adopt an auction format, I think there is still a place for buyer’s agents. If a buyer’s agent represented a shill bidder, and it got out, their reputation would take a tumble.
I did have standard inspection contingencies – including sewer and what not. My agent was an independent – owning her own small agency (and Zillow premiere ***** – if that’s meaningful). I don’t blame her for losing the house. That’s on me. I underestimated the market. She recommended giving my best shot, and I probably would’ve could’ve should’ve gone $10k higher. Bad poker, that’s all. She was great for the sale of my other house and got $35K more than I thought we’d get (and $130K more than we were told we would get by the most well known and well thought of brokers in the area).
The Buyer’s broker for that place was a joke though. We weren’t hearing anything from her about the financing closing even 2 days before the close. So I googled for her clients’ phone #, called the guy at work and he didn’t even know when the closing was! My broker actually called their mortgage broker to push them to get their ass in gear. On the day of closing, the Buyers didn’t have a sitter for the signing. Mobile notaries were dispatched etc.
Their broker didn’t keep them on schedule and didn’t even seem to have a clue herself (They were also in a 1031 and would’ve been badly burned if they failed to close). Sorry for the long post. Probably TMI.
I guess it depends on how quickly the seller wants to move out of their house. If they’re not in any hurry, then waiting a day or two isn’t going to hurt anyone. And yes, they could get additional offers and some could be under list, in which they can counter that they already have an offer at list and maybe that will motivate them to bid higher.
But anything over 5 business days and you already have an offer at list or better is not going to make your buyer too happy. Could turn some buyers off.
If they’re not in any hurry, then waiting a day or two isn’t going to hurt anyone.
The most common belief among sellers and listing agents but it doesn’t take into consideration that the buyers are anxious and don’t like the feeling that you are shopping around their offer. If they blow out, and nobody else offers, the hunt for two-in-the-bush backfires.
Let’s pinpoint exactly what the waiting is hoping to generate – an extra 1% to 2%? Pigs get fat, hogs get slaughtered.
Now that’s something to learn, thank you for a very clear explanation, a very informative article, gives us a clear starting point.