By Lydia DeLeo
Real Estate Agent with Compass 475.125122
There is a truism in real estate that the first offer you receive on your home is often your best offer. Although this isn’t the case in every situation, it certainly holds true the majority of the time. Over the years, we have seen numerous initial offers that were low, however, upon negotiating ultimately got close to what was acceptable to the seller. There is absolutely no downside to countering an offer, even if it's a small reduction. That signals to the buyer that you are willing to negotiate but are not willing to give away the farm. And the buyer's response to your counter will give you a good sense of where things are headed.
Today more than 90% of all home buyers start their home search online. They supplement their online search with visits to Sunday open houses. By the time they are ready to make an offer on a house, they are well-educated about the market. They have looked at everything in their price range, comparing features and amenities and have a good sense of value. When a new house comes on the market, they can immediately assess how it compares to what they've seen and whether it's worth the price. Their offer will reflect their perception of the home's value vs. competing listings.
However, once a house has been on the market for several weeks, most of the showings you get will be from buyers who are in the early stages of their search. They are still doing research on the market and not yet ready to buy. The longer the house is on the market the less sense of urgency buyers have. They think, "Well, no one has bought this house, so it must not be worth what the seller is asking." or they think, "Maybe there's something wrong with it." or even "Maybe I can get this house for a steal." And that's when the low-ball offers start to come in. The more time that passes, the more likely you will end up accepting an offer that is lower than the initial offer you got.
Weigh the strength of the offer against your selling objectives
Now that you understand the case for seriously considering the first offer, let’s get into the details of the offer to see if yours is actually worth it:
Price:
The closer the offer price to your listing price, the better, but don’t get too greedy. A first offer within 10% of your listing price may be worth negotiating if all other components of the offer are sound.
Cash vs. financing:
Cash offers are more reliable than mortgage-backed offers since they guarantee a certain and swift closing. When backed by a lender, even pre-approved buyers may be denied a loan for a variety of reasons such as a job status change or a low home appraisal. According to the National Association of Realtors, financing difficulties account for 35% of closing delays.
Contingencies:
Purchase contingencies state that an offer is valid if and only if the listed criteria is met. As a seller, you want an offer with as few contingencies as possible to increase the likelihood of the deal closing.
Some contingencies, such as inspection contingency and appraisal contingency, are fairly standard, though a buyer may remove them to sweeten a deal.
On the other hand, if your first offer includes a home sale contingency — where the buyer’s purchase is contingent on selling their home first — you should think twice before entering negotiations. This contingency puts a giant question mark on your closing timeline and may cancel it indefinitely if the buyer’s home fails to sell.
At the end of the day, if you’re unable to arrive at a mutually acceptable offer, then you can always walk away...
Thinking about making your move or interested in a market analysis of your home's current value, we would welcome the opportunity to serve as your local resource. We are a top team of real estate agents specializing in the lakefront communities of Wilmette, Winnetka, Kenilworth, Northfield, Glencoe and surrounding areas. If you would like to schedule a consultation, please give us a call at 847.682-7321 or send us an email deleo.omalley@compass.com.