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:
http://www.neighborcity.com/
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.
What about agents those use the email to pass offers/contracts back and forth for the buyer and seller to sign digitally rather than going to get in the face of the listing agent in person?
From my own experience, the sales contract has many ways out and they really aren’t binding.
Concerning being contractually obligated to pay a commission how do you suggest the situation is handled if your listing agent suggests a “low-ball” asking price in hopes of getting overbids?
Seems like the stategy could work but it also seems that you could be on the hook for a commission at a price even the agent thought was low.
1.What about agents those use the email to pass offers/contracts back and forth for the buyer and seller to sign digitally rather than going to get in the face of the listing agent in person?
Yes, very standard practice these days and muy convenient. The last step I mentioned is a technicality on every form that the opposing agent has to acknowledge receipt of the signed agreement.
Gov H. the lead attorney at CAR has said that if tested in court the judge/mediator may ignore this exercise, and let stand a contract signed by the principals – which is the way it should be.
The way the form is written, it gives power to the opposing agent that they can hide from you while procuring another deal, and then say that because they haven’t acknowledged the agreement, it is void even though buyer and seller have signed. The agents aren’t principals to the transaction.
They aren’t God either, though they act like it from time to time, and try to tilt the table their way.
the sales contract has many ways out and they really aren’t binding.
Agreed, the buyers have so many escapes it is like swiss cheese.
Sellers have none – once they agree in writing, they are moving unless the buyer wants to let them out of the deal for some reason.
3.Concerning being contractually obligated to pay a commission how do you suggest the situation is handled if your listing agent suggests a “low-ball” asking price in hopes of getting overbids?
Seems like the stategy could work but it also seems that you could be on the hook for a commission at a price even the agent thought was low.
I totally agree and the agents who do it better have a modified listing contract to cover it.
The commission to fear is to the buyer’s agent who submits the only low but full-price offer, and then digs in when the listing agent and seller says “just kidding, our lowball strategy didn’t work so we are cancelling the idea.”
if your only offer is the lowball full-price offer, can’t you just respond by not responding? Or simply lie (I know agents never do) and say the seller decided to entertaining other offers much higher than yours.
You missed my previous comment that you and other agents should refrain from commenting here. You expose your inexperience regularly.