When to Decline and When to Accept an Offer
It leads back to a simple question with a complicated answer – how do we extract the best price without losing the buyer? Whilst there are no certainties in a real estate negotiation, there are some principles that will help guide you through the process.
What does the recent sales evidence suggest? As the seller, you may have a target number in mind, however how does that number compare with comparable recent sales? Does the offer seem fair, high or low? Once you have established this very simple rating on the offer at hand, you will have a clearer view on how to handle the negotiation. Never base your response to an offer on the asking prices/price guides of other unsold listings. Always use recent comparable sales on which to base your response to an offer. The most painful offer to accept is the one that is lower than the offer you previously rejected. Remaining calm, logical and unemotional during a negotiation is crucial to making the right call.
Many sellers ask hypothetical questions prior to the home going on the market. Questions such as ‘What should we do if someone offers $320,000?’ or ‘What do we do if we get an offer in the first week?’ It’s natural that the seller poses these questions, but they can only be answered in context of the campaign. An offer should rarely be judged against time on market. The digital age has made marketing real estate an almost instant process. An offer should be judged against the feedback of other potential buyer’s feedback and interest. If the first buyer on the first day makes an offer on your home, yes, this can be a very tricky situation. Make no mistake, it quite often happens this way.
There are three basic formats in which an offer can be made. Verbal, written and contractual. By law, real estate agents must disclose all offers to the sellers. Whenever an offer is made, it’s worth remembering that verbal and written offers are non-binding. Only a signed contract with a deposit can be considered truly genuine. If you accept a verbal or written offer that crashes, it’s best to consider it a non-offer going forward to avoid making mistakes when assessing future offers. Be wary of the high verbal offer – easy come, easy go!
If you are fortunate enough to have multiple buyers for your property, the whole equation becomes easier. Before you become complacent about having multiple buyers though, you must satisfy yourself that they are genuine buyers. To decline a contract offer in favour of non-binding verbal offer can put your campaign into a tailspin, quite literally. Once a contract offer has been made, it’s best that all competing offers are submitted on a contract as a sign of genuineness. Any buyer that promises to pay more without signing a contract should be played cautiously. Competition makes getting the sale easier, however, if you make the bidding process transparent such as a public auction or Dutch auction, you can easily undersell. Competing bids must never be disclosed as the buyers then focus on trying to beat the competition by $1,000. Use competition and confidentiality to extract every genuine buyer’s highest offer in a rapid time frame.
There Are No Rules
There are no rules around the governance of making, accepting and/ or rejecting an offer. The property is not sold or purchased until contracts have exchanged unconditionally. It’s common for the seller to ask the agent ‘How long do we have to consider the offer?’ An offer is an offer until the owner countersigns a buyer’s unconditional contract or the buyer withdraws from the negotiation. It’s a mistake to think that a buyer will leave the offer on the table for a prolonged period whilst the owner chases a better offer. Complacency can bite during a negotiation, even in a boom.
If you do reject an offer, it’s worth noting that declining an offer does not guarantee a higher offer being made in the future. If you accept an offer, you will never know if a better offer was going to turn up next week, so don’t think about it.
Peter O’Malley (excerpts from his book – Real Estate Uncovered)
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