Yet again this week I was reminded of how personal a home sale can be. Really, the same applies to a home purchase as well. This week we listed a home for some great clients in the Midtown area. They have been incredible clients to work with during the preparation stage. They have followed all of our advice from the start, including a pre-inspection and then immediately began addressing any safety issues or items that we noted should be fixed. The photos came back and their house looked amazing.
The listing went “live” five days ago and yesterday we received an offer…wait for it…for 86 percent of list price! What a joke, right? I knew that this offer would go over like a lead balloon, and I was right. Rebecca, our Director of Operations, sent the offer summary to our clients and me. I decided not to call them right away but rather to give them some time to react to the low ball offer. Within five minutes I received an email from both of them confirming that waiting to call was the right move. They were HOT! They were offended and mad, quite honestly. Do you blame them?
We are in a seller’s market still, right? Yes, we are, but that will not stop reckless offers from coming in. So how should you handle it?
Most importantly, try not to take it personally. It is easy for me to say, and hard for some clients to do, but it is a must. Let’s use our aforementioned clients as an example When the low ball offer came in on their house, their initial reaction was to reject the offer. However, over time our team has learned that every offer deserves a response. Time and time again during the recession we would receive low ball offers and eventually get the buyer to a price that worked for both the buyer and seller. Here are a few rules of thumb when handling low ball offers:
1. Always present a counter offer. Regardless of how offensively low an offer might be you should always counter. Trust me, I want my clients to be honest with me and usually they are mad and hurt. Low ball offers feel like an insult or personal attack on the quality of their home. Once they process through the anger, we then discuss our response. I often coach my clients to give me their response (what they would like to tell the buyer), and then we take the emotion out of it and draft a calculated response. Never forget that the first offer is statistically your best offer. However, there are exceptions.
2. Its not about where you start, its about where you end up. As I shared before, often a low ball offer leads to an acceptable offer. You never know how a buyer is being coached from their agent, their family, their spouse, their financial advisor, CNNMoney, etc… Some buyers come to the table with a preconceived notion of a certain percentage that they should get off the price. Usually the market will teach them that their preconceived notion is wrong. Unfortunately, that may mean that they have to miss out on a couple of homes first before the lesson sinks in. Nevertheless, always receive an offer with gratitude. Be grateful for the offer (even a low ball one) and keep the end in mind.
3. Know when to walk away. Okay, now I have “The Gambler” by Kenny Rogers in my head. By walk away I mean there comes a time when buyer and seller must recognize that they are not a fit for one another. If we go back to my Midtown clients example for a minute, I will share with you what I mean by not a fit. When we received the low ball offer, my first move was to call the other agent and get the buyer’s perspective. How did they arrive at this offering price? What did their agent coach them to do? Are they negotiable or is their offer firm?
In asking those questions I discovered that this was the second home that this buyer had low balled. On the first home, the buyer and seller could not meet eye-to-eye. Apparently, the buyer felt that the first home was grossly over priced. Funny thing: The same buyer also thinks that our listing is over priced. Hmmmm. Sounds like a pattern.
The last nail in the coffin was that the buyer had informed his agent that our client had purchased the home in 2007 at the peak of the market (true). And that it was not worth what he had purchased it for because the market tanked right after he bought it (false). Yes, the market tanked in late 2007 and continued to do so until 2013. What the client does not understand is that values have rebounded at an incredible rate. In an earlier column, I shared that at the end of 2012 we were 24.2 percent behind the peak values of 2007. However, half of that loss was recaptured in 2013 and in 2014 homeowners who purchased at the peak (in some cases) are able to sell a home for what they bought it for or even a little more.
Needless to say, my clients walked away from the buyer. After all, they weren’t really a buyer to begin with in my mind. They were a trier. The buyer also taught us that he was a terminal negotiator. Someone must lose for him to win. That just didn’t work for us. We wish him luck. Maybe the third time will be the charm.