Not so long ago the first offer you received on your home was going to be the best, or at least most of the time. Over the last year my experience shows that is no longer the case. Why have things changed and how does it affect a home sellers negotiation and offer consideration?
Lets first look at the basics of an offer so you understand all the components that you, as a home seller, need to consider. There are many parts of our offers that are legal boiler plate content. While you need to know and understand it in general, it’s not something you can change. Your attorney can change a contract legally, your Realtor cannot. We’re going to focus on the parts you do have a say in.
Understanding Your Offer – Purchase Price
It is important to know that while the price is the number one ranking factor for most sellers, it should be considered alongside the other aspects. That said, the price elicits the most immediate and emotional response. Remember that unless your buyer is offering the amount you are asking, he’s likely making a first pass and is open to receiving a counter offer.
The Low Ball Offer – In 2014 our real estate market has recovered and sales are great, both here in Barrington and the surrounding Northwest Suburbs of Chicagoland. Yet low ball offers still seem to be common place and my experience over 2014 is that sellers are both frustrated and insulted by them. In the words of one of my investors in 2014 – I am not giving my houses away!
As a property seller, if you receive a low ball offer, always be prepared to negotiate to see where it might go. It’s worth a try and sometimes you might be surprised where it ends up. That said typically a low ball offer is an uneducated buyer, or is looking for a deal. He won’t be willing to get near to the price the property should sell for.
Cash Offers – Is cash king? Well cash doesn’t mean you get more money, it simply takes away a finance contingency. You may get to close your sale quicker. Cash offers are more common place in our market at all price levels. Your cash offer may be less than one with finance!
But are financed buyers really so bad? Pre-approval letters are not all created equal. A buyer might lose his job a day prior to closing. That said I have not had a sale fall through because of loan denial in quite a while.
We are here to educate you but only you can decide if taking a lower offer in cash is right for you.
Asking price in cash is KING!
Know Your Price – If you have been honestly educated about the potential sales price for your home by your Realtor, you have the potential sales range in your mind.
For smaller homes and those that have similar and same models in your neighborhood, this can be really fined tuned and the range narrow. i.e. $165,000 to $170,000. If your negotiating gets you within the range, the offer deserves serious consideration.
If you live in a higher priced area like Barrington or Long Grove your homes are either semi custom or custom. It’s unlikely there will be identical homes but there will be similar homes. As long as the location, size, age, acreage and condition are similar, we can adjust as needed and give you a range of recent sales. So an example might be $1,000,000 to $1,100,000 as a sales target. It’s easier now to identify low ball offers versus those buyers that appear truly interested in buying your home. Consider $700,000 as an offer! Low Ball, right? Absolutely.
The value of an honest price assessment becomes invaluable at this time. Inflated prices do you no good at all, your offers might be on target but your price is not. You’ll end up being confused and likely disappointed. However it’s also important for your price to be re-assessed regularly. A sale closeby can have an effect on your asking price. If you are on the market for three months or longer, let’s look at your asking price every three months and adjust if necessary.
Stand Your Ground – If you know your property’s price range there’s no reason to cave in to low ball offers. I understand your circumstances might make it a good idea and that’s fine. Ultimately it is your home and your decision. All I am saying is if the offer is not close to what your home should sell for, trust the data you’ve been given by your selling agent. If you want close to the numbers given, dig your heels and in say no thanks.
Do the math though first. Your real estate agent’s experience in selling homes can help you understand about your property carrying costs, the time of year, the market action today, and whether you can hold firm. A good selling agent knows her numbers and won’t push you into taking an offer so she can get paid.
Understanding Your Offer – Earnest Funds
Low ball offers usually have low ball earnest fund offers too. In the low end of property sales I am seeing some pathetic offerings for earnest money. It seems like buyers are afraid to get some skin in the game. Are they really being earnest or just trying to get away with the minimum. Don’t be afraid to counter the offer of earnest money. Gone are the days of 5 to 10%, it seems tough to get 1%. If the amount is not what you want and they are not willing to commit to more, remember you are considering this as part of the offer. As your real estate agent selling in Barrington and the Northwest Suburbs, ask me for my considered opinion and ask me what happens when things go wrong, because sometimes they do.
Understanding Your Offer – Closing Date
Your buyer has a time frame and so do you. Again this is part of your offer and you’ll need to consider it’s impact on your plans. That said I do believe sellers need to be more flexible than buyers on this one. Moving home is stressful and you may have to be living with family for a while. You might have to find short term temporary accommodation. Or you may have to jump fast and find a new home. Do whatever you can to make the closing date work. Why? Because I am assuming at this point the price you are getting is what you want. Is it really worth losing?
Understanding Your Offer – Your Buyers Mortgage
Our new contracts have some pre-set time periods for a buyer to obtain his mortgage. We can alter them as needed but the pre-set 45 days to get a final commitment for a mortgage is truly adequate. Allowing longer than that is not necessary at all. A good selling agent will look at the loan terms and make sure you understand what they are asking. Even if you agree to a 12 week closing, there’s no reason for the mortgage to take 10 weeks. We want your buyers locked in!
Understanding Your Offer – Your Buyers Home Sale
Always a difficult decision! Your buyer has a home to sell. This part of a buyers contract can be quite complex. Are they for sale yet? Who are they using? Do they have a buyer? What are the terms of their sale? Where are they in the process? What are the contingency dates? What is the closing date? WHAT COULD GO AWRY? As a home seller, you need to sit down with the real estate agent selling your home. You need to fully understand what the process is and how it benefits you or the buyer and what the pitfalls are along the way.
It’s a very personal decision as to whether you accept a buyer that has a home sale tagged on to them. Some go smoothly, others do not. I would say it is the risky part of a home sale. As your real estate agent selling Barrington IL homes, I’ll be happy to explain it at length.
Why The First Offer May No Longer Be The Best
Now you understand the components you need to consider in offers received, you are well educated about what to expect.
When the real estate market crashed selling agents had to monitor the market closely because listings were losing value by the week. Now the market is recovering and locally quite strong, sellers no longer have to look in front to guess what’s coming, they can truly look behind to see what has happened. Sales, sales, sales. There are plenty of them now to use and find a price range for your property. Prices are not declining.
Buyers on the other hand are being a little slow to grasp the concept – they are no longer in the driving seat! The pressure for home sellers to take any living soul with funds has gone. Mortgages are available, even with small percentage down payments. The job market recovered and buyers are coming back to the market to buy, everyone is moving in, out, up and down. Yet buyers continue to make those low ball offers thinking sellers are desperate.
It will correct itself, after all when it became a buyers market, sellers were slow to re-act with pricing, it took well over a year to start truly understanding that the decline wasn’t a minor glitch but a collapse. Buyers will realize after they lose a few homes to other buyers, they need to position themselves into a place of strength to win.
It’s also time for buyers to stop looking at homes they cannot afford!
A real estate agent selling homes in a focused area, for us that is Barrington, knows the numbers, knows what is going on in their market, and knows a low ball offer. Making sure you hire the best real estate selling agent for your area is an important aspect to your home sale sanity!
Real Estate is Local – Find a Real Estate Selling Agent in Your Town
It’s important to know I am writing this from the Northern Illinois perspective. This is where I know the market, where I sell and where my expertise is. Every market is different, find a real estate agent selling in yours and get the expert guidance you need to sell your home.
If you have a home to sell in Barrington, or the surrounding country suburban areas, please give Corinne a call at 847-363-3686.