With good timing and a good offer, you should succeed in negotiating with a seller.
Our friends received an offer for their house while they were away on vacation. The initial offer came in about 12 percent below their asking price.
They thought it was low. We thought it was a good initial offer. They countered and the buyers came back with a number that was reasonable.
But the fact that the final offer contained a number that was reasonable wasn’t the only thing that make the offer a good one. There were several other important components that helped convince our friends to accept this offer.
In this case, the buyers didn’t have a home sale contingency attached to the contract. They’re currently renting a home and don’t have to wait to sell their current residence in order to close on the property.
Today, that’s the rare occurrence. There are plenty of wanna-be buyers in the marketplace, who are eyeing today’s insanely low interest rates and wishing they could commit. But buyers who don’t have any long-term ties are harder to find. Getting an offer without a home sale contingency was an excellent sign.
Another nice feature of the offer was the willingness of the buyers to close on the seller’s timetable. The owners of the property they’re renting are flexible in terms of the lease. They can leave with 30 days’ notice, which is faster than most escrow companies can set up a closing. That flexibility was also an important part of a good offer.
Next, the buyers already had their cash lined up. While they do have a financing contingency, they have already been approved. The question on the table is whether the property will appraise for, or above, the amount listing in the contract. In this case, the sellers had recently refinanced and the property appraised at a price sufficient to justify the purchase price.
Finally, in making their final bid, the buyers wrote a long letter about themselves, what they were looking for and why they wanted to move to the property.
As we read over the letter, it reminded us of a similar letter we wrote nearly 18 years ago when we purchased our home. We made the best offer we could, and wrote about why we wanted to live in the home. The letter helped our sellers understand that we loved their house and didn’t want to tear it down. (We later renovated and added onto the property.)
We’ve always believed that letter helped get our offer, which was a good one, over the finish line.
With home values continuing to drop, sellers are having some trouble adjusting to the new home price reality. Not every low offer is a good one. Some are just buyers throwing out the lowest offer they can imagine, hoping a seller is desperate enough to say yes.
But a good offer has some key components you should watch out for: An initial offer price that is around 10 percent below the list price (assuming you’ve priced your home correctly); an attorney review contingency (if you’re in a state that uses real estate attorneys to close residential deals); a financing contingency (unless it is a cash offer, in which case there may be an appraisal contingency); and a home inspection contingency. It also helps to have flexible closing terms and no crazy requests.
If you get an offer that looks like this, even if the initial price is 15 to 20 percent below the list price, you should ask your broker to have a serious conversation with the buyer’s agent. If the buyers are serious, you should give them a serious counter-offer. If the price comes up significantly (which many agents are seeing these days), you might have a good offer in hand.
Treat it carefully. There are many more homes for sale than ready, willing and able buyers. The faster you can complete your deal, the more likely it is that you’ll close.