We may have all heard the old adage, “The first offer is always the best offer.” Like the phrase “Location, Location, Location,” it’s a real estate myth that we will hear until the end of time. In the phrase, “always” seems concrete, with no flexibility, which is simply not true. There are many exceptions to the rule. In reality, while the first offer may generally be one of the best offers, most of the time, it is not always the case. It all depends on the circumstance. Previous transactions reveal that YES, in many instances the first offer was, in fact, the best offer. On the other hand, we have seen sales where the seller was able to hold out, play his or her cards and take a much better offer. Each sale circumstance is different and certain variables will weigh in. Pricing, Days on Market, Property Condition (updated and remodeled vs. original condition or “outdated”), Vacant vs. Occupied (or tenant occupied), Owner Occupied Purchaser vs Investor, Seller and/or Buyer Motivation are some of the considerations. Here are a few examples:
A well-priced home, updated and “move-in ready” priced comparably to recent sales as well as priced comparably to actively competing homes for sale will generally sell quickly with the offer price very relative to the marketplace, while a similar overpriced home will tend to sit and age on the market. The longer the days on market, the more the property attracts lower-priced offers. This is where a real estate investor will throw in a much lower price. If it’s been on the market a while, particularly longer than the average market time for the area, it is obviously overpriced. In these instances, the “investor” buyer type is more apt to go with an aggressive much lower than list price. Many sellers reluctantly will take one of these offers and simply wave the white flag of defeat without much, if any, countermeasure. We have seen this again and again. Holding out for an owner-occupied purchaser will generally yield a much higher price but again, those buyers will seek value as well.
Days on Market
We have seen homes sell with “0” or “1” day on market and the listing agent gloats about the sale with a postcard mailer to the subdivision. In studying some of these transactions it was revealed that the home was listed at a price much lower than “active market competition” also known as “Market Position Pricing” and/or lower than comparable sales. Simply put, the agent probably could have got a much higher price. This generally happens when the subject property has more strengths or compensating factors that were not taken into consideration on the price strategy. Lenders on foreclosed properties oftentimes mandate a five-, seven-, or even 10-day grace period, in which case they wait until the end of said time and tell all offerees to produce their “highest and best,” even if there is only one offer on the table. Be the bank! We highly suggest sellers steer clear of taking the first offer within the first week of being on the market and see other opportunities will present themselves, i.e., not respond to any offers until after the first full week on the market.
The pulse of the retiring baby boomers and the emerging millennial demographic reveal that they are all generally looking for that “turnkey” or “move in ready” home. The home is updated, remodeled, with newer modern flooring, updated counter tops, high ceilings, updated fixtures with at least a two-car garage. Homes that are a “fixer-upper” or are “original” or “outdated” are generally passed over, despite adjustment pricing to reflect such needs. No matter how much less an outdated home is priced, these buyers would rather pay more, in some cases, significantly more, for a move-in ready home. Example: the seller is inheriting his or her parents second home or vacation home that is in its original pristine condition. This product is not going to fetch what the same sized remodeled home across the street sold for. Time and time again, we see sellers or inexperienced agents not taking into account the property condition relative to the list price strategy. In the above example, the price starts high, the days on market accrue, and finally, after repeated price cuts, offers start to materialize. The owner-occupied buyer offering 10% off the list price 30 days into the market was much better than the investor offer at 18% below the original list price at 120 days on the market. We see this time and time again.
Top 10 Home Selling Mistakes and How to Avoid Them
Leaving money on the table is always a bad strategy. Property pricing is the single biggest consideration when selling a home. Ask us for a copy of our free report entitled Top 10 Home Selling Mistakes and How to Avoid Them. QCBN
By Peter Medal
Andrea Mauk, Peter Medal and Leslie Nelson are the Principals of the Prescott Elite Team at My Home Group Real Estate. Their offices are in downtown Prescott at 240 S. Montezuma Street, Suite 101. Reach them at 928-597-5151 PrescottEliteTeam.com or PrescottEliteTeam@gmail.com