I was just talking on the phone with an owner of one of my listings. We were deciding how to respond to an offer that was 75% of list price. Ironically, this was the THIRD such offer I received this week. I received an offer at 57% of list price on one home and an offer at 83% of the list price on yet a third home.
Pretend you have a Park City property for sale. You receive an offer at 57% of your list price. You don’t have a mortgage on your property. You can carry your property without any distress. You follow the news enough to hear that real estate prices have already hit bottom. You know that your property is priced somewhat aggressive, but is not overpriced. How do you respond?
The answer is that you don’t respond. You say to the buyer, “thank you for your offer, but no thank you.” You then feel kind of bad for that buyer’s agent who spent time showing the buyer around, writing a bunch of low ball offers, and basically giving the buyer a lesson on the Park City real estate market instead of helping them buy a home.
What if the buyer comes in at 88% or 90%? There is a much greater chance the seller will enter into negotiations and give the buyer an opportunity to “chew the seller down.” I was in a negotiation earlier this year where the buyer came in at 92.5% of asking price with no contingencies and a 7-day close. My seller countered, and the buyer came back with his initial offer. We were under contract the next day and closed in a week. Ironically, this offer at 92.5% of asking price came in while we were in the midst of negotiating another offer that started off at 83.5% of asking price. In the end, the lowball buyer lost his opportunity to buy the property.
You will probably end up at a better end point if you start off making a reasonable versus a lowball offer. In fact, if you start off with a lowball offer, you run the risk of losing the home to a buyer who comes in with a reasonable offer.