Real Estate

Should you accept the first offer?

European woman with a coconut to offer during ...
Image via Wikipedia

Getting an offer quickly can be a double-edged sword for some sellers because they are happy to get an offer so quickly, but are wondering if the reason they got an offer so quickly is because the priced it too low or they wonder if that means their home is so wonderful that they can get an even better offer if they continue to wait.

Getting a quick offer is a function of a few different things.

The first is the pricing.  Proper pricing is essential to getting offers.  Some think that they should price high and then negotiate down to a more appropriate price.  They think that if they price the home on the lower or mid side that they will be offered an even lower price and have to sell below what they want to sell for.  This is simply a misconception.  When a home is priced right, buyers working and REALTORs recognize it and move quickly.  You can potentially get a higher price if multiple people recognize the opportunity and you get multiple offers.  In this case, you can even get more than asking.  Pricing high only keeps the property on the market longer, reduces showings and eventually leads to dropping the price.  People at the upper end of the price range your home is in are often looking at higher priced homes and will go for those (because of what they offer) before they will go for yours that is priced too high for it’s size, condition or surroundings.  Additionally, the longer the home is on the market, the lower the offer is when you finally get one.   Buyers now have reason to offer you a lower price.  If you price the property right the first time, you will get an offer sooner and due to the shorter time on the market, you will get an offer closer to asking price.  The longer the home is on the market, the more opportunity buyers have to offer you a lower price because they realize that due to your lack of offers, you are likely to accept something lower to “get rid” of the house.  Pricing too high will leave you paying for the home much longer and then selling it for a lower price anyway…leading to a lower NET for you.  Additionally, the first offer you receive is likely going to be the best and even if you aren’t willing to accept it outright, it behooves you to at least work with it.  If you turn it down the home could potentially sit on the market longer and then you still get a lower offer later because of the additional time on the market.

The second is Condition.  Homes that win the beauty contest get higher prices than homes that are perceived as out of date or are in poor condition.  Because buyers today do not want to have to do anything, the less they feel they have to do to the home, the more valuable it will be to them.  Pricing is still very important here because a house that looks great but is priced way outside of the market, it will be perceived as a nice home that is priced too high.  Again, pricing always matter.  You can have the most beautiful home in the world, but if it is in a less desirable area and is not price appropriately because of that, it will sit on the market until the price reaches an appropriate level.

The third is timing.  This is the one factor we can’t control.  Timing can be in terms of listing in a “hot” market or in a “soft” market.  Market’s can fluctuate and sometimes interest in an area dies down dramatically following a very aggressive time.  On a different note, timing can mean that you list right when a buyer has been waiting for your exact model to come on the market.  They were waiting for it, so regardless of who you listed with or whether or not the market is hot or cold, they would be interested in it (providing it is not outrageously priced or isn’t in terrible condition).

The key is finding the “sweet spot” between all of these factors; however, do not feel hesitant to accept the first offer if it is a very strong offer.  If you get a very poor offer up front, then it makes sense to keep it on the market (providing you are not over priced and the offer doesn’t simply reflect the true market value)…but if the offer is close to asking and has favorable terms, you need to really assess what the cost of keeping the home on the market will be.  You could lose a very good opportunity by passing on the first offer just because it is the first and you have only had the home on the market a few days.

A good REALTOR will advise you on what to do and you need to trust the person you chose to list your home.  If you do not trust their judgement, perhaps they are not the person you should have the home listed with.

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