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The Reverse Offer is that a buyer motivator or is it just a bad strategy?

The Reverse Offer is that a buyer motivator or is it just a bad strategy?Is this for desperate home sellers a poor strategy?

Have you heard of the Reverse Offer? This is where a seller writes an offer to the buyer. This Strategy has been considered controversial at best. I have heard agent using it n a case by case basis, where the interested buyer is dragging their feet on writing an offer and this would prompt them to negotiate.

I find this negotiating against the seller's best interest from a financial perspective. What are your thoughts?

It would only make sense to me if the property was over priced in the first place and you took the listing, hence I have a problem with this type of strategy, twice. Once taking the overpriced listing and second to be negotiating against the seller's best interest.

Call me old fashioned, I believe in price the property correctly and in a down market price it a bit under the waterline and generate maximum interest and exposure. What are your thoughts?

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Posted by Endre Barath,Jr. 310.486.1002 on 07/28/2010 03:11 AM

Comments (64)

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64 Comments on The Reverse Offer is that a buyer motivator or is it just a bad strategy?

JUL

2010

I agree with you. A seller does not know the motivation level of the buyer or the point they are in the purchasing process. Bad idea for home sellers.

Aaron

I think that there is a time for the reverse offer. Sometimes it can overcome the inertia of inaction. One reason that it can be effective is that it is used so rarely. Many agents have never heard of a reverse offer. If buyer and seller are so close, but the transaction appears to be stalled, a reverse offer can get the ball rolling again. Even a simple message (with seller's permission of course) to an agent - submit the offer at this price and these terms could get the deal done - while technically not a reverse offer could accomplish the same thing.

Interesting perspective. Thanks for sharing. The best negotiations always include communications that seek fairness in a transaction.

Blooming for home buyers.

Thank you for posting and sharing your informative article.

Endre I have never heard of a reverse offer and I'm not quite sure I'd be comfortable with it primarily because I would not want to put my seller at a disadvantage of being perceived as desperate and needy. However, if it has proved to be a strategy that works for some, I'm all for it particularly if the seller doesn't have a problem with non-conventional negotiating tactics.

Hi Endre, The first I have heard it, thanks for the update. The only thing I could think of that was close was just rewriting an offer. But that is totally different! Nice post!

I had a buyer present a reverse offer on one of my listings recently. I think it's a great idea to get both parties engaged in a conversation.

Endre - I, like Charita and Dan, have never heard of this. If I understand it correctly it is a buyer that has visited the property with an interest that needs a kick in the @ss to move forward? So the property may be in the wrong pricing position? Interesting process. See I learn something every single day from AR.

JUL

2010

Endre, I have used reverse offers in the past. Your point is well taken about price but sometimes it's not just about price - perhaps it's buyer occupancy prior to closing OR some personal property that you overheard them say they really liked, or maybe it's financial assistance. It's a creative way of getting some negotiations started when used correctly.

I have never seen a reverse offer but I think that it may be a good option for those buyers that hang around a listing and never pull the trigger.

Endre. As unromantic as it sounds, I find with SOOO many homes on the market, lots of home buyers don't buy homes they "love", they eliminate the ones they don't like and choose from the remaining. In other words, there are often 2 or 3 homes that would work for the buyer. As such, which one they choose can sometimes be based on mood or some other capricious criteria. Proactively making a "seller offer" I think is a great way to increase the chances a buyer (that has yet to exclude your listing from the short list) remembers/focuses on your home. I don't think in THIS market that it shows desperation, I think it shows savvy.

Further, if your seller is about to do a price reduction anyway, before reducing in the MLS, you can make a reverse/seller offer to the last few agents that showed the property. The buyers may be motivated by the thought that they're getting a deal no one else is privvy to.

Leonard

I think a verbal communication to the buyer's agent telling them what the seller would take would accomplish the same thing.

Writing an offer this way seems like extra and uneeded work; price the property correctly and stage the product. Verbal communication with the buyer's agent, as stated by Dennis (above), accomplishes the same thing I think.

I have also never seen this but it might help move a potential buyer off the fence. And as Leonard said, if you are about to do a price reduction offering the reduced price before reducing it in the MLS might be a great strategy.

I have heard of reverse offers, but never used one or know anyone who has. HMM might be a great idea for short sales?

I haven't heard of this strategy! Has anyone done it successfully? Why not just list the property for THAT PRICE???

I've done a reverse offer as a listing agent, and it worked perfectly. I don't believe it put my sellers at a disadvantage at all. We had a set of buyers who had seen the house 3 times. They were coming from out of town and were very skittish about choosing the wrong neighborhood, according to the buyer agent. My sellers were in full agreement. We were priced correctly for the market, and we made a reverse full-price offer and threw in a membership to the neighborhood swim and tennis club, a $1200 value. I gave the buyer agent a nice brochure on the neighborhood club, as well as some more in-depth information about the schools.

This reverse offer got the discussions going. The buyers came back and negotiated, and we reached agreement. The buyer agent had never heard of the reverse offer, and was a little taken aback, but he will thrilled with the result.

In the end, we had a lot of happy campers!

Wow! Great post! I've never heard of a reverse offer, but I'm in agreement with previous comments that if it's a win-win situation, why not do a reverse offer. I recall one of my buyers touring the same house three times and just couldn't make up their minds. In this instance, had the seller offered a reverse offer, there probably would have been a sale.

I know Mike Ferry recommends it but I don't do it.

The strategy of using a reverse offer (RO) depends on the offer, doesn't it? After all, if the RO is compelling and creates a call to action from a buyer, isn't that your goal? The RO doesn't necessarily include a price reduction, but tremendous buyer incentives to close the sale.

Your pricing strategy is going to attract more buyers, hence more opportunities to close, so I subscribe to that type of marketing. When buyers learn that the price isn't as important as the total cost of buying a property, a RO is an excellent strategy.

Hmmmm! Would that count as two offers on the table, if you had a different real buyer with a real offer?

Reverse offer! Now that's funny! It's an OFFER, period. Can you please show me in the agent/seller rulebook where an offer is required to come from the buyer? So, when your seller counters an offer that a buyer has made, do we still call that a counter offer or is that a re-counter? How about 'reverse counter'?

All joking aside, a, um..reverse offer, can actually be a very effective selling technique if used correctly, and no, it doesn't show any desperation on the seller's part, again, if used correctly. Let me ask, does anyone ever think that the stores are desperate when they have sales going on? You know, "this weekend only, 20% off' type sales.

Two points for doing a seller's offer. You have to know the reason why your seller is selling in the first place (motivation) and you have to have some idea of why a particular buyer may be interested in, but not making an offer on, the property (again, motivation). Knowing the first and having an idea about the second, you can usually formulate an offer that will appeal to the buyer. At the very least, it will usually keep your property 'in the running' and the buyer knows that this seller is at least willing to negotiate to a reasonable agreement.

Hello Endre:

Others more clever than me thinks this is good idea. I'm skeptical. If the reverse offer does not include a price reduction I don't see the point. If it does include a price reduction why not offer it to the market?

Brian Rugg

While I've never written one, I have suggested it to sellers from time to time. $1000 might be a small price to pay to get a commitment-phobic buyer off the fence and start the conversation. Plus it let's you set the initial framework for negotiations, which can sometimes be an advantage. Again, I wouldn't do this every time, but at the right moment it could be a useful arrow in your quiver.

It sounds like a desperate idea. I am not saying I would never do it, but you are negotiating against yourself.

Sounds like a great idea for the right circumstance. Some buyers don't want the stress of a negotiation, they just want a house. If the buyers are sitting on the fence, this might be the perfect tool to get them off of it. Same goes for the sellers, if offers are few and far between, why not recommend this. It just may be the trick to find out if your sellers really want to sell. I love the idea!!

I have used reverse offers in the past and 85% of the time it has been successful. I think it depends on the Buyer and the Buyers Agent if it is worth pursuing.

Wow, thank you for all your valuable comments. I will try to respond to most of them. I glad it generated this much intrest and it is fun when there is real conversation going on.

Hmmm ... I think this just might be crazy enough to work. I'm thinking of sellers who keep getting feedback that the house is too high, and the sellers say, "Why don't they just write an offer?" Well, the seller can write the offer!

I've seen reverse offers in the past some worked other were ignored. I like Brian's #23 idea. Do the reverse offer then lower the price to the market.

Mark

Aaron--- after reading all the comments I might revisit the concept, my biggest concern is if the buyer's agent is not strong enough to convince a buyer to write the offer, that same buyer's agent might not be strong enough to keep the buyer in Escrow either.

Dan, Thank you for your input.I agree once you are in a negotiation it helps to do a reverse-counter offer. Here is a bit different writing 12 pages of an offer.

Charita, great point if it helps all parties why not:)

Reverse offer is perfect for the seller who is getting showings but no offer. The seller won't lower the price and says, "Why don't they just make an offer?" So here is the dialogue: "OK, Mr/Ms seller what offer do you want them to make that you would accept?" Seller says, "I would accept x$." There is your reverse offer.

I did this once and we closed. It's great to have all the tools in your tool box so you can adjust at any moment to the situation.

why would a seller automatically drop his price? He has made an initial offer by listing it at a certain price. So we should say to our sellers hey lets list it $10000 higher then we want so we can drop it and make an offer???? and now that youve priced yourself out of the market whos even going to look at the house??? I advise my sellers where we need to price their home to sell it. If they don't agree un less they are just a frew dollars higher I dont take the listings....you won't sell it and all you do is set him up for the next agent.

JUL

2010

Ken, that is exactly right:))))

Lee & Pamela, thank you for your clarification I am sure we all learned something:)

Marcy I had a listing in Tarzana not too long ago and there was a buyer and their agent came in three times, I just did not think they would stay in Escrow. The good news was the second time they came in on my open house there was another couple and they saw the competion and the urgency, hence I did not have to use this method. (particularly since I was not comfortable with the concept anyway)

Leonard, thank you for your valuable clarification, Hmm Savvy? has a ring to it:))

I have never heard of a reverse offer. What document would you use to write that?

Dennis- interesting point, thank you for your input

Shawn- I like how you elaborated on Dennis's point

Jim- Interesting strategy

Ann- I have always considered pricing the property correctly and it has worked for me up to now. So let's hope it continues.

Kathy- my sentiments the same

JUL

2010

I learned something new today - had never heard of a reverse offer. Seems like it would be better to just lower the price - but perhaps in certain circumstances an offer to pay costs, replace the carpet, or some other concession might give the buyers that needed push.

Endre: I have used the reverse offer to get the ball rolling and twice now this has concluded into a deal.

I have heard of this being used effectively although I've never done it. This is how it worked.....a buyer looked at a home but chose to move on and revealed objections in feedback. The seller considered the feedback and made a reverse offer to the seller with these items in mind. It started the negotiation process and each party ended up happy.....home sold!

Melissa, thank you for your explanation some one who actually did one and shares it is truly valuable.

Kristina you are probably correct:)

Kimo Great point we are all so focused on money and your explanation is well taken.

Keith are you thinking multiple offer situation? I would be very hessitant to call it that until the buyer actually countered back with something reasonable.

Roger, I watched a few years ago on Last Comic Standing a stand up comedian who came from Hickory, you must have been hanging out with him....all kidding aside your points are well taken. I was mostly against this type of negotiation approach, now I am on the fence after the favorable input that I have heard here.

Brian- I am of this school as well

Steve- at least you have suggested it, I would be half harted and would need a strong presentation to have this unconventional approach accepted.

Gene- That has always been my position

A real estate agent can't write an offer without the Buyer or Seller's approval, so I'm not understanding why you think a Seller approving an offer that he helped write would be against his best interests.

AUG

2010

Hi Endre,

I use the RO to get those second-showing buyers off the fence. It's not necessarily about the price but, the sellers agreeing to make the deal happen by say, installing the carpet of the buyer's choice, leaving that piece of furniture that the buyer said they loved, offering a previously unadvertised home warranty upgrade, enclosing a loft to make it another room (a $500 cost to my seller that the buyer has in mind is an 'expensive' endeavor), etc. It's in my sellers' best interest to get an Offer and we do everything that we can to make our listings more appealing to a buyer who just won't pull the trigger, including ROs.

Another example is if we're price well but, that particular area is not the 'hot' area at the time and my sellers have to move. We'll calculate carry costs and come off the price that amount to get the buyers to consider a quick Closing.

I just did a post on this & I'm not sure how I feel. I've had a seller 'reach out' before & maybe it won't be such a bad thing if the seller just wants to move on. It's the sellers choice but they should know the pros & cons.

AUG

2010

Russel I am on the fence since this post and all the comments I received. The biggest reason I said that it is not in the best financial intrest of the seller, is because I looked at it from the perspective if the Listed Property is $1million and the seller submits an offer of $950,000.00 now the message is you can come back even lower....after hearing the comments that it is not just about price I am a bit on the fence at best.

Debe, after your great comment now I am clear the benefit is there, hence now it is one more item in my tool box. Thank you for the clarification.BTW congrats on your huge POINTS Achievement on the Rain:))))))))

Lyn, I am a firm believer I am just a facilitator, nevertheless I want the Seller to have all the options as well as the pros and cons of the options. Then they can make an inteligent decission.

Dan #26 comment - I did not mean to skip you, just got home from being out all day and then dinner. sorry about that..anyway .You make Valid points, I personally never worked with a buyer that was not serious enough, I would usually gage the objections and if the objections were not Valid, then I would confront them...if they did not agree I would tell them they needed someone else as their agent. As long as the objections are valid I have the patience, It is not unusual that I have clients with whome I work over 1-2 years....

Dawn, same as to Dan sorry about it... Anyway I totally agree you have to gage the Buyer as well as The Agent representing them.

Joetta, I am with you on this NOW:))

Mark & Jannelle this is almost too tricky:))

George, Thank you for your Dialogue

I'm thinking... don't make more of a selling strategy than need be. Whether you sell homes, toaster ovens, or lemonade, it shouldn't matter from whom an offer comes. Cut to the chase. A price either works for both parties or it doesn't - no hard feelings. How you get there...who cares? If you can't get there quickly...move on.

AUG

2010

Endre, Thank you for posting this. I've never heard of a reverse offer before. Amazing, I always learn something new on AR. It's an intersting concept, and I've enjoyed reading the pros and cons from people who have actually done it. Sounds like it could be a useful tool in the right situation. Will defintely put this one into my tool box too.

AUG

2010

Bill thank you for joining the conversation and your input.

Elyse the more tools we have in our box the better our service becomes to our clients, thank you for your visit.

AUG

2010

I see nothing wrong with it. It gets an offer on the table and starts more serious negotiations.

AUG

2010

Jim before thi spost I was totally against it, now I am on the fence. My concern is OK we are negotiating, question is will the buyer and the other agent be strong enough to stay in Escrow?

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