While teaching a class on purchase contract negotiations, I used an example of a home seller who rejected an offer. The buyer's agent was upset that they didn't counter.
It was an appropriately priced home, that showed well. The buyer sent in an offer for $100,000 less than the asking price. There was no cover letter, no pre-approval letter and the contract looked like it was written by a 3rd grader. No indication they were serious or would be able to close. So the seller rejected the offer.
The buyer's agent responded immediately and demanded and explanation as to why they didn't counter.
Here is where the buyer and their agent went wrong:
- The price was so far from anything the seller would accept, they had no common ground. They were not going to meet them in the middle or anything close to it.
- The contract was not executable. In the rare case that the seller considered accepting the price, they could not sign the contract. They would be forced to counter to clean up the mistakes. The counter would require a re-write of the entire contract to clean up mistakes. If they have to counter to clean up the contract, the price is on the table too. This mistake weakens the buyer's hand in a negotiation.
- The buyer did not persuade the seller they were serious.
- The buyer's agent showed a lack of professionalism and convinced the other side this would be a painful at best escrow, if it ever got there.
- The buyer did not make the case that they could close if they got to escrow.
- Bottom line - The buyer did not give the seller any real basis for a negotiation.
When you make an offer on a home you need to do a few things.
- Present a clean, executable contract. If they sign it, you are going to escrow. Be sure they are not forced to counter, to clean up your contract. If they do, everything is on the table.
- Demonstrate that if they accept your offer, they will be dealing with a professional and not an idiot.
- If you offer less than the seller wants to accept, make your offer strong and attractive in every other way. Make them think twice before taking the risk of losing your buyer by countering.
- Here's the bottom line. You need to make the case that if they take their home off the market, you will bring it to closing.
When presenting an offer, make the other side feel comfortable dealing with you. If they feel confident you can close, they may be a little more negotiable. Solid buyers do not grow on trees. Flaky buyers and flaky agents do not get the same level of respect.
I just added a follow-up blog post to this one: Not All Realtors® Agree - Rejection vs. Counter Offer