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Who would write an offer for less than the asking price?

By Kelley Eling

Real Estate Agent with Fathom Realty Group License# 01336994

April 22, 2007 08:58 PM

There's been a lot of discussion about price. I'm here to discuss it a little more.

Coming from the Seller's and Listing Agent's point of view, you have to have a price. I mean I suppose you could just put it out to the general public and other agents, "Hey, this property's available for sale. Name your best price." Of course, that's not how it works here in our neck of the woods. Although I have seen some FSBOs in the area offer their home in the newspapers "this home will be sold to the highest bidder this Sunday". I have not heard any success stories in the paper after that.

Coming from the Buyer's and Buyer's Agent's point of view, the price serves as a guide as to whether or not the buyer can afford the home. Personally, when I work with a buyer, I feel it is part of my job to find the best property for them. And that includes my investigating all possibilities--including what may be "overpriced" listings.

Whenever I present an offer that is less than the asking price I always include how we came up with that price, which is usually in the form of a mini CMA.

My buying clients are not at all afraid of offering less than asking price. They usually just figure what it is worth to them, based on the comparable homes they have seen. Then we write it up. Lately, all of them have been accepted.

I see properties in Sonoma that have price reduction after price reduction and it still doesn't result in a sale. There simply are not very many buyers here right now.

As I finally get to my question: What would stop your buying clients from offering less than the asking price, regardless of how much less it is? And as an agent, what would stop you from encouraging your client to do so, providing you felt that you could support the value of the offer? Even if you felt the offer was too low and you didn't think it would get accepted, would you not counsel your client that they would probably get a counter offer or a rejection rather than an acceptance? Nine times out of ten, you get a counter. A willing,qualified buyer and a willing seller are all it takes to make the deal.

What stops a buyer and/or a buyer's agent from writing an offer on a perfectly good property if all that they have issue with is the price?

I encourage agents and the general public to reply.

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Brad Patshkowski

Heritage Home Loans a division of Mann Mortgage LLC - Spokane Valley, WA

Home Loans Spokane, WA

I agree that price must be established...otherwise you as a Realtor are going to spend all your time and gas driving people to homes you ahve no idea they can afford. This is something I try to stress to all that I work with...find out how much home you can afford and then go find it. Good post Kelley.

Apr 22, 2007 10:34 AM

Lenn Harley

Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA

Real Estate Broker - Virginia & Maryland

The list price of a resale home is like the menu at Club 21, merely a suggestion.

Apr 22, 2007 11:59 AM

Paul David Hiebing

Grampp Realty: Real Estate in the Quad-Cities - Bettendorf, IA

Quad-City REALTOR®, @ Grampp, Realty of The Q.C.

I was taught by a lot of the "old school" agents (those who pre-dated computers and, in a few cases, maybe even the dinosaurs) and I still look at the price per square foot $/SQ FT for any given listing, and put a lot of weight on it..

I then set ranges for various styles, amenites and areas... (i.e. a 1800 Sq. Ft., 4 Bedroom, 1& 1/2 bath, 2-Story, with 2 Car Gargae in Near North Central Davenport would have a range of $55-$85/sq. ft., or a list price of between $99,000 and $153,000)

If its below that range, I usually figure that it needs some work, and will investigate with listing agent...

If it's above that, unless there are obvious reasons from the MLS Description... I don't even show the property... It's overpriced and I won't waste my buyers, or my, time....

And when I do show a property that my buyers want to write an offer on... I always do my own CMA and I can usually determine the market price to a $/sq ft range of about $5-- (i.e. $75 to $80)...

If the sellers accept the offer, we have a deal. If they don't, I advise we go to next house...

Apr 22, 2007 03:35 PM

Laurie Manny

Long Beach CA Real Estate - Long Beach, CA

For some reason, which remains a mystery to me, buyers agents are reluctant to show overpriced properties here. I say show them and offer a "reasonable" price for the house. You do not have ESP. You do not know if the seller will reduce the price or negotiate an equitable arrangement until you try. I think the buyers agents are lazy and know they do not have the negotiating skills required to properly represent their buyers so they only show properties they can handle. Just my opinion.

If an overpriced seller receives several offers at or near market they may begin to "get it" and finally accept one.

Apr 22, 2007 08:58 PM

Tony and Suzanne Marriott, Associate Brokers

Serving the Greater Phoenix and Scottsdale Metropolitan Area - Scottsdale, AZ

Coldwell Banker Realty

What would stop your buying clients from offering less than the asking price, regardless of how much less it is? Nothing.

And as an agent, what would stop you from encouraging your client to do so, providing you felt that you could support the value of the offer? Nothing!

Even if you felt the offer was too low and you didn't think it would get accepted, would you not counsel your client that they would probably get a counter offer or a rejection rather than an acceptance? Absolutely - and I would encourage the listing agent to have their seller counter rather than reject - it's all about engagement.....

Apr 22, 2007 11:31 PM

1~Judi Barrett

Integrity Real Estate Services 116 SE AVE N, Idabel, OK 74745 - Idabel, OK

BS Ed, Integrity Real Estate Services -IDABEL OK

I tell my buyers that most sellers appreciate and will consider any reasonable offer. I also tell them that if they are not comfortable with the price, don't let that prevent them from making an offer, just make the offer that they are comfortable making.

Apr 22, 2007 11:46 PM

Diane Bell, Hilton Head Real Estate, Bluffton

Charter 1 Real Estate, Hilton Head, Bluffton, SC - Hilton Head Island, SC

Commenting on the price per square foot method, that is almost impossible here in Hilton Head due to the far ranging value of different home sites. For instance, a golf and lagoon view in a plantation will have far greater value than a wooded lot. In the north, we used to love wooded lots......here, view is everything.

Apr 22, 2007 11:55 PM

Jen Walker

Realty Executives of Mid Missouri - Jefferson City, MO

Jefferson City, MO Real Estate

I have no problem making an offer on an "overpriced" property. In some cases, the seller doesn't know it's overpriced. But their agent should and probably does know that. I think that many times people think that overpriced properties equals unreasonable sellers and they just don't want to deal with that. Good post!

Apr 23, 2007 12:57 AM

Tim Maitski

Atlanta Communities Real Estate Brokerage - Atlanta, GA

Truth, Excellence and a Good Deal

Who's to say what a reasonable offer is? I've seen many "unreasonable" offers accepted. Some how I get the feeling from most agents that the seller is entitled to a fair price. As a buyer's agent, I strive to get a home somewhere below what a CMA might determine to be a fair price. I'm trying to get a bargain for my clients. It's not the easiest thing to do and it creates friction with the seller, but I really don't care if the seller isn't getting a fair price. My job is to get the best deal for my buyer. My joy is when the appraisal comes in higher than the purchase price. I then feel like I have really earned my commission.

Apr 23, 2007 01:08 AM

Virginia Halter

RE/MAX Signature Properties - Harrisburg, NC

ABR, CDPE, CRS, GREEN, SFR, SRES

I have no problem with showing an overpriced listing. Itell my buyer clients that it is overpriced and I show them how I concluded that it is overpriced. If I low-ball an offer I try to send comps for it. My biggest problem lately ar ethe agents who are trying to justify their list prices with comps from OTHER NEIGHBORHOODS. Not all neighborhoods are equal. If I have solds from the same neighborhood that comp witht he property then they take precedent, I am pretty sure.

If we low-ball an offer I also tell the buyer that we run the risk of not hearing back from the sellers. Worst case!

Apr 23, 2007 01:12 AM

Ann Cummings

RE/MAX Shoreline - NH and Maine - Portsmouth, NH

Portsmouth NH Real Estate Preferrable Agent

Kelley - congrats on your featured post!

I have no problem at all with my buyer clients submitting an offer at less than the asking price. No one ever really knows what a seller will accept until they see it in writing. And unless you're in a very strong seller's market, people would be foolish, in my opinion, to not encourage buyers to submit offers. I do caution buyers about making really ridiculous offers on a house if it's THE one that they really want, as they do run the risk of insulting the seller. I've had that happen, so I have first hand experience, and I share my experiences with all my clients - buyers and sellers.

Ann

Apr 23, 2007 01:27 AM

Eric Bouler

Gardner Realtors, Licensed in La. - New Orleans, LA

Listening to your Needs

I write on what we think its work. If the asking price is too high then we may never get to see the property. You never know what people will take so go ahead and write it up. Eric

Apr 23, 2007 01:33 AM

Don Horn, ABR, CRS, GRI, CNE

Keller Williams Realty - Goodyear, AZ

When representing sellers I tell them they should never be insulted by an offer they consider unreasonable. The important thing is that a buyer has identified themselves as someone who likes their home and would like to own it. Its now time for the seller to seriously consider the offer and seriously consider their own expectations. And often, the seller needs to consider whether they should complete this transaction and go on to be the buyer in a buyer's market for their next house.

Negotiate! Make a counteroffer if you can't accept the offer, even if you are worlds apart. One agent I really respect told me that i (and my client) should never end the negotiation, keep trying to find acceptable common ground. If the buyer breaks off negotiation that's too bad, but I want my seller working to try to get a deal. As long as the seller really wants to sell and the buyer really wants to buy there must be some way to adjust terms to make the deal look better to all.

Apr 23, 2007 01:37 AM

Mitchell J Hall

Manhattan, NY

Lic Associate RE Broker - Manhattan & Brooklyn

I will counsel my buyers however even if I think they are wrong or too low, it is still my job to present their offer. I have just been going through a back and fourth countering. The wife really wants it but the husband is trying to play hardball over $3,000. The seller came all the way down but they are still $3,000. apart. Both agents have been trying to make it happen. I just heard from the wife after I wrote an email to the husband giving him all the reasons why it is a good deal. She just said they will take it if it is still available.

Apr 23, 2007 02:18 AM

George W. Miller

Keller Williams Realty - Naugatuck, CT

Naugatuck and Beacon Falls Real Estate

I always tell my clients that I will present any offer that they want to present. I also tell them when I think their offer is unrealistic. I tell them that they raise the risk of shutting off negotiation prematurely. I also tell my sellers that they should look at selling their home as a financial transaction and not be overly sensitive to offers that they receive. If an offer is much too low then send that sisnal by countering only slightly less than asking. The important thing, in my opinion, is to take the emotion out of the transaction whenever possible.

Apr 23, 2007 02:29 AM

Michael Delp

Mortgage Pro - Telford, PA

I think ALL offers should be considered by the seller. I have heard of sellers pulling their overpriced homes off the market because they were insulted by the offers, but most of the time they counter the offer.

Apr 23, 2007 02:46 AM

Desiree Daniels

RE/MAX Tri County - Robbinsville, NJ

Kelley

Absolutely... ask I type I am doing two market analysis for buyers who want to present offers on properties that I do not have listed.

It is our job as a buyers agent to do just that. We are supposed to comp., advise and investigate anything and everything we can before presenting an offer on a buyers behalf... terms.. conditions.. additional offers.. time frame.

Any agent who just writes an offer without doing all of that is NOT working in the buyers best interest. I agree, If you watch "Days on Market" and you know its overpriced... I strongly urge an interested buyer to make an offer even if below asking... once the reduction hits.. the property generally "pops".

Thanks for the post... and sharing

Apr 23, 2007 02:52 AM

Kelley Eling

Fathom Realty Group - Sonoma, CA

Realtor Extraordinaire

I had a buyer write an offer on a property that he just loved. He absolutely lit up when we were there. His initial offer was $100K below the asking price. We presented comps to support our offer. After negotiations, buyer and seller finally came to agreeable terms and we closed on April 13th.

Right before this I was in escrow on a property that we came in $29K less than asking and we prevailed--in a multiple offer situation. Other circumstances prevented a closing, but still we did come to agreeable price and terms.

I am now in escrow with another buyer. We came in $25K less than the final list price (after several price reductions) and after negotiations, again we prevailed. We are set to close in a few weeks.

My point is what someone said earlier, the price is a guide. The final selling price is determined by a willing, qualified buyer and a willing seller. Sometimes the property sells for less, sometimes at the asking price and sometimes it sells for more--much more.

If you like the property, write it up at a price and terms that are comfortable for the buyer. It's the agent's job to present the offer in an acceptable light. If the original terms are not acceptable to the seller then it's the agents' jobs to help negotiate the price and terms that are acceptable. This is part of how we earn our commission.

Apr 23, 2007 03:43 AM

Joe Gomez

Realty Executives of Treasure Valley - Eagle, ID

i always encourage my buyers to place an offer with the general understanding ( I hope ) from the seller's rep that there is alwasy the opton of COUNTERING the offer and eventually meet at a win win place !

Apr 23, 2007 06:23 AM

Caleb Mardini

Bellevue, WA

Thanks for this post.

When you've been out looking at a number of homes you get a pretty good idea of where a particular home sits in comparison to it's competition. In addition if you've looked around and this is really the home for you, then making an offer is imperative, sure you may not get it, especially if it's newly listed, but you've got your name on the list when the seller looks at a price drop, and you've given it a chance.

The key is to remain detached. When we make a low offer, I counsel my buyers to be willing to walk away, and to remain somewhat detached.

Apr 23, 2007 09:22 AM

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