Expert: Matt Heisler - 6/25/2007

Question
Hi Matt,

Well, we finally have people looking at our home - a lot too. We priced it at $269,000 which I thought was a good price. Our realtor called yesterday and told us we got an offer for $250,000.  She said she thinks we should meet them halfway and counter with $255,000. (Do realtors usually give their  input like this? I really like her, but I felt she was overstepping her job).  I told her that I did not want to drop that low, and thought that we should counter with $267,000. I said that is how we negotiated on the house we are in now; you counter offer, but you don't go all the way down the first time. She got very excitable and said that we might lose them.  She said our house has sat there for a year and we've been losing money on it. I told her that the buyers don't know that we're desperate to sell.  She said "yes they do! Your house is EMPTY!"  I told her that doesn't indicate to them that we're desperate.(Is she right about this??)  She acted as if the buyers held all the cards, and we had to go along with what they wanted. The buyers said they want to settle on July 20th.  I think it's a ploy by them, (and my husband thinks their realtor) to get us to give them a lowball price.  I know we've struggled, but that doesn't mean we have to give our house away, and be taken advantage of.  Is this realtor correct in what she's saying?  The house showed again today, and the people loved it.  Do you think we should get our house appraised, so we don't make a major financial mistake (we've already made too many)- or do you think that we should just go with the numbers we have, and what people are willing to pay?  I just think that the realtor is acting desperate, and is going to convey that to the buyers, and not represent us well, and we'll end up on the short end of the stick. I told our realtor that I had read that you shouldn't jump right away to offers.  My daughter thinks that the realtor is pushing the sale for her own benefit, and because our contract is up next week. I thought it was pretty gutsy of those people to come in with such a low offer. We've been through so much with this.  I don't want to make a major mistake in our last mile.  Can you offer me any advice on how to handle this?  Thank you very much for your help.

Answer
Hello:
1) Counteroffering: I'm not completely sure of your situation because your math doesn't work.  Halfway between 270 and 250 is 260, which is not a bad counter.  I think the  key in ALL negotiations is to make sure that whatever you do, you only plan on going back and forth a MAXIMUM of 3 times.  Otherwise someone gets angry, and basically it will be miserable and expensive from that point.  The difference between 260 and 255 is $5000 - but it's only 2%.  In the grand scheme of things it's not a lot.  Might sound like a lot, but in real estate, walking away from a deal for 5k is rarely a good idea.  In short, if it was me, I would counter at 265. When the buyers say 255, go to 260 and tell them you're firm. Then agree to whatever they offer the third time - it's within $500 of the max you can get.
2) Vacant house: In general, buyers will assume that you need a buyer more than they need a house with a vacant property.  I routinely advise buyers of this when negotiating, and I am more aggressive with the offers on vacant property.
3) Services:  A good agent will negotiate at least 15 deals a year.  Over 5-6 years, that means they've done 75 deals.  Based on that experience, MOST clients prefer that we give advice in this area, as they have done less than 3 in the same time period.
4) Your realtor may be desperate - but you need to do your research on your agent before an offer comes in, preferably before signing a contract. I think your agent is trying to get you in a situation where you can close and move on.  That's sound advice.
5) Lowballing:  A lowball offer is really anything that's less than 10% off the listed price.  This offer isn't. With the house on the market a year, you're going to get low offers.  That's how it works.  I usually advise my clients to "price competitively" to avoid exactly this scenario.  But most are skeptical.
6) They're in cahoots!:  I doubt it. This is very unlikely.
7) They Love the house!: Then why is their offer so low?  Separate their emotions from the money.  They aren't the same.  People don't come to me and say, "I love the house, can I pay the sellers more money?" They negotiate if they think they can.
8) The offer:  Do you have this offer in writing?  If it is, than July 20th isn't a "suggestion" it's a firm commitment.  Time is money, and if they are going to close sooner, it's worth money to you.  How much money, however, is up to you.  A typical 265 home would probably cost about $2000 a month, in taxes, mortgage, and utilities, or $500/week.  But really a fast close is worth more than that to most people.
9) Negotiating styles:  Every situation is different.  How you bought your new house, and how someone buys yours isn't going to be the same.

In closing, what you really need to ask yourself is "if this deal falls apart, am I prepared to stay in this situation for 3 months?"  Because it will likely be that length of time before you get another offer.  If the answer is "no", then get the deal signed before the buyer thinks you're too difficult to do a deal with.