Series: The Art of Offering Less «

Just about everyone enjoys finding a bargain. My kids love shopping at the local Value Village over in East Bremerton WA. The last time I was there with my son, Luke, I found a really nice leather dress belt in mint condition for only $2.99 that normally retails for around $50!

There is this tendency when the market softens and slows down for Buyers to expect greater bargaining leverage when it comes to home sales prices.

Typically, when a market shift takes place that favors the Buyer (commonly referred to as a ‘Buyer’s Market), there is high level of inventory of homes available for purchase. At the same time, as ‘Days on Market’ increase (the number of days on average that it takes for a house to sell/close), Sellers begin to reduce or discount their listing price. Add to that the number of recent short sales and foreclosures that have occurred due to our current economic conditions, and you have the potential for finding  some really excellent bargains for today’s Buyers.

However, regardless of how current market dynamics favor Buyers, one should never assume that every Seller is equally desperate to make pricing concessions. Each property must be evaluated on its own unique merits. The basic questions Buyers need to ask are:

1.   How long has the home been on the market?

2.   Is the house priced aggressively, according to current market value?

3.   What have comparable homes in the immediate area sold for in the past 1 to 3 months?

The answers to these questions can help to dictate whether or not a lower price offer is reasonable or realistic. If the home has been on the market for any length of time without a price reduction or without much showing activity, chances are the Sellers might be more motivated in making a concession. If the home wasn’t priced right at the start, accordingly market value, then the Sellers might be coming to the point where they realize an adjustment might be necessary. A brief market analysis should be able to determine if the home is priced correctly.

In the event that a Buyer decides to offer less than the asking price, there are definitely some strategies you can employ that will help to improve your chances for success.

The offer price is just one element to a contract offer, albeit the most predominant. The key to being successful in offering less than asking price is to strengthen all of the other elements of the offer.

We’ll cover those other elements in the next installment, so stay tuned!

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Rich Jacobson is a licensed real estate professional providing knowledgeable empowerment and relentless representation for his clients of residential properties and vacant land throughout all of Kitsap County WA and portions of Pierce, Mason, and Jefferson Counties. You can also find him at KitsapLife.com and Crabbing in the Hood.

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In our last episode, Bill and Betty Buyer were sitting down with their trusty Agent, Realtor Ron, to draft an offer on their dream home. They had spent the past 3 weekends touring dozens of potential properties, when they finally found just the perfect place!.

When it came time to discuss the offer price, Bill proudly asserted, “We’re going to offer them $50K below the Listing price, and ask them to pay closing costs too!”

Pulling his jaw off the floor, Realtor Ron looked down on the MLS data-sheet for the subject property.

“Their home has only been on the market for less than two weeks,” Realtor Ron stated.

Pulling up statistics for  several comparable properties in the same neighborhood that had sold in the past month, Realtor Ron showed the Buyers how the property was actually priced very aggressively, below many of the most recent sales. In addition, a quick check on the County Website revealed that the home was priced just below the property tax assessed valuation as well.

“But it’s a ‘Buyer’s Market,” responded Betty Buyer, “Aren’t all  Sellers desperate?”

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There is this tendency when the market softens and slows down for Buyers to expect greater bargaining leverage when it comes to home sales prices.

In the event that you, as a Buyer, decide to offer less than the asking price, there are definitely some strategies you can employ that will help to improve your chances for success.

Just understand that each property and Seller presents a unique set of circumstances, and each needs to be considered separately.

The offer price is just one element to a contract offer, albeit the most predominant. The key to being successful in offering less than asking price is to strengthen all of the other elements of the offer. Here are some suggestions:

1.   Cash Buyer:   Obviously, the old adage ‘Money Talks’ still bears true today. Cash Buyers will almost always have the greatest degree of negotiating power in a real estate transaction. But let’s face it, the overwhelming majority of Buyers today require some amount of financing.

2.   Letter of Loan Pre-Approval:    Okay, so if you’re in the clear majority, and plan on using a mortgage loan to purchase the house, then you need to effectively convey/communicate your financial solvency and ability to satisfy the contract. One way this is accomplished is through an official Letter of Loan Pre-Approval furnished by your mortgage lender (always make them ‘address specific’ and not ‘dollar amount’ specific).

3.   Letter of Buyer Introduction:   Another method I have found to be effective is to draft a Letter of Introduction about my Buyers that serves to put ‘flesh’ on the offer. It helps to divert the attention away from ‘dollars & cents’ and puts the focus on real people trying to achieve their dreams. I know, it sounds corny, but trust me, it works.

3.   Earnest Money:   One of the purposes behind offering earnest money is to demonstrate the seriousness of your intent to purchase. It makes a statement to the Seller about how much you want their home. If you’re going to be skimpy on the offer price, then soothe the wound with a hefty earnest money deposit.

4.   Make it a ‘Clean’ offer:   Make your offer as straight-forward and with the least amount of ‘hoop-jumping’ as possible. This means eliminating or reducing any redundant contingencies or addendum.

5.   Other Seller Considerations:   One of the things I always ask the Listing Agent before drafting an offer is “Are there any other considerations besides price that are important to the Sellers?” You’d be amazed at what is important to some Sellers other than the sales price. Some want an accelerated closing. Others a delayed or extended closing. Sometimes accommodation to these other considerations can make a huge difference.

This is, by no means, an exhaustive list of elements you can vary or strengthen to better position yourself when submitting a low offer. In the next installment, we’ll talk about the risks associated with submitting a low offer.

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Rich Jacobson is a licensed real estate professional providing knowledgeable empowerment and relentless representation for his clients of residential properties and vacant land throughout all of Kitsap County WA and portions of Pierce, Mason, and Jefferson Counties. You can also find him at KitsapLife.com and Crabbing in the Hood.

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Tags: Buyers, Kitsap County WA real estate, making a low offer, making an offer, seabeck wa real estate, Silverdale WA Real Estate

This is the 3rd and final installment in a series entitled “The Art of Offering Less” and deals with the unique nuances associated with tendering an offer that is lower than the asking price.

In the 1st article we discussed the market dynamics that tend to encourage or breed low offers.

In the 2nd article, we shared various strategies for Buyers to achieve success with low offers.

In this final part, we’ll talk about the risks that are inherent with making low offers.

Obviously, the biggest risk you run in offering less is leaving the door of opportunity open for another Buyer to come along and rain on your parade. By this I mean, that while you and the Sellers are negotiating the price, and countering back and forth, another Buyer can come along and offer something more attractive. This effectively puts you in a defensive posture, and usually results in you having to sweeten your offer. As a result, you typically end up paying out way more money than you would have if you had simply offered a reasonable amount in the first place.

Therein lies the true secret of writing a low offer – determining that ‘magical’ initial price that doesn’t insult the Sellers, but yet is still within reason so that it attracts their interests and serious considerations.

As a Listing Agent, I always counsel my Sellers to consider each and every offer as a serious offer, regardless of whether it’s low or not. Unfortunately, not all Sellers are properly represented or counseled. As such, there are those who take low offers as a personal insult and refuse to respond back to the Buyers. At the very least, you should always counter back to an amount you feel is more reasonable.

Just because the market has slowed and the inventory of available homes has increased, don’t assume that every Seller is desperate and willing to consider a lowball offer. Many Listing Agents are now counseling their Sellers to price their homes very aggressively right out of the gate in order to effectively compete against short sales and foreclosures. Be sure to work with a Buyer’s Agent who has an intimate knowledge and understanding of your local market, and can provide you with accurate comparative analysis/justification for home valuations.

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Rich Jacobson is a licensed real estate professional providing knowledgeable empowerment and relentless representation for his clients of residential properties and vacant land throughout all of Kitsap County WA and portions of Pierce, Mason, and Jefferson Counties. You can also find him at KitsapLife.com and Crabbing in the Hood, or e-mail:  kitsapagent@gmail.com

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Tags: buyers market, home buyer tips kitsap washington, Kitsap County WA real estate, making a low offer, Silverdale WA Real Estate