Is no offer better than a bad offer?
In a recent post, I explained the reasoning behind sometimes taking a pass on certain offers even when there are no other offers on the table. Selling a house is not unlike getting engaged... it's important that you get it right the first time, and if you chose the wrong person, it's going to come at a cost.
Same with buyers.
If you hitch your wagon to a flaky, under-committed buyer just because no other offers have materialized, you are taking on a ton of risk. Because when a house goes under contract and then comes back on the market a week later, everyone automatically assumes something was wrong with the house, when in reality the buyer may not have even done an inspection.
(There's no box to check for "cold feet" in the MLS, by the way)
So in the past few days I have once again swerved into an unusual set of circumstances around a new listing. In our new tire-kicking, wait-and-see market of 2019, I've had really good activity for this property, with eight showings in the first week and several interested parties.
In fact, that interest eventually manifested into four different offers... three that came in within 24 hours of each other and a fourth that came in after I had shown offers one, two and three the door.
Here's a synopsis of what those offers looked like:
Offer #1: Full price, but with a contingency to a home built in 1902 which has been on the market for 46 days and shows no indications of selling anytime soon.
Offer #2: Full price, but in this case the buyer is in a lease through March and wanted us to wait almost four months to close (seriously).
Offer #3: $10,000 below list price with a first-time buyer using down payment assistance programs and who is maxed out at this price point.
Given the three options, the only one that felt workable was #2. I asked the agent what her buyer was paying in rent ($1,600 per month) and said if we could figure out how to bridge that divide, we might be able to patch something together.
My seller's home is vacant and she has moved out of state, so she wants to sell quickly. But like all sellers in this market, she really has just one shot to "get it right" when choosing a buyer... because as we go into the holidays, should we be off the market for several days (or weeks) and then end up coming back on the market (for whatever reason) in December, it's likely going to be a cold, lonely Christmas season.
I asked the agent for Buyer #2 to talk with her client and try and figure out a plan, whether that meant breaking the lease early, subleasing, even offering up the rental on Air BnB for a few weeks (if approved by the landlord) to make the deal work.
Instead, I got this.
"My client is making a 20% down payment and so for each $5,000 we lower the price, he'll keep an extra $1,000 in his pocket," she said. "Since he needs $4,800 to cover the rent through March, he needs to lower the price $20,000 for it to work."
And with that, she sent me an offer $20,000 below the offer she had submitted two days earlier.
Hammer, meet forehead.
If that's the best problem-solving you can come up with (and apparently it was), there's 0% probability that I want this agent within 100 miles of my seller's home.
Fortunately for us, as the aspirin was kicking in and my headache was finally subsiding, the showings kept coming... and within two days, we had another seriously interested party.
Full-price, no contingencies, four week escrow, 20% down.
Yes, yes, yes, yes.
And now we're under contract.
But the lesson here is that in 2019, good agents have had to develop (or re-develop) the discipline to say no to things that don't make sense. Even when there's nothing else on the table.
The process sucks, and frankly, some desperate agents are upset with me because I won't accept their marginal offers. Which I attribute to the fact that, in this market, there are a whole bunch of starving agents who need these deals worse than their clients do.
But please, do some thinking and come up with solutions.
For the agent dependent on the contingent sale for the home struggling to sell built in 1902, put some teeth in your offer. Let $1,000 of earnest money go hard every 7 days until we've maxed it out, or perhaps let some portion of it go hard after the inspection, or give yourself 15 days to get the contingent home under contract concurrent with an immediate price reduction.
Do something, but don't just serve up a garbage offer.
To agent #2. The ball was at the one yard line. We were talking about a $4,800 issue in terms of how to cover the buyer's rent for three months. Maybe you throw some money in, we throw some money in, the buyer takes the home "as is" and we close in four weeks. There was a path here, and you gave us absurdity.
And to the first-time buyer stretching to come in $10k low, you're just not going to get that deal five days into the process on a home drawing lots of interest. Find a home that's been sitting for 46 days (I know of one built in 1902) and maybe that seller will be open to a $10,000 chop.
The point is, the whole real estate ecosystem is in transition these days and there is plenty of wreckage to go around. A much larger than normal percentage of transactions are falling apart because buyers are nervous and agents don't know how to solve problems.
I guess this is why my phone keeps ringing and my services are in demand.
It takes discipline (and faith) to say no. But increasingly in 2019, "no" is a much better response than saying yes to something that's ticking with a fuse sticking out of it.