Knowing when to accept an offer
Is it true that the first offer on a property is generally the best offer? It frequently is, since serious buyers who are ready to act are always looking for new properties on the market. But even if the offer you're negotiating is the second, third or fourth, there are a lot of things to consider.
In a challenging real estate market, getting an offer on your property could be difficult, but getting an offer that you think is acceptable is sometimes impossible. But before you totally reject an offer that is not exactly what you were hoping for, ask yourself a few questions.
If you have a buyer who is financially qualified and who also is not encumbered with another property to sell, consider yourself lucky. If you reject this buyer, how long will it take you to find another with similar qualifications who is willing to pay the same price?
Time is money, and if a good buyer walks away because of a minor price point difference or repair issue, you need to consider your monthly carrying costs while you wait for another buyer. It could very well be more cost effective to accept a lower offer or agree to a repair after you calculate what your carrying costs would be for an unknown number of months in a soft market.
The next problem is financing. If your buyer is obtaining a mortgage, which the majority of buyers do, the property must appraise at an acceptable price before the bank will make the loan. This is becoming one of the biggest problems we're having in today's real estate market.
Because of the slow sales market, it's not uncommon for there to be no comparable properties available in a particular area, or if there are, they may be foreclosures or short sales that have sold at discounted prices as well as other distressed sales.
For example, if the agreed upon sale price is $500,000 and the buyer wishes to obtain an 80 percent mortgage of $400,000, the property must appraise for $500,000, if it appraises for anything less, the bank will not lend the money.
When this happens, the only way to keep the transaction together is if the buyer pays the difference in cash or the seller comes down in price. No one likes to be in this position. The buyer feels he is overpaying for the property and the seller must accept less money than he anticipated or lose the sale.
In recent years, appraisers have become very very critical on property values due to the volume of foreclosures. In addition banks are frequently requiring larger down payments. The point is, sticking to your guns, particularly on pricing, may in the long run result in a no sale with expenses in the form of carrying costs building up.The only way to get through a real estate market in flux is to be flexible, reasonable and use a sharp pencil.
Offers on real estate are like exotic plants, they need just the right amount of water, not too much sun and a sprinkling of fertilizer. If they're not properly coddled, they may not bloom, or they may disappear completely.
