Getting Nervous When Offers Come In Too Quick
A: This is a stupid little thing that does indeed happen out there in the world of real estate. The reason is because selling your home is a very emotional decision that can make some sellers wary and nervous. When the reality of a deal getting done inches closer, that is when the wariness can turn into nervousness; and that can lead to a rash decision that surprises everybody involved. Luckily it doesn't happen too often, but I did go through this three times in the past two months alone. In my opinion, the last thing you want as a seller broker is to have your client second guess their decision to sell OR their pricing strategy when first putting the apartment on the market. History usually shows that the best offers come in the first few weeks, but as a seller, sometimes you can't help but wonder if you really did price your property correctly?
One of the biggest headaches I find in this business is when you run into a seller that gets nervous or scared when you present a solid offer soon after the property hits the market. What does the seller want???? If you price at $1,250,000 and you get a solid bid in 3 days from a motivated buyer, why is that reason to get all nervous and nuts that ultimately leads to a rash decision?? Well it's not my place to say! I just question why the seller listed the apartment in the first place before thinking things through properly. Unfortunately my clients and I just experienced this situation for a midtown condo. Asking price $1,250,000, 3 days on market, we submit a solid offer and get a seller response of $1,240,00 - so we ACCEPT! And what are we rewarded with? A seller that got scared and removed the listing from the marketplace. This was the third one in the last few months (520w19, 144w27, & 200e58), and I thought it might make for a good topic of discussion.
Here is the rub: Its the seller's home to sell, they need to agree to all terms of the deal or its just not worth getting the attorneys started! In the end they are the one that must countersign the contract that the buyer signed first to seal the deal. Nobody can force anybody to sign that contract. Sure you might be able to calm a buyer or seller into more seriously considering one way or another, but you can't force them to sign the contract! That is something they must do on their own; likely after dealing with the emotions of buying or selling in their own way.
Whenever I present a solid offer for a property whose listing history is under 7 days, I get a bit worried that the seller may start to question things. On the one hand you may get a seller that is ecstatic to have gotten a solid offer in such a short period of time and who feels lucky to be able to move forward so fast. On the other hand, the seller may start to rethink their pricing strategy ---> Did we price too low? Did we give the market a chance to present all offers? Am I making a big mistake here? In both situations, the reality of selling hits home once that first solid written offer is received - it just becomes real and sometimes that can scare a seller a bit. Usually things work out just fine, but sometimes they don't!
I recall selling my condo at 245 E 93rd St, Unit 2M in early 2006. I received a $975K offer in the first week and played tough! The strategy didn't work and I lost the bidder. I wonder how serious they might have been anyway just removing the offer after we were $50K apart in negotiations that first week. Turned out I sold for 40K less some 4 months later. Doh! Live and learn I guess.
The worst is when a seller starts to rethink their pricing strategy and questioning if they are leaving money on the table because they got such a strong offer so quickly! Ugh, that is when the seller broker should educate their client on how markets sometimes work. Sometimes you have a perfect buyer (highly motivated) that missed out on a few places and maybe recently lost a deal because the seller took a higher offer or decided to remove the listing from market after accepting an offer. So, naturally, when the new place hits the market (your place) and the buyers like it they are ready to go in aggressively with all ducks in a row - something as simple as a situation like this. Yet the seller may interpret the situation differently; that they priced incorrectly and that is why they got this strong offer so fast. After all, this is my home and my biggest asset and I have one shot at getting the most money as possible on this trade! That is the thinking in the seller's mind in this specific situation.
The seller should be mindful that if the property was under priced in a market that is clearly active, that you should not only get a ton of traffic immediately but you should also receive multiple aggressive bids. Therefore, if you get one solid offer in the first 7 or 14 days you should NOT mis-interpret that to mean your pricing strategy was wrong; that could lead to a rash decision. The reality is more likely that a perfect buyer found your place at the right time and decided to make a statement to you in a timely manner that they want to do a deal - within reason of course!
I have always explained here on UrbanDigs that brokers do not dictate value of any one individual property, the market does! The broker's job is to educate you on where this market is, how to price your property to meet your time line to sell, and to market/service your listing in the broadest way possible to procure the highest & best offer. The market will ultimately price the true value of your home; and the market is bigger than all of us! Pricing right is the best strategy any seller can do right now, but it sometimes comes with the consequence of raising uncertainties in the seller's mind if they really have no true motivation to sell other than to test the market to see what their place might fetch. That is when the listing broker needs to either educate their client on market dynamics or question if this seller is real enough to warrant their time. Nervousness and wariness are natural human emotions that many sellers and buyers will feel at some point in the process - and the process can get very emotional! The key is to avoid letting those emotions cloud the right decision that works for your personal situation.
Comments (10)
Do you impose a penalty fee on the seller who breaks off negotiations like that? It would seem only fair after having to go through all that leg-work only to have them break it off at the last minute.
Posted by Anonymous | February 9, 2010 3:53 PM
would never happen. the listing agreement clearly states the commission is only owed at closing upon transfer of the apartment. i just dont see how sellers would agree to pay for this and I dont see how individual firms can get away with charging for this, unless they all do it. And that would be a form of price fixing.
I personally dont work with sellers anymore, but its happened to me about 3 times...not much, I was always more of a buyers broker
Posted by Noah | February 9, 2010 4:46 PM
I got offers within 1% of asking for both my apartments the last two times I sold, 1999 and 2008. I went to all the open houses in my neighborhood and within our price range in the city for two months before we sold. I asked the brokers what were the important features to buyers and what areas were selling and why. I did my homework, made the necessary improvements and was happy with my price and my buyers offer. I didn't second guess my decisions.
Posted by lisa | February 9, 2010 9:35 PM
This just happened to us. Bid $50k below ask and then came up to ask on a co-op that had been on the market for approximately a week. The sellers freaked out and pulled the listing (even though the apartment had been off and on the market for 18 months at a range of higher prices). Very frustrating!
Posted by SC | February 10, 2010 9:51 AM
SC - yep, its happening. Now this is not to say its a new trend or anything, its not. This kind of thing just happens in markets all the time. Selling is very emotional and some sellers get real nervous when it gets real.
But its very frustrating! Why did the seller respond to our offer, if they had no intention of seeing it through? That is vexing to me. 144w27 was worse...6 days of active negotiations...finally 10K apart, and we agreed to accept, and seller backs out and removes from market. The funny thing there is how it was my clients that needed the extra day or two to decide whether to take the sellers 3rd counter over 4 days or so...we were being pressured for a response, and then, bam, taken off market...huh??
Posted by Noah | February 10, 2010 10:27 AM
Noah, your experience with your own apartment tends to prove the conventional wisdom about the first offer frequently being the best one. Your larger point underscores the necessity of testing the seller before testing the market.
Posted by Malcolm Carter | February 10, 2010 11:54 AM
My bet is that this behavior is not specific to one side of the market or the other. Rather, it has more to do with an individual's stomach for risk taking, greed, or practicality in regard to a major life decision.
In a market uptick, a seller motivated in some part by greed will back away from what may well be an early good solid offer at the current market, believing that the current uptick represents upward momentum and a higher return if they wait it out. Let's not forget that there's a lot of anecdotal evidence though that during the contraction we saw the exact opposite: buyers more motivated by ROI rather than practicality would walk away from long negotiations at the last second because they believed the downtick represented downward momentum and they could get more home for less money if they waited it out. In Jan '09 I had negotiated with a buyer for over a month and bent over backwards to help him feel good about the price and terms of the sale of my condo, swallowed hard and dropped my price way below what I thought I might be able to get if I held out- only for him to walk away at the last second after telling me a few days before he was excited about the deal. His decision in the end hurt him and helped me though it sure didn't seem that way at the time.
Yes, pointing out the obvious but as I've often said here in the past this isn't really about the difference between buyers or sellers; those with greedy intentions will frustrate those who are practical and reasonable every time.
Posted by joenyc | February 10, 2010 12:51 PM
I agree that this is where an experienced broker can be useful. If the broker has worked with the seller, there shouldn't be any waffling on price. Sellers should look at an early, solid offer as a blessing and not doubt themselves.
Posted by Mike | March 2, 2010 11:31 PM
I agree that this is where an experienced broker can be useful. If the broker has worked with the seller, there shouldn't be any waffling on price. Sellers should look at an early, solid offer as a blessing and not doubt themselves.
Posted by Mike | March 2, 2010 11:32 PM
only get a ton of traffic immediately but you should also receive multiple aggressive bids. Therefore, if you get one solid offer in the first 7 or 14 days you should NOT mis-interpret that to mean your pricing strategy was wrong; that could lead to a rash decision. The reality is more likely that a perfect buyer found your place at the right time and decided to make a statement to you
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