Accepting a first offer

"Your first offer is usually your best offer" is a truism for a reason.

30yrs (another poster on this board) can explain it better than I can, but the explanation is roughly ... at any given time there are a pool of hungry buyers with pent-up demand.

These buyers have been in the market, and have a good sense of pricing.

When something new comes out, one of them who has been "waiting" will make a move.

If that offer is passed on, then your alternate buyers are:

1) people from the waiting pool who didn't jump on your listing when it was new (presumably because they want a lower price)

and 2) new entrants to the market -- who come on every week, but usually aren't as knowledgeable/hungry as the waiting buyers.

I think the exception to this is that some segments of the market (UWS 3-BRs, say) have a nice spring season, but that's a fairly far way out.

ali r.
DG Neary Realty

Thanks Ali. Good thoughts.

I also realized that the homebuyer tax credit may have exhausted buyers for places in my price range. I feel good about moving forward, so fingers crossed......

What neighborhhood are you, and what type building and size of apartment/

Brooklyn, large one bedroom, large building

I wish I accepted my first offer. Ended up selling 4 months later for 15k less. Not a big deal I guess, but the first offer was the best one. Ali is right, usually the peak activity and interest in a property is first few weeks..as it sits, it gets more stale and buyers tend to think about why a property is not selling unless a price cut comes in..lots of psychology in this game!

front_porch is right on the money. And considering you are only 2-3% less than your ask, that is very appropriate (most apartments build in 5-10% negotiability).

(Matthew Russell - Brown Harris Stevens)

While i agree that 2-3% below your offer is not a bad thing, i think we are missing the fact that it sounds like you underpriced hoping to get ask? I am not sure what you were considering in pricing below the comps because it was FSBO, but that should not matter that you were trying to sell on your own with no broker, because if you changed your mind, you would not want to raise your price because a broker came involved.

But since you already priced the way you did, I would take the money and run because there is no going back and pricing higher to get down to the price you wanted. Waiting it out i agree with all almost always will yield less.

Which would make you feel worse:

That you could have put it on the market in a more timely way and gotten 4% , even 6% more? Or:

You rejected first buyer, kept it on the market and it didn't sell for 8 months, by which time the market fell, the listing got stale, you have a financial emergency, the bank puts pressure on you for missed payments all the while they refuse to renegotiate and you go into foreclosure like the millions of foreclosed souls who were sure they had the markets all figured out.

Take the money and run. Then downsize and feel good about yourself.

You had a target sales price in mind and now someone is essentially offering you that. So why are you hesitating? It is like a person who is dying to get into a club but when accepted the person begins to think "If I'm getting in, maybe it isn't really that good a club." Stop it. If you did your homework in pricing the place, then stop worrying. Be happy.

In Dec 2009, we made an offer for $1.3M for an apartment in UWS. The offer was rejected, due to a higher offer.

After two months, in Feb 2010, this higher offer never materialized, and the seller came back to us, saying that she is ready to accept out $1.3M offer. We offered $1.25M and the seller refused again despite the lack of other options.

Two months later, in April 2010, the seller came back again, giving us as the absolute minimum price at $1.2M. We did not bother to counter. With cool head I did a better comp comparison and figured out that the market price should be closer to $1.15M-$1.175M; my prior experience said that any negotiation to lower further the price was going to be fruitless.

The apartment is now in contract. (Btw, it is http://streeteasy.com/nyc/sale/479203-coop-206-west-85th-street-upper-west-side-new-york) I am curious to see the closing price. Something will tell me that it will not be above $1.2M.

We were exactly the buyers described by Ali. We have been looking for long, liked the apartment, were even convinced to overpay. The seller felt that selling quickly for a $100K discount from ask, was not to her best interest. Let's see what the final discount from the original ask is going to be.

To answer your question: Accept the offer now! You will not get better offers down the road.

Pirot, you remind me of my own experience. AFter countless open houses and studying my target market niche in early 2008, I bid on what I thought was the near perfect apartment. Problem was, it was unrealistically priced and I knew getting the seller to move as significantly as she'd have to would be unlikely. Still, I knew my comp analysis was correct. In the end, after much back and forth, I bid $1.05MM as a final offer. I was told by her broker that the seller "wanted to clear a certain amount" and that $1.2MM was the lowest she'd go. I explained that "what she wanted to clear" had zero to do with value and was an illogical way to negotiate and that no one would pay that price. Logic fell of stupid seller ears. The seller ultimately decided to wait and just rented to place out.

As for me, I went on and found a different "perfect apartment" in which I am now very happy.

Jump ahead 2 years. Lehman happens in the interim and the world economy goes to hell. GV real estate takes a hit like everywehre else--although to a slightly smaller degree. The seller's right to rent her place max'ed out in the coop which has a 2 year limit. She put it back on the market. With no small amount of schadenfreude, I tracked the sale which ultimately closed at $940,000.

Here, the apartment seems correctly priced in that a buyer has emerged willing to essentially pay the price. Rejoice. I love Ali's explanation of why.

I just finished looking or an apartment and while hunting a broker at an apartment on the UWS that just went on the market back in June tried to back us in a corner and make an offer as she claimed that they got an offer close to ask at the first open house. My wife and I went back to look a few days later so that we could make a decision. Prior to going to the open house though I used streeteasy as a resource and found that an apartment had just closed a few months prior that made the apartment value at about 50k or more below the $900k ask. The building is condo and the sponsor still owns a large part of the building and it was a sponsor unit that sold which normally should mean a higher value to begin with.

The broker was going about selling all wrong by telling everyone that the couple wanted what they paid 3 years prior when they bought from the sponsor. I even told her based on the comp that they were to high, she told me that she really was not sure but that she was told it was a rush sale, no time to argue that it was a sponsor unit.

We went back to look and still felt that for the price it was small and would not stay there more then 5 years or so, and did not think it was worth the $900k.

Well the apartment is now still on the market after two months and another sale occured which does indeed point to a lower value on the apartment. I assume that if they indeed really had a buyer that they or their broker saw an additional apartment close and decided that their offer was to high.

In the meantime, I decided to go with more space and buy a condo in harlem for the same money.

the above is not to say that you can't get a higher offer by holding out (this is what my clients who hire me as a listing broker often do, is make me turn down the first offer and wait and work the market).

The problem is that 1) the difference between the first offer and the higher final offer is most likely to be significant if you have an unusual piece of inventory that the market doesn't know how to value (big terrace, special renovation, unusual location, etc.)

and 2) waiting for that one specific buyer who loves "your place' doesn't generally take a month, it usually takes six months, and there are costs associated with waiting that long -- you're paying mortgage, maintenance etc.

In addition, if what you're waiting for to get that extra bump is a hot market, say a spring frenzy, then after you sell at a higher price you find yourself a potential buyer in the same market.

ali r.
DG Neary Realty

hey Ali!
How long ago were the days of "Diary Of A Rookie?"

You are definitely a Pro now!
I always like checking out what ya' have to say on various issues--you make some great points!

I've got a similar story -- found a place we really liked after a lot of looking, made an offer that I felt was $30k above market (the broker's valuation was higher than mine), but were told that the seller wouldn't even START negotiating until we came up a further $25k. We said no and walked -- no way were we paying at least $55k over what I felt was market price.

We then eventually found a better place for less money (priced below market), moved in, etc. And, sure enough, the original place sold many months later for $35k less than we had offered. (So I had even overpriced it by $5k.)

In our situation, the first offer was definitely the best one. We had been looking for a long time and just wanted to be done with it -- so even though it was against my view of the market, we were willing to pay more than the place ended up being worth. We were eager enough to take valuation advice that I wasn't entirely comfortable with, and to make a too-high offer. When that didn't work, we kept looking.

That being said, the problem in our case was that the apartment was priced $80k over market -- no one was going to pay that. Had the apartment been priced at market, and our offer come in under that, there might have been value in waiting -- because there might have been more offers in the offing. But there weren't going to be any takers at the inflated price -- so it was just going to sit. (In fact, an evil little part of me likes to think that our original offer convinced the seller that she could get more, by convincing her that the market was higher than it was -- and therefore caused it to stay on the market for as long as it did. That's just wrong, but...)

What I like about Ali is that she shares insights that aren't obvious to even the well-informed, and that illuminate the selling/buying process. You compare Ali's posts to the insipid self-evident garbage pronounced with great seriousness by many of the vapid brokers on Selling NY, and you see the difference between a broker who adds value to a transaction and one who is just oily and not terribly smart. Look at the explanation Ali gives here about why it is important to carefully consider accepting a first offer versus the moronic statements of the CORE guy with the accent on Selling NY who, while speaking with gravitas to a broker about a new listing, will say things like, "What is going to be very important here is to price the apartment to sell in this market." Duh.

I have sold all of my houses and one apartment within the first 2 weeks of listing. Following Ali's logic, the first offers you get upon listing IS the market. When I sell, I sell because of a life change that requires that I accept the market as it is at that moment in time. It's quite simple really; buy a great property, make it nice, and it will always sell quickly for at least market price. What points you may lose on the sale can be easily made up on the other side.

I find this whole idea of realtors advertising the fact that a seller won't entertain offers beyond a certain price to be ridiculous. Give it all to me I say. A low baller could quite easily turn out to be a market buyer with a little negotiation.

if i can't sell within around two months, i just take it off the market. but i've never HAD to sell. the three sales that occurred happened within one day, one week, and two weeks of being on the market, all realistically priced, at ask or over.

it's not so easy to price right now, things seem to go up and down more. i think the OP did well, and i agree with ali entirely that the early buyers are likely your best bet.

Caramamia

What you are experiencing is something that happen quite often not only in real estate but in general business as well. It's a natural reflex and you may start to wonder, "Am I priced too low? Can I get more? All under the umbrella of "Did I do something wrong?"

A lot of great posts by everyone on this thread.

I promise you, the buyer will go through the same phase once you accept the offer.
It's a natural reflex.
As a long time buyer looking, I can tell you the longer a negotiation drags on, the more fault you find with a purchase and chance to change your mind. Betting on what will happen after labor day is quite a risk.
Only your personal situation can dictate to you, what's best for you.

Caramia? I think you are leaving alot alot of money on the table. Don't let these renters tell you how you should not get every penny from every transaction, it's the American way. Had a friend who traveled to china, who argued about a $.25 (American) rickshaw ride bc a native Chinese was only being charged $.15 (us). Don't be a schmuck and taken advantage of.

I say go over the top and counter above ask. You are welcome.

http://www.buzzle.com/articles/why-your-first-offer-is-usually-your-best-offer.html

My first offer was my best offer...and I am SOOOOOO glad I took it. The people out there who have been pounding the listings for weeks, months, years, etc. hop on those fresh listings and make their move. Don't be fooled by thinking "Wow, such a quick first offer...I should wait and let the bidding begin." They will move on and you could be begging for that first offer in a few weeks, months, etc.

FSBO is a unique situation, too. Are your buyers unrepresented? If so, that immediately makes their offer at least 2.5 - 3% better than represented buyers whose agent would need to be paid. In other words, you'd need to get your full ask from a represented buyer to net what these unrepresented buyers are giving you. A bird in the hand....

This here's a story about buyer and seller
Too early in summer with no offers better
Than ask around streeteasy, get opinions, and watch the talk
And here is what could happened if the buyer does walk

It could take as long as walking to El Paso
For a second offer near the first, what a mess yo
Buyer meanwhile could find options more perfecto
Caramia take the money and run

Go on take the money and run
Go on take the money and run
Go on take the money and run
Go on take the money and run

thanks guys for the compliments -- I have to say though, that this particular insight belongs to my colleague 30_yrs, and if I have any sense it's that I sit next to him and pay attention to what he says.

Lenox, thank you esp. since I am struggling with the second book (which will be fiction within a real estate millieu) as we speak.

ali r.
DG Neary Realty