Having been in the real estate business for over 25 years, I have experienced every different type of offer to buy, been involved in countless heated negotiations, seen contracts fall through, and experienced both disappointments and joy with my clients. As such, I can say with 100% certainty that when attempting to buy a home, there are two primary philosophies on an amount to offer:
- Offer a price which announces your intention to begin negotiating and then keep going back and forth.
- Go for the gold, with an offer too good to turn down (this does NOT necessarily mean full price – more on that later)
Let’s first address Option 1. Don’t do it. Why not you ask? You just want to get the best price! The most solid deal! You think “Well, it doesn’t hurt to ask?” I counter that sometimes it does. The seller may say “NO” to your bid or not even counter at all. Ouch, that does hurt. Insult them (also known as ‘leaving room for negotiation’) and when you return to the bidding, it will cost you your position of strength. You’ve shown the seller you want the property, at least enough, to counteroffer again.
Thus, Option 1 is the least advisable, since it can be frustrating, time consuming, invites other bidders and does not always work out. Feelings, principles and miscommunications are common elements with this strategy. It no longer become a business transaction, but rather a battle of the wits and emotions – with the seller usually gaining the upper hand.
Option 2 on the other hand, is usually more effective. Let’s call it The Godfather Option; “make them an offer they can’t refuse” or are fearful of countering. But “I don’t want to leave too much money on the table,” you say. “I want the deal!” you insist. Of course you do, but in all my experience I have rarely seen THAT much left, if any at all. So here’s how the Godfather Option works: (Please note that none of this is recommended for those ‘screamin’ deal’ bank homes that are currently receiving multiple offers – that’s for another post)
- Make sure the seller understands this is your only offer. Let them fear the loss of a sale.
- If they do counter, just go silent for a week or two, or three. Make them beg for a counter offer. You can always offer the same amount again (or lower depending on their motivation).
If you have miscalculated your offer (which we hope would not happen with the aid of your agent) and someone else buys it within that two-three week silent period, remember – there’s a good deal every day: now, more so than ever.
If this was the home of your dreams and no other one will do and you tried Option 1 or even a harsh Option 2 – all I have to say is “Get outta here…” Remember, when you are sitting on the front porch of your dream home 5 years from now, you probably won’t be kicking yourself for paying just a tiny bit more…you’ll be congratulating yourself for the best decision you ever made.
Randy Walker – President