BC Sunshine Coast real estate by Menno at Royal lePage Real estate on the BC Sunshine Coast

One of the questions we receive a lot, usually just before somebody would like to make an offer on a house, is how big the usual spread is between list price and offer price. It’s an interesting question but it can’t be answered.

When you've spotted a house you really like, the desire might crop up to make an offer on it. At that point, the decision has to be made HOW MUCH to offer.

There are people who make quite a science of this. If the asking price is a certain amount, they’ll offer a certain percentage off that, if they are interested in a property. Obviously, there is no such method. Some sellers are more motivated than others. Some sellers build in a “negotiations buffer” into their price. Other sellers have just played away their negotiations-buffer by reducing their asking price. What happens from there on in negotiations isn’t scripted. There could be a slight discount available, there could be virtually none.

Fact is that anybody is allowed to make an offer on any property at any price. This means that, from time to time, people choose to make absurdly low offers. Sellers tend to find these low-ball offers terribly offensive.

To most people, it’s no fun to receive a low-ball offer. After all the hype, expecting the incoming offer, it’s a total let-down to have to deal with such a low (and insulting) offer. What is the best way to deal with a low-ball offer? Should you ignore them or should you embrace them?

Assuming that the seller is an actual person (as opposed to a bank or other institution) you need to pick a strategy that doesn't antagonise the other party to the contract.

JUST ONE WINNER – OR ALL WINNERS

There are people who take pleasure in acquiring something literally at the expense of somebody else. They want to get something for significantly less than it’s worth. When you are on the receiving end of a low-ball offer, you don’t know what’s behind the offer. Those people making that “harsh” offer could be very nice, reasonable and pleasant people who decided to “try” this approach. Maybe they are being coached by somebody, perhaps they don’t realise that there are actual people on the other side of the deal? Because you generally have no idea who “those people” are that are making the low-ball offer (all you’ll be receiving is the paper the deal was written on), it’s usually best to keep your cool and stay calm, polite and forward-thinking.

It may be true that people who make absurdly low offers aren’t showing a lot of couth. They obviously disregard the notion that a deal, to be good, must have to work for all parties involved. Notwithstanding such feelings, there’s always the possibility that there’s a reasonable person behind that low-ball offer. Or else: that they perhaps really would like to purchase your property. You just don’t know.

Real estate offers aren’t simple documents. It’s a good idea to take lots of time to deal with the papers; it’s not good to just glance at the price and forget about the rest.

Sellers typically don't actually enjoy the process of selling a house. It involves stresses, frustrations and concerns that rank high on most people's list of displeasures.

THE STRESS OF SHOWING AND THEN THE STRESS OF A LOW-BALL OFFER

After having gone through the stresses of many showings, open houses and hours of waiting for feedback from your real estate agent, here comes THE OFFER. This is a moment of further stress and possibly additional emotions. Let’s imagine what will happen when that offer is “bad” (Bad can mean almost anything: price too low, closing date way-off, odd conditions, and so on). Usually it’s just the too-low-a-price that sends sellers into a state of fury. What are your options; what are your rights and what are your obligations?

It’s good to know that you must do absolutely nothing after receiving an offer. Legally, you have no obligation at all. When your real estate agent comes to the door with that stack of papers called THE OFFER, you can just send him or her away. You don’t have to do anything. You don’t even have to look at it, you don’t have to talk to the agent, you don’t even have to open the door. You don’t even have to be home! Legally speaking, there’s nothing wrong  with going on a three-week trip to a place where they don’t have cell phones, Internet or even regular old-fashioned phones and fax machines. You can be gone and out of touch. It’s rather awkward, it may not be very smart but it’s not against the law!

I keep on emphasizing that the entire offer needs to be looked at and considered; not just the price. It takes time and substantial effort to study and understand a real estate offer.

Most offers you may ever receive aren't ALL bad. There are probably parts of it you may like (other than that dreaded low price). Start concentrating on the good stuff.

HAVING A  G O O D  LOOK AT THE PAPERS

For arguments’ sake, let’s imagine that you end up looking at the papers. The first thing that you notice (or should notice, I should say) is that it’s not AN OFFER … since it says in bold print at the top: Contract of Purchase and Sale. It’s a serious piece of paper that will have consequences … once accepted. What some people say “oh it’s only an offer” is true and not true. It is indeed ONLY an offer up to the moment it becomes an agreement. The contract is factual at the moment both parties sign it.

It’s quite rare for any first offer to be accepted in its entirety. When receiving the offer, you (the seller) will have four options (meaning four different ways in which you COULD react to the offer):

Acceptance

An accepted offer means that both parties (buyer and seller) have agreed to all the terms and conditions, exactly as set forth in the offer to purchase. Congratulations!

Rejection

A rejected offer means that you (the seller) did not agree with the terms and conditions set forth in the offer to purchase.

Counter offer

A counter offer means that you (the seller) agree with some of the terms and conditions of the offer, but not all of them. Then you make a counter offer to the buyer. The counter offer may change the price or closing date, or add or remove conditions.

Nothing at all

It’s true. You (the seller) may actually do nothing at all; it’s completely legal. There could even be a certain statement in doing nothing at all, like: shape up the offer or get lost. Normally, however, this option only occurs when a seller can’t be reached or found. Even in this electronic age, people sometimes stay out of touch for a while. It happens! By the way, if neither “acceptance”, “rejection” or “counter offer” are used, this “nothing at all” becomes the default.

It's very hard if not entirely impossible to see the selling process of YOUR house as a straight business transaction - even though is actually IS.

FORGET BEING OFFENDED?

It’s tough to keep your cool when you feel quite wronged or offended. Still, remaining cool, calm and collected is the best way to try and figure out if the buyers can perhaps be convinced to improve on their offer. At this point, you have nothing to lose. These buyers are not your friends nor are they your enemies. Most likely, they won’t become your friends either – nor your enemies. It’s quite possible that you’ll never even meet these people.

As understandable as it might be to feel offended in certain situations, it’s good for nothing to react as if you are insulted. Having an agent between yourself and the other party is a tremendous benefit at this point. Together, you can be cool and collected and formulate the best possible response. Generally speaking, it’s most beneficial to take the high road. The name of the game is to get the property sold – not to make your point. The purpose is to make the deal flow – not to hide behind your own barricades.

Before answering to an offer that you, initially, don't like, it might be smart strategy to take a deep breath and do nothing for a moment. In other words: relax.

HERE’S A SUGGESTION

There are many responses possible at this point – every situation is different by its very nature. This is where you can take advice from your real estate agent and your lawyer. Many people also take some time to talk to friends and family members – just to bounce the idea around and get another not-as-biased response to the situation.

Low-ball offers (or any offer, for that matter) are often written with a very short window for acceptance. This is part of a bully-strategy that you can just ignore. The “time for acceptance” only applies if you are going to accept the offer. If you’re not planning on accepting the low-ball offer, then there is no real benefit to you to formulate a quick response. Sometimes, it’s good advice to take some time away from the situation and revisit the possibilities of a response a while later.

Being prepared for all sorts of real estate offers is just about half the job done. Below are some text articles that may help in getting you braced up for what might happen.

MORE reading material on agency issues and what your agent can do for you can be found here in these following blog articles:

Market developments: http://www.mennorealty.ca/Blog.php/up-r-down

About deposit and down-payment: http://www.menno.ca/?p=19492

How home staging influences a deal: http://www.mennorealty.ca/Blog.php/beware-of-staged-homes

Making it look its best: http://www.menno.ca/?p=17649

Make an offer, the selling process: http://www.mennorealty.ca/Blog.php/walking-you-through