A few months ago one of our clients put in an offer on a home for sale in Kirkwood. The house was one of those annoying no shows till the open house, and of course that drives up the price in certain situations. The psychology of people all milling about a home makes some buyers who would otherwise not put an offer in on a house make some silly offer so that they don’t “lose” the house. We’d counseled our buyers that you don’t want to get in a bidding war because the winner is usually the biggest loser, but, when a home buyer decides they want to put an offer in, our counsel goes out the window. Here’s what happened with our potential home buyers, and I suspect happens with a lot of home buyers in a hot real estate market.
The Target House
There was absolutely nothing special about this particular home. The asking price was within the buyer’s price range and that is what made it worth taking a look.
The Whitney Houston Moment
I’ve written about what I call the “Whitney Houston Moment” When you have a good sense of your clients’ interests and emotions, you get this moment when you know they are going to write an offer on a home. When the potential home buyer has made this decision, it’s kind of magical in the way it changes the thought process. They go from hunting for a home to finding. When they get to the found stage, they want to buy the home. But, it’s not as easy as just telling the seller “I want this house.” You have to craft an offer that will appeal to the home sellers AND that will beat any other offer.
Constructing A Compelling Purchase Offer
“What should we do?” That’s the first question I usually get after a potential home buyer has made their decision that this is the house they will buy. I think this is a very important thing to note as well. If you have an agent who isn’t familiar with the area, or isn’t all that interested in their clients, the offer isn’t going to work. The clients are going to end up paying way too much to buy a home. There’s always another house. Some real estate agents just want to be done with this deal and move to another, and that can get really costly to home buyers.
We know the Kirkwood market, and we knew this particular home, although not special in any way, was going to go above asking price, and the question was just how much. We could see comparable properties going for as much as $20,000 over asking. We told our clients that we thought an offer of $20,000 over asking would at least get into the game.
While $20,000 might not seem like a lot of money to some, it is a lot of money. And, that $20,000 was really going to put our home buyers in a house poor situation. That is, they were going to have a great house, but no money for furniture or anything else. If you can follow this for a moment, we found a house. At it’s asking price, it would work great for our buyers, which is why they wanted to write an offer. However, when the house really wasn’t going to sell for that asking price, the deal stopped making much sense.
$20,000 Over Asking Price Didn’t Get The House
We received word the next day that another buyer had made a higher offer. Here we are, $20,000 over asking price, and no house to show for it. Here are the thoughts we all shared.
- Disappointment Our buyers wanted this house and we weren’t able to get it under contract for them.
- Frustration As a real estate agent, you are always trying to put a deal together that will get your buyer the house that they want. You have a situation like this when there isn’t anything that you could have offered other than a higher amount that would have brought the house to the buyers. Unfortunately, you can’t offer more because it’s even higher than what the buyer could really afford anyway. It causes frustration, because you are trying to figure out a solution when there isn’t one.
- Relief Surprised? A good buyer’s agent knows that there is always another house. Also, if you are bent on finding value for your buyers, you know bidding wars aren’t the way to get value. I don’t like when buyers get stuck buying a house that doesn’t fit them with respect to price. I also get uncomfortable knowing an agent in the future is going to see the sales history and my name next to the buyer agent line where someone bought a house for something like 120% of asking price. It just looks bad.
Finding The Right House
I usually wait a day after our buyers lose out on a bidding war to re-start the home search. That’s usually all it takes for motivated home buyers to get over their disappointment and move on. The following weekend, we showed a home in Kirkwood that matched their budget, was priced right, and didn’t involve a bidding war. In that time since the purchase, they know they were better off waiting for the house that they actually bought than the home that they didn’t get that was $20,000 over asking price.
We know that there is no such thing as fair. However, in my career in real estate, I’ve noticed that home sellers and home buyers generally get a good outcome if they approach the process in a good way. Things seem to work out for them. On the other hand, I’ve seen where some real estate agents tend to be jerks in how they go about their real estate business. Those home buyers and home sellers don’t seem to have things work out for them. Do I have scientific proof? Of course not, but I still believe it.