House #20: First Offer

January 2, 2011 · 4 comments

We received our first off on The Lake House today, despite the fact that we haven’t yet finished the staging and haven’t even listed it for sale. Unfortunately, the situation is more annoying than anything else…

An agent called us yesterday asking about the availability of The Flood House. We told her it was already under contract, but if she wanted to look at it with her clients (and potentially submit a backup offer) we’d be happy to show it to them. Additionally, we told her about The Lake House, which is just a mile down the street, and let her know she’s welcome to show her clients that one as well, despite the fact that it wasn’t completed.

We sent the agent some details on the property, along with some preliminary pictures that we had taken. We let her know that it was listed at $110K. She called us back soon afterwords and told us that her buyers were “looking to stay under $100K” and asked if there was any shot of making that work. We let her know that if they saved us the trouble of having to finish staging, taking pictures and listing it, we could probably make something work at that price.

My wife and I discussed it, and decided that we couldn’t go much below $100K (assuming we want to make our minimum profit), but we’d be willing to take somewhere around $99K for a quick sale, which would hit our minimum target.

Well, the buyers looked at the property this morning, and then came back this afternoon. This evening, we received an offer.

Sadly, despite the agent asking us to come down below $100K, and us already agreeing to give that $10K concession, she submitted an offer for just $90K. While I don’t blame an agent for trying to negotiate, she is putting us in a bad spot. In fairness, we can’t counter-offer for more than $100K, as we already agreed we’d go below that. By the same token, we can’t counter for much less than $100K, as that’s our minimum sale price.

Unfortunately, by already getting us to agree to accept less than $100K and then submitting an offer for far below that amount (plus a large amount of closing costs and a delayed closing), the agent is putting us in a situation where we essentially need to make a take-it-or-leave-it counter-offer at well above the buyer’s initial offer price. While we don’t really care about having to do this, it will likely give the buyers the impression that we are being inflexible — all because their agent tried to be greedy.

Anyway, we’ll be making this take-it-or-leave it offer tomorrow and it will be up to the buyers to decide if they are willing to take it or not. It will make us look incredibly inflexible in our negotiations, but that will be the fault of their agent, who can choose to explain it to them or not…

4 responses to “House #20: First Offer”

  1. steve says:

    You will find another buyer if this one doesn’t work. We had a similar situation happen to us before, we got heavy into the negotiations with a Buyer, presented him our lowest quick-sale no-bs price. He said, I am going on a 3 week vacation, if you agree to about 8% lower than our lowest I will start paperwork now.

    We ended up passing on his negotiation style and sold it for full-price two weeks later.

    A good answer to these type of offers sometimes is, “We are investors and do not intend to occupy the property, if the property is sell at this price in 60 days we may consider your offer, but to lock it up today it will require $99k” That shows firmness and flexibility at the same time and no buyer wants to wait.

  2. […] Real Estate Investing Tips: What You Should Know About Receiving Offers Posted by: stan | Category: Flipping Houses, Real Estate Investing, Rehabbing Houses […]

  3. Great answer Steve! I am going to remember that one.

    Sometimes you just have to let them play their games which involves you walking away from the offer.

  4. J Scott says:

    Steve –

    That’s the perfect attitude for an investor. As you indicated, investors need to take the emotion out of the equation, do what is financially optimal, and if circumstances change, you can reconsider. But, there is no reason to modify your strategy just because the buyer is willing to walk…if the house is worth the price, there are plenty more buyers out there…

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