It’s a mixed market in Silicon Valley right now.  Many sellers are getting multiple offers and overbids, especially in Cupertino, Sunnyvale, Mountain View, Palo Alto and anywhere with extremely underpriced properties in desirable locations. Other areas, and lower price points, are experiencing a sluggish market.

For home owners trying to maximize their sales price, does it make sense to have an “offer deadline”?

When an offer deadline makes sense

If you are pretty confident that your home will receive multiple offers, the deadline helps in a few ways.

• it prevents the offer situation from being a mere “foot race” (fastest one wins, rather than highest offer and best terms)
• it allows everyone enough time to see the house, read the inspections, disclosures etc.
• it provides enough time for the sellers and agents to plan

But how to you gauge that offers will be coming?

First, the property would be priced substantially lower than the recent, similar properties that have closed. That is #1.

Second, there needs to be strong interest indicated via the usual clues: lots of showings (private and during open houses, if any), plenty of buyer agents reaching out for more info, strong number of disclosure package downloads, and, of course, agents asking when offers are due. Best is when the directly state that their clients will be writing an offer.

If these things are not happening, it might be jumping the gun to announce an offer due date.

Backfiring can happen

As with all strategic plans, this one can backfire too.  If an offer deadline is published or promoted, and then no bids are forthcoming, it’s more than just a let down.  It’s a market signal that this home is overvalued by its owner and agent.  Then, suddenly, it can appear to be an old or stale listing, even if it’s just been on the market 7 to 10 days.

The middle path

Many real estate agents take a middle path, either commenting in the MLS private agent comments that “an offer due date will be determined after the open house weekend” or something more vague, such as “call regarding offers”. Or they may say nothing until agents ask, but have a comment in the private agent section regarding “no pre-emptive offers”.

In my experience, if 4 – 6 agents ask about an offer due date, that is pretty good interest, but it’s not enough by itself unless there are also a lot of disclosure packages downloaded.

Disclosure package downloads are a good clue on interest

The most important thing for deciding on an offer deadline is understanding the interest level of home buyers, and a concrete way to measure that is with the disclosure package downloads.  Counting the buyer agent and their client(s) as one download:

• Often 30-35% of the number of disclosure packages download will be the number of offers received, assuming that the property is in good shape (not perfect) and / or that the price is at least low (if not extremely low) compared to the expected value. Example, 30 downloads might be 10-12 offers.
• Homes with a lot of issues will have a lower percentage of offers. Here,  30 downloads may be only 5 offers.
• Properties that are worry free, in beautifully remodeled condition, in great location, and well underpriced may have a 50% or more ratio.

We never know until a property goes on the market how it will fare.  It is wise to be cautious about advertising an offer date unless you are very certain that you will be seeing multiples! The market right now is a little funny. Homes priced aggressively are getting multiple offers. Homes priced AT value are not moving quite so fast.

 

Related reading:

Receiving an offer (on our popehandy.com site)

A summary of tips for multiple offer situations in Silicon Valley real estate contracts (on this site)