Why didn’t I get a counter offer?

Buyers charging at an open houseMultiple offers continue to be a common occurrence in Silicon Valley right now, at least among well priced, well presented homes that are reasonably accessible. When facing multiple bids on a property, some sellers will just take the one they like best, or do a verbal negotiation to get the sale price and terms where they want it. This leaves those on the outside wondering “Why didn’t I get a counter offer?”

When there are an abundance of home buyers for one property, it can be overwhelming for the seller.  Some home owners may want to issue a multiple counter offer to the best qualified, most serious bidders.  (It is unlikely that every buyer will get one if there are a lot of bidders, as some may be too low or have terms that are too cumbersome.) Some sellers will issue just one, regular counter to the top buyer – but that is increasingly less popular, since if that buyer rejects the counter, the seller may then be back to Square One.

How to sellers choose which offer to counter?

Often, the highest price is not the offer with the best terms, even in a bidding war.  Home sellers want both, of course – the least risk with the most cash. (Sometimes there are other factors, too, such as a rent back, escrow length, or other issues beyond cash and risk.)  In those cases, frequently the Realtor or real estate sales person (the listing agent) will coach the seller to counter one or more of the better buyers (best prices and terms) to improve the final sale on both counts.   Some sellers don’t want to do this, though – it’s stressful, they are afraid that everyone will say no and they’ll be left with the property unsold.  Alternatively, then, they may counter only one offer – and tell the buyer’s agent that they are the only one, at least for now. If negotiations don’t work with the first buyer, the listing agent may go back to the others.

When you are waiting for a response to your purchase offer…

Meanwhile, everyone waits, everyone wonders what’s going on.  The longer it takes to hear back, usually the lower the odds are that their contract will be the successful one, or even one getting a counter offer. Sometimes, though, the seller just wants to sleep on it.

Lost out?

If you heard that you didn’t get it, it’s helpful to ask for some feedback. Some listing agents will tell your buyer’s agent “you were close, but the other offers had no contingencies” or “we got 10 offers, and yours was in the bottom third”. This is a great opportunity to learn so that  your next offer attempt has a better chance.

Without that information, you will be left wondering, again, “Why didn’t I get a counter offer?” “Why didn’t the seller at least give me a second chance?”  Buyers wonder this all the time.  Some buyers submit 5 or 10 offers, all unsuccessful, and they still wonder.  The harsh reality is simple: your offer wasn’t good enough.  Either your price or your terms (or supporting documents) didn’t cut it. Write your contract as if you only have one chance, because that’s the reality most of the time.

 

 

 

What to expect when your home gets multiple offers

multiple offersYou’re selling your Silicon Valley home, and your real estate agent just informed you that you have not one, but several offers coming in.  Joy!  What should you expect in the way of prices being offered?  Today we will discuss what can, and often does, happen.

(1)  All in a fairly tight range of pricing:  Sometimes, the bids all come in at about the same value or within a small range.  For instance, let’s say your house is listed for $900,000 and you get four offers.  In this case, the bids could be at $920,000 and $925,000 plus two more at $930,000.  These are all pretty close to one another.  The terms could be different, though.  Perhaps the lowest one is all cash.  Maybe the middle one has no contingencies.  You get the idea.  In any event, when you see that “band” of pricing, it’s a pretty good indicator of where true market value is.

It should be noted that in some markets, multiple offers are not over list price.  This can be a factor of the market conditions at the time (such as a declining market) or a reflection that willing and able buyers simply find the list price to be too high.  Do not assume that multiple offers will always be over list price (though at this writing, virtually all are). When the offers are similar, the terms or even little things can make a difference (who wrote a letter to the seller? who was a pest at the open house, grumbling about the condition?)

(2)  Tight range plus several at best price:  More often, especially with larger numbers of contracts, there’s a spread that includes a close range of offers, but a few of them are tied for the highest value or very close to it either within or above that range.  Here’s how it could look visually.

Multiple offer potential spread of bids

With the example above, what I’ve seen happen is that most of the potential buyers are looking at the closed sales and deciding that they reflect current value.  The others, though, understand that the closed sales reflect contracts which were most likely accepted at least 30 days ago, and are considering the trajectory of price appreciation.  In other words, if home values are rising at the rate of X per month, they are mentally seeing where this price should be now.  They are saying “let’s add 10% to the comps to get to today’s value” or some such formula.  These multiple highest bidders are the ones who understand the market when it’s moving up fast.
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What happens after a purchase offer is submitted?

what is happeningIn the San Jose area, probably 90% or more of real estate purchase contracts are emailed to the listing agent by the buyer’s agent.  In the old days, the standard of practice was to have a live presentation by the buyer’s agent to both the listing and agent and the seller(s). Can the buyer’s agent present the real estate purchase contract directly to the seller and listing agent in Silicon Valley? Yes – it’s just not so common anymore.

Either way, what happens after the contract has been delivered or presented?  If it’s a live presentation, the buyer’s agent will be asked to either leave and be called later (or emailed) or requested to take a seat in the lobby (or in his or her car, if at the seller’s home) and wait while a private discussion happens between seller(s) and listing agent.  From there, it could be some questions to clarify why things are a certain way (such as a low initial deposit, a long escrow or long contingency time frames).   Questions aside, the response could be quick if it’s a super clean offer and the only one presented (or in the wings).  Conversely, it may be several hours, or possibly longer, before hearing back with an acceptance, rejection, or counter offer.

It’s similar with an email presentation.  You might get questions or clarification requests right away (ideally one call with all questions, rather than a stream of them over several hours) coming from the agent and/or seller through the agent.  Or you may not get much other than an acknowledgement that the paperwork was received.  You may find yourself waiting and waiting….

What’s happening behind the scenes if the response is not forthcoming in a short period of time? (more…)