Seller concession

Dogs playing tug of war - words seller concession, buyer concessionWhat is a seller concession? This refers to anything that the seller gives or grants to the buyer. Sellers are not the only ones who can grant concessions, but right now it’s in the news more due to changes underway in how we sell real estate and the forms and clauses we use to do so.

Concessions are a normal part of negotiation. Most of the time, both sides concede something in the arena of price and terms. In a sense, it’s a bit like tug of war in that both sides want the best price and terms, but most of the time the negotiation is a little give, a little take, unless there are a lot of multiple offers.

Seller concession examples

A good example of a seller concession would be accepting a price less than the list price. The seller concedes the desired price.  A concession can be about money, time, inclusions, or any number of things.

Other home seller concessions might include:

  • accepting an offer with a contingency, or some contingencies
  • home owner agreeing to pay for a home warranty
  • providing a credit to help with the buyer’s closing costs (if there’s a lender involved, there may be limits to that credit)
  • paying the buyer’s agent’s fee as outlined in the buyer representation agreement (there’s a box to check in the contract)
  • allowing a longer close of escrow than typical if the buyer requests it (perhaps to close escrow on their current home)
  • leaving personal property, such as the washer, dryer, and fridge – or patio furniture, a pool table, a TV, etc.
  • permitting a longer than typical timeframe to meet buyer’s needs for contingency removal or depositing money to escrow (we have run into religious reasons for this to be requested)
  • granting access to the home for visits beyond the typical 17 days
  • agreeing to remove a fixture that the buyer does not want
  • making repairs prior to close of escrow (termite work, roof leaks, or anything else that the buyer asks and the sellers agrees to cover)
  • with buyers of homes in common interest developments, sometimes the seller only orders the bare minimum, legally required HOA documents – if the buyer requests newsletters or other non-required items and the seller pays for and provides them, that’s another seller concession
  • the seller could agree to pay points on the borrower’s mortgage – this would also be a seller concession

 

Buyer concessions

Buyers sometimes make concessions, too. Some of the buyer concessions that we’ve seen included these:
(more…)

Why Do Agents Suggest That Sellers Price Their Home “At The Market”?

A very common seller concern, understandably, is selling the home for too little money.  Oftentimes they want to price their Silicon Valley home so that they “have room to negotiate” and “don’t leave too much money on the table”.

The trick is in figuring out how much room you really need to negotiate and at what point you’re dramatically hurting your chances of selling by overpricing. Where’s the tipping point?

Why do home sellers sometimes overprice their homes?Let’s do some mythical math – let’s say a 4 bed, 2 bath home in Los Gatos or Almaden Valley is worth approximately $1,000,000 (depending on terms like “As Is”, the loan type or all cash, free rent back, etc., the probable sales price range might go from about $975,000 to $1,025,000).

If the home’s likely value on the market is worth about one million, many agents will suggest listing the home at about $999,000 in order to get buyers who may not search over the $1 million mark and to drum up interest, traffic, and hopefully at least one offer.

Saavy and experienced agents know that most homes sell fairly close to list price in today’s market (Almaden Valley houses are selling, on average, at 99% of list price and Los Gatos homes are selling at an average of 97% of list price), so most would not want to go beyond that percentage – whatever it is – since we also know that most homes are not selling.  Five percent over probable list price is ususually the upper limits of what may be wise positioning.   In the case of our mythical million dollar home, the highest that some agents would see as potentially viable might be $1,050,000 – but many others would not venture that high, feeling it creates a big risk of the home sitting on the market too long and ultimately selling for much less if the home is perceived as shopworn. They might place the upper limit at $1,025,000 or close to there.

Sellers, though, sometimes see the numbers but want to list their home higher – perhaps 10% higher or more over probable market value.  Why is this so often the case?

(more…)