It’s a little funny that when Silicon Valley home sellers and their listing agents get contracts or offers, many do not want to deal with issuing or negotiating counter offers. In many cases, it can go like this fictional bidding scenario:
Offer due date set, and let’s say there are 5 offers. Of the five, perhaps one is all cash, one is half cash, and the rest are 20-25% down. Most offers will be in a tight cluster of pricing (this is probably “true market value”). One may be far higher than the rest. Or perhaps two a little higher than the others.
- The seller wants the highest price, no contingencies, and preferably, all cash.
- If the all cash offer is non-contingent (no contingencies for inspection, loan or appraisal) and is the highest price, there will be a straight acceptance in almost all cases. No counters.
- If the best combination of cash and contingencies and pricing is the half-cash offer, most likely the listing agent will phone that buyers’ agent and ask if those buyers would match the highest price. If those buyers say yes, one counter offer will be issued and it will have a short deadline for response.
- If the “best combination” buyers say no, the listing agent and sellers will move to the next best offer, however they decide “best” looks, and phone them, giving them the opportunity to come up.
- In these scenarios, meanwhile, the rest of the buyers and their agents wait – and hear nothing in the meantime.
Once in awhile, there are a few good offers that are all neck-and-neck, and perhaps there’s one flaky looking offer at a higher price. If that happens, the listing agent and sellers may issue a multiple counter offer to most or all bidders. That used to be really common, but today, I’m finding the most typical scenario is the “one phone call” approach instead.
Why don’t these Silicon Valley home sellers just give a counter offer rather than call? Or why don’t they issue a multiple counter offer every time?
This is a funny shift that we’ve been seeing in how the game is played in recent years. Some listing agents and sellers, understanding that San Jose area home buyers are already stretching themselves with overbids and short contingencies and the whole rest of it just don’t want to push them all harder. Their fear is that they start with five offers, push a little bit, as with a gentle feather, and the buyers all walk. Should that happen, they will lose their best moment for maximizing their sale price, as they are unlikely to ever see so many offers at one time again. Fear is a great motivator! They don’t want to risk going from five offers to none!
Therefore, there is some careful tippy-toeing that takes place. A quiet phone call with phrases like “we just want to give you the first opportunity…” tends to make buyers feel lucky to be bid up rather than annoyed that they are already paying more than list but being pushed to do more.
In this kind of real estate market, what buyers want is to be the ones who are given that phone call. They can just as quietly (and quickly) decline, but know that they had the “at bat”. At least they can be the ones to say no, rather than to be passed over.
How can buyers’ agents and home buyers improve their odds of being the team that the listing agent and home seller will want to have in contract? Here are some tips (please click on the links for articles on these subjects):
- Understand that real estate sales are not just business but about relationships; to get the sale in the face of multiples may have as much to do with the relationship as it does with the cash or terms. Sellers are afraid that the buyer may walk, the deal won’t close, or the escrow will be bumpy. What can you do to allay those fears? How can you be the buyers whom the sellers will trust? Trust building is hugely important!
- Ask yourself this: what can we do to improve the impression made to the other side which will be favorable? Consider your behavior at the open house as an opportunity to make that good impression and make the best of it! And whether at an open house or not, ask thoughtful questions (not picky, stupid ones).
- Be thorough with your offer package. Write a nice letter to the sellers about why you want to buy their lovely home out of all the real estate listings in Silicon Valley. Include a copy of your check, proof of funds, signed disclosures – whatever your Realtor advises. Don’t skimp! And ask your agent to go the extra mile too, offering to present the contract in person (even asking is viewed as a good sign: “How would you like to receive my buyers’ offer?”) Here’s a summary of multiple offer tips:
Real estate sales in Santa Clara County and San Mateo County are a little scarce right now due to the extremely low inventory. Many buyers are frustrated and upset at the difficulty in purchasing a home in this climate. If approached carefully, you can improve your odds of success. It begins with a good relationship between you and your agent and the listing agent, who in turn will relay those impressions on to the seller. It can help tremendously if you hire an good, seasoned Realtor who is well known in the market. When the listing agent knows and likes the buyers’ agent, it’s an asset in that “trust building” which is so key to your being the buyers who will get that call.