From Harriet’s VIEWPOINT® in REAL ESTATE series in the PV Mirror, Find more articles like this in the Blog section under Viewpoint
“THE FIRST OFFER IS THE BEST OFFER ”
This truism quoted by real estate agents is a lesson they have learned from their actual experience. Why is the first offer you receive on your property the best one? From my experience, here are some of the reasons:
1. The first offer is from the first person who has written an offer, regardless of the number of showings the property has had.
2. This offer is influenced by the current market conditions current at the time the offer is made.
3. The written offer is often a reality check for the seller regarding how the market views the value of his property.
4. It is crucial to work the offer through negotiation as long as possible. You never want to be the side to give up first. Counter on price, terms, conditions, the kitchen sink, etc.
5. The offer is not personal, and the seller should not take it as such. The offer process is business being conducted.
6. I have never personally known sellers who were glad they turned down their first offer. On the contrary, they regretted that they had lost the first offer through unrealistic expectations of higher prices or better terms later.
7. Real estate is a commodity and has cycles up and down. You must have an understanding of where the market is at the time of the offer.
The general economy, real estate environment, and expectations of the principals at the time of the offer influence the outcome:
The seller generally wants and expects his extra care in construction or amenities to be of the same value (or more) to the buyer in terms of the price offered. What is difficult for the seller to see is that in a buyer’s market or market with no buyers, it is very difficult to receive ANY offer. To receive an offer for less than the listed price, is going to be the most likely scenario.
Even if the asking price was dropped the day before, the offer is still the best one because it is the only one. For a seller to think back one year or 5 years before when the market was in a different cycle is a waste of time.
The seller, if he wants to sell his property, has to be a realist. Prices before could have been too high to be realistic. They may have been set when we were in a bubble. We all know that a bubble is not realistic. In a bubble, prices and activity are extreme and not the norm. The best advice I can give a seller is to be in the ‘’now.”
From the buyer’s perspective, he has other pressures affecting his desire to write an offer. He is bound by how much money he has. He is influenced by the press, gossip, economy, and general perception of the market at the time. He has to worry about buying too high in a real estate market which may still go lower before it stabilizes. Anyone who will make an offer in a slow market has more risk that he is still paying too high if there are no comparables of sold prices and dates available to him.
Closing costs for the buyers are higher here than in the rest of North American and much of Europe and South America. Keep in mind a purchase price of 155,000usd may cost the buyer another 8,000-10,000usd dollar, not including any financing costs or unusual circumstances.
Closing procedures can take weeks and months to close because of many factors: documentation of persons in an international transaction, wiring of funds internationally, fideicomiso or bank trust approvals, and holidays occurring in more than one country which impede transfer of funds or information.
The classic truism which says the true price is what the buyer is willing to pay and what the seller is willing to sell. Nothing else matters at that point. Are you willing to sell? Are you willing to buy? Do we agree on the price and terms? If not, let’s negotiate!
This article is based upon legal opinions, current practices and my personal experiences. I recommend that each potential buyer or seller of real estate conduct his own due diligence and review.
Harriet Murray (an article from her Viewpoint series in the PV Mirror, or check her blog for all Viewpoint articles)