Here’s a behind the scenes look at a real estate transaction in this market.
Our seller’s home has been listed for sale for about two months. We’ve had more than 30 showings but no offers. I knew we were priced close to where we needed to be, but prices were still falling.
I called some realtors who showed it, whom I know and trust, for a “heart to heart.” I asked them, based on what you’ve seen of our competition, where do you think we should be priced? They all said that it was just a bit high and a $10,000 drop should do it.
I shared this with my seller and suggested that based on the fact we are still getting showings we should hang in a bit longer. This can be very difficult and discouraging for a seller. Preparing and leaving your home sometimes several times a week without any results can take a toll.
Had we been in the market of late 2007 or 2008, we would have given our client different advice. In that market we would have advised our client to lead the market down with price. Prices dropped as much as $75,000 or more in that time. In that market you want to be a price leader and sell quick. Many sellers in that time held out in price and simply followed the market to bottom.
In our case, I felt the market was pretty much at bottom, so the plan was to keep the marketing in full swing and hold out. After all it was working, we were seeing lots of activity.
It’s really important to know the market and to know what factors to watch that signal a shift in demand and supply.
Finally we receive an offer! Not what we hoped for, but at least we have something to work with. After a few days of negotiation we arrive at an agreed price, but the terms they want us to accept just didn’t work — a four-month possession, a $5,000 deposit and the inspection to be done a week before possession.
Those terms can be hugely problematic. For a possession that long, I would want a $10,000 to $20,000 deposit. Should the market fall, the buyer could simply forfeit their deposit and walk, leaving my seller to start again in a lower-priced market. My seller could sue, but often it’s more hassle than it’s worth. Furthermore, having the inspection condition four months out is just a no go.
We negotiate further and my seller is thinking about accepting. Before he does, I call my broker for advice. I rely on him often as he has some unique experience. His real estate office is one of the higher producing offices in the Edmonton region. This means he has seen a lot of issues and has gotten to know how a lot of realtors operate.
I told him the situation and he said the realtor we’re dealing with will likely come back at us hard after the inspection and renegotiate. With this information and unfavourable terms, we didn’t do the deal.
A few days later we receive another offer. Of course, it’s not what we want but it is an offer. We negotiate hard again over a few days. Finally it comes out that their price is the top of what they are qualified for. My seller decides to accept.
Now the terms get in the way again. My seller feels he has given enough and doesn’t want to give anymore and I agree with him. So here we are holding out over something that is about $300. And then another showing request comes in. Not a big deal, as we’ve had lots with no results.
Normally I operate by the bird in the hand type of thinking, however, this time, in this situation, I felt a little differently. I contacted the realtor to ask a few questions. I asked if he picked our listing for his client or did his client pick it himself. The client picked it, he said. I asked if his client was really interested in it and if he felt it was a good candidate for them. He said that his client was really looking forward to seeing this one and that he felt it was a good candidate.
Now I can better advise my client. As the showing was a day away, I shared what I learned and suggested that he take his time in considering whether to accept the offer on the table and give in to their terms.
Shortly after the showing we are notified they are writing an offer. I was elated — we are now in a multiple offer scenario in a soft market. You have to play this carefully as you absolutely want to keep both offers in play. It’s not uncommon in this market to have one party withdraw their offer.
The offer comes in a little higher than what the current offer on the table is but still not what we were hoping for. So now what? There is no easy answer here. We could accept or risk countering at our price. I advise my client to test this offer as they know we have another. There is risk in doing this, but not a lot. If the buyer rejects our counter, they will almost always still honour their original offer. We counter and they accept.
We managed to get $10,000 more and the sale closed without a hitch. It doesn’t always work out this way, but sometimes if timing is on your side, you can generate multiple offers and do a little better. I felt great, as any realtor would, as all the work in imaging, marketing, and negotiating paid off.
Our seller was very happy and that makes us very happy.
We are encouraged as two other of our recent listings went into multiple offers as well. Is this a sign the market is turning? I hope so.
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