No Offer is Insulting
No offer is insulting. Period. Most of the time when sellers say that an offer is insulting, this idea comes from their non-business-savvy real estate broker. Be aware: Many financially able and savvy buyers will start low. So my advice is to always counter. But whether you counter or not, the correct response to ANY offer is: Thank you very much for your offer.
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Could we start this chapter with a question: A little kid, a perfect stranger, approaches you and says: You sir, are a stinky pirate. Let’s add the fact that there is no other person there to hear it. It is just you and the little kid. So the question is, are you insulted? Well sure, on the surface of it, maybe you are. But upon two seconds of reflection, I rather doubt it. First, it’s a little kid who is a stranger. Second, does he even know what he is saying? And third, no one else heard it. If you are insulted by this scenario, I submit that there is more wrong with you than the unsupervised child. In other words, can you genuinely be insulted without credence or damage? That is, without credibility of the allegation or cost to you? Sure it is an insult, but you are not insulted.
Yet we see this sort of nonsense in the real estate business all the time. It goes something like this. A seller lists his $500,000 house for $525,000. And for this discussion, it does not matter whether that is a good starting price or not. But an offer comes in at $400,000. If this offer goes directly to the seller, there is what? Maybe a fifty/fifty chance that the seller would bother to counter. I mean time is valuable. But if the offer goes first to a broker, when submitting the offer to the seller, the broker sniffs: This offer is insulting, I know you are insulted, it’s not worth a response. I’ll tell the buyer you’re insulted.
And often this will shut down any further discussion. I cannot tell you how often this happens in residential real estate. We’ll come back to the broker in a minute. But for now, let me just ask: Should this type of thing insult a seller? Let’s up the stakes, what if the offer is only $300,000?
Now the question here is not: Will some people be insulted? Because undoubtedly some will be. Rather, the question is: Should you be insulted? Well, could we think of this as we did the charge of being a stinky pirate: What is the credibility and what is the cost to you? And let’s assume it is one hundred percent credible. An all-cash offer and the buyer includes a bank statement as proof of funds. The point is, this insulted business all revolves around the question of: What does this cost you, the seller?
I submit that it costs the seller nothing. What do you care if a buyer wants to spend his time and effort making a ridiculous $300,000 offer? Other than the time for a showing, and most showings produce absolutely nothing, the seller is not even out any time. If he chooses, the seller does not even have to take the time to read and consider the offer at all. So the offer may be insulting, but should the seller really be insulted? There is a difference.
Pride. Sometimes, that’s the real issue. The buyer’s $300,000 offer wounds the seller’s pride. But if you are reading this book, and certainly if you have made it this far, I think you will know how silly this is. Pride has no place in a $500,000 business deal.
So take cost and pride out of it and what have you got? An offer. And what do we do with offers? We counter. Hey, I never said this was rocket science.
If you as the seller are at $525,000 and the buyer is at $300,000, sure you may not want to spend time on it. I get that. But if you have the time and inclination, why not give the buyer a counter? You don’t even have to write it down. Call ‘em up or shoot them a quick email. Say: Hey, got your offer; thank you so much for your interest. Yes, I see your proof of funds and I know you are serious. As a show of good faith on our side, we’ll come down to $524,000.
Now I hear you: That’s a waste of time. And if you feel that way, I am not here to talk you out of it. But I will tell you, I have been on the buy side with enough very shrewd and wily investor types to know that some people just have to start this way. It is who they are. And something else: I have seen some of them go on to actually overpay for property. Because where they start is not a valid indication of their actual interest. It’s just not. In fact, the first offer is of no real significance. So why shut the process down before you find out what their actual interest may be?
And this brings me back to the inept brokers. I guess that is what this is: The brokers seem to believe that where the buyer starts is a valid indication of a buyer’s interest. And if the buyer starts low, the broker is willing to totally dismiss the buyer regardless of actual interest, which remains unknown. And because the broker believes that starting price is a valid indication of interest, the broker makes no further attempt to discover the buyer’s actual interest.
As for the broker telling a seller that an offer is insulting, well, that is merely a broker simply demonstrating that he or she has not thought this out. I also think that by telling a seller that an offer is insulting, the broker somehow thinks that she is proving her allegiance to the seller. But true allegiance would look like this: Well Mr. Seller, I am not at all sure of what to make of it. But it’s too early to tell; let’s see where it goes.
Of course, that takes a bit more effort…and a bit more smarts.