Your agent rings you — the first offer on your home just pinged their inbox. Excitement, relief, and anticipation swirl through your synapses. The buyer’s offer, she shares, is a bit lower than your asking price. The six figures enter your ears, plunging you into a state of indecision and unease. Should you accept this first offer or wait and see if something better comes along?
While this is a highly personal decision, several objective factors can help you make the call. We’ll coach you through evaluating a first offer based on your selling objectives and market conditions. For added expertise, top real estate agent Kris Shook, who closes 23% more sales than the average agent in Tacoma, WA, joins the conversation.
Your first offer usually comes from a serious buyer
Let’s start with a case for your first offer: there’s usually a motivated buyer behind it. This buyer is excited about your home and wants to act quickly to beat their competition. They’ve likely spent enough time in the market to know what inventory is out there for what price and have taken this into account when crafting their offer.
Even if this first offer is on the lower side, you can respond with a counteroffer to boost that number into your goal range. As a seller, you want to negotiate with a first offer type of buyer — you can use their attachment and fear of losing out to a hypothetical higher offer to leverage a better deal.
When you turn down the first offer outright, you’re taking a gamble. The longer your home sits on the market, the less likely you’ll receive a higher offer. Shook shares his perspective:
“At the end of the day, I told my clients that if you don’t like the offer, you don’t have to choose it — it’s your choice. But the longer we stay on the market, the less likely we’re going to receive the offer that you guys want, because the longer we’re on the market, the longer that people are going to look at it as if it’s not priced right. Eventually, somebody’s going to come in and write another offer under list price.”
When a property’s “days on market” time reaches beyond average, buyers begin to wonder if the price is off or if something is wrong with the property. As the threat of competing with other buyers diminishes, a buyer’s strategy shifts from making a competitive offer to bargaining a deal.
Weigh the strength of the offer against your selling objectives
Now that you understand the case for accepting the first offer, let’s get into the details of the offer to see if yours is actually worth it:
The closer the offer price to your listing price, the better, but don’t get too greedy. A first offer within 10% of your listing price may be worth negotiating if all other components of the offer are sound.
Cash vs. financing:
Cash offers are more reliable than mortgage-backed offers since they guarantee a certain and swift closing. When backed by a lender, even pre-approved buyers may be denied a loan for a variety of reasons such as a job status change or a low home appraisal. According to the National Association of Realtors, financing difficulties account for 35% of closing delays.
Guarantee your first offer is a cash offer with HomeLight’s SimpleSale program. We’ll gather offers from our pre-approved cash buyers and introduce you to the highest bidder within 48 hours. If you choose to accept an offer, your sale will close lightning fast, concluding with a moving date of your choosing.
Purchase contingencies state that an offer is valid if and only if the listed criteria is met. As a seller, you want an offer with as few contingencies as possible to increase the likelihood of the deal closing.
On the other hand, if your first offer includes a home sale contingency — where the buyer’s purchase is contingent on selling their home first — you should think twice before entering negotiations. This contingency puts a giant question mark on your closing timeline and may cancel it indefinitely if the buyer’s home fails to sell.
Depending on your circumstance, a buyer’s flexibility with closing and moving dates can influence your decision to accept the first offer. For instance, a buyer may be open to negotiating a rent-back if you need more time to transition after the sale.
Does the offer meet your primary selling objective?
Unless you’re in an ultra-hot market (think Bay Area or Manhattan), you’re not looking for the perfect offer, you’re looking for the best offer overall. The offer components listed above carry different weight depending on your primary selling objective.
For instance, if you’ve already purchased your next home and need to sell your house ASAP, then a cash offer with few contingencies is the way to go, even if it’s slightly below your listing price.
Your market conditions should influence your decision
If you’ve evaluated the quality of the first offer and weighed it against your selling objective and still aren’t convinced one way or another, consider your market conditions.
Are you selling in a competitive seller’s market where multiple offers are a near guarantee?
There’s less pressure to accept the first offer you receive when buyers are bound to line up for any home that hits the market. Shook shares that in Tacoma’s hot seller’s market, multiple offer scenarios are the norm.
“Up here, we have an option for our sellers: they can either accept offers as they come in, or we could put an offer review date on the property.”
Depending on your state laws, you can include an “offer review date” in your listing to allow time for offers to flow in before responding. This puts the review window in your control, rather than the buyers’.
Are you in a buyer’s market where homes similar to yours are a dime a dozen?
In a buyer’s market, housing supply exceeds buyer demand, causing homes to sit on the market longer and decrease in price over time. If a home similar to yours sells for less than your listing price, then a first offer reflecting that price is totally valid.
“My clients received an offer $10,000 lower than what their home was listed for. I know why, because an identical home next to them just sold for $10,000 less,” Shook shares. “Now if the homeowners sold their home under list price for a reason — maybe they needed to get out of there and move, or something happened, or they got scared because of COVID-19 — and they just took the first offer that was $10,000 less, then, unfortunately, that affects you.”
Even if you receive an offer for more than a comparable home just sold for, your neighbor’s sale price may haunt you when an appraiser values your home against recent sales in the area.
How long has your home been on the market compared to the average ‘days on market’?
As we mentioned earlier, the longer your home sits on the market, the less likely you’ll receive a higher price. If weeks go by before your first offer rolls in, that’s an indicator your home is overpriced. Consider how that first offer compares to your home’s true market value, rather than its listing price before you write it off.
Does your home appeal to a niche or limited buyer pool?
Take your first offer seriously if your home appeals to a limited buyer pool due to its location or style (for instance, a home next to train tracks or with novelty architecture in a neighborhood full of traditional homes). Your first offer could be your only offer for quite some time…
Don’t forget to counter before you accept the first offer
In real estate, everything is negotiable. Buyers expect you to respond with a counteroffer before signing your keys away.
Discuss the areas of the offer you’d like to improve (price, contingencies, closing costs, terms, moving date, etc.) with your real estate agent. Then craft a reasonable counteroffer, including a deadline for response to keep negotiations moving forward.
Your buyer can accept your counteroffer or respond with a counter of their own. Either way, you’ll walk away with a better deal from some back and forth than from accepting the offer as is.
To accept, or not to accept: Let’s recap
As you can see, there’s so much to consider when evaluating the first offer. Weigh the offer’s quality against your selling objectives and your market’s climate to decide if it’s worth pursuing.
Consider accepting the first offer if…
- You’re pressed for time and need to sell ASAP
- The offer is close to your market value (even if it’s below your listing price)
- It’s a cash offer
- You have a limited buyer pool
- You’re in a buyer’s market
- Your home has recently gone on and off the market
- An identical home to yours just sold for less
Reject the first offer outright if…
- The offer is way below market value
- Your listing is young and you have time to spare
- You’re in a seller’s market where multiple offers are common
Take these factors into account, and know that ultimately, the choice is yours!
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