From San Fransisco Chronicle
See Jeff and Grace Safrin's blog for more information
You've had your house on the market for several months with no takers. Lately, though, a nice young couple has come back to give the place a second look, perhaps even a third. You wait anxiously, but still no offer.
What do you do? How about turning the tables and making them an offer instead, an offer they just might not be able to refuse.
It's called a reverse offer, and it's a technique Grace Safrin, an associate broker with F.C. Tucker/Advantage Realty in Valparaiso, Ind., used to sell three houses last year. "It's a form of match-making that has worked on several occasions for us," she said.
Reverse offers aren't new. They were used in the 1980s recession when mortgage rates were in double digits and the few would-be buyers were often reluctant to pull the trigger. But except for a few mild slow markets since then, wannabe owners have pretty much fallen all over themselves to find houses, often battling over the same one, and all sellers had to do was sit back and wait for the offers to come in.
Things are different now. The market is saturated with homes, and buyers are back on the sidelines. So, if you are what is called a motivated seller, Safrin and a number of other progressive realty pros say it may be time to dust off this old tactic.
"In this real estate market, it's not always business as usual," the Northern Indiana agent said.
"A reverse offer works something like this: A potential buyer has shown more than passing interest in your house, and the buyer's agent has indicated his client really likes the place. But for some reason, a week or two has gone by and the buyer hasn't made an offer.
Something is holding him back. Perhaps he likes everything about the place but the carpeting. Maybe he wants to show the house to his parents and get their approval. Perhaps he still wants to look at several other places. Or maybe he's just paralyzed from watching the news about the awful real estate market.
It can be any number of things. So based on feedback from his agent, why not make the reluctant buyer an offer? Maybe you'll knock a few grand off your asking price, agree to change the carpeting and throw in a 12-month home warranty. Perhaps you'll also agree to wait for however long it takes for him to get approved for a mortgage, or give him some extra time to close.
In other words, whatever it takes to not only get his attention and but put his John Hancock on a contract. "I've never met a buyer who has been unhappy to receive a reverse offer," said Steve Leung, an agent in Cupertino. "Are they surprised? Usually. Will they listen? Most always."
Not all realty pros are enamored with the reverse offers. Greg Cremia of Shore Realty in Nags Head, N.C., is one nonfan. "Everybody is looking for something new," he said, "but new things aren't always the best."
Cremia's main objection is that with a reverse offer, the seller is tipping his hand. "What the interested buyer hears is that the seller is either desperate, struggling, getting divorced, sick, in financial trouble or needs to sell and is willing to negotiate a real bargain of a deal," he said. That's not the ideal position for a seller starting the negotiation process, he said, "but (it is) a dream scenario for a buyer."
Ruth Gabbard of Gabbard Hawaii Properties in Honolulu said she is a little gun-shy. Though she's done several successful reverse offers, she also is concerned that the seller may be showing his cards to the other side.
At the same time, Gabbard says that if the seller is desperate, his "desperation will come across no matter what."
"To me, price reductions spell desperate," she said. "If you reduce the price five times, that tells everybody everything they need to know. So why not take the bull by the horns. Sometimes, if there's just an inkling of interest from a buyer who's not quite to the plate, making him an offer might make him bite."
There are other ways to use reverse offers, which also are known as pre-emptive or seller-initiated offers. One might be if the buyer is using an inexperienced agent and your more veteran agent wants to write the contract to make certain it is worded perfectly. Another is if negotiations have broken down and you want to make one last-ditch attempt to get the deal back on track.
Todd Waller of Real Estate One in Ann Arbor, Mich., even uses the ploy when his clients have found two or three homes they'd be happy to buy. "I have asked the listing agents of those homes to submit an offer to my clients," he says. "For my buyers, it's an opportunity to not be tied to one contract and gauge a seller's willingness" to negotiate.
Still, reverse offers don't work in all situations. But if you are truly motivated, it is an aggressive, if unorthodox way to force the hands of an otherwise hesitant buyer.
Agents who have used the technique successfully suggest keeping these points in mind:
Interest: The would-be buyer must have shown some interest. Throwing an offer out there to just anybody who views your house probably won't be enough to get their attention. They should at least have come back for a second look. Otherwise, warns Kathy Skrzypiec of Newport County Real Estate in Tiverton, R.I., it could encourage fire sale-type counteroffers.
Feedback: Similarly, the buyer must have mentioned to his agent that there was something he liked about your property. The big backyard, perhaps. Maybe the woods behind the house. Or perhaps the large master suite. Whatever it is, something must have tickled his fancy; otherwise, he wouldn't have come back. "There has to be very, very good feedback," said Safrin, the Indiana broker.
The buyer: Your potential purchaser must be qualified. That is, he should be pre-approved for a mortgage. If he's not, you could be spinning your wheels. Also, try to determine what type of financing he is going after - government or conventional. The time it takes to process his loan will determine how long your property will be off the market.
His agent: You can't try to bypass the buyer's agent. "If you have good communications with the other agent," said Jenny Robinson of Keller Williams Realty in Clarksville, Tenn., "the offer can be tailored" to his client's needs.
If the buyer's agent balks, though, or if he doesn't understand that you are trying to open a dialog with his client to see if you can come to a meeting of the minds, making the buyer an offer won't work. That's why Safrin spends at least a half-hour with the other agent explaining what her seller is trying to do. "It's a new paradigm for the buyer's agent, too," she said.
The offer: Here, Safrin suggests putting yourself in the buyer's shoes, and being generous. Find out what has been holding the buyer back from making an offer, and meet those objections head on. If the house needs a paint job, for example, offer to paint it, or at least give the buyer an allowance to cover the cost. Or maybe he needs some help with closing costs.
Price: Obviously, you'll have to come down on your asking price. But don't cut to your rock-bottom number, at least not right away. "Leave yourself some wiggle room," said Gabbard, the Hawaii broker.
Expiration: Once the offer is made, it cannot be revoked unilaterally, said Leung, the Cupertino agent, so be sure the contract has an expiration date. Otherwise, it is considered an open offer.
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