Because of the plentiful inventory of homes in most markets in the United States today, Buyers have the opportunity to choose homes that are not only in spectacular condition but are priced well below previous market values. And, because there are so many homes from which to choose, these Buyers feel very justified in offering something even well below the list price. The Santa Fe market is no exception.
Recently, I had a Buyer who found an expensive home she liked very much. She was more than financially qualified to purchase the home and she decided to make an offer. In general homes in Santa Fe sell for between 3 and 5 percent of list price. Oftentimes that list price has already been reduced several times but, once the price comes down to where a Buyer is willing to make an offer, the purchase price is usually not less than 3 to 5 percent off the list price. I did a market analysis for my Buyer and we discovered that the house she wanted to purchase was listed at a price that was about $100,000 over the highest priced sale in the neighborhood in the past 6 months. My Buyer decided to make an offer which was about 12% below list price. In addition, this house which was located on Santa Fe’s beautiful Eastside, had multiple levels, a steep driveway and was in some ways a bit dated though in very good condition. The Seller was not anxious to move but health issues were making the move a necessity.
The Seller did not have a Realtor to represent him. My Buyer and I wrote up her offer and I prepared letter to the Seller explaining our rationale, letting him know how much my Buyer loved his house and mentioned that even though the offer may be less than he expected, this Buyer was well qualified and willing. I also included the market analysis showing the current market value of his home.
What did the Seller do? What would you have done if you had been that Seller? We have a declining market. Based on the market analysis the house was seriously over-priced. It had some issues such as, the over abundance of stairs and the steep driveway that would limit the number of Buyers willing to purchase the home. Another offer could be a long time in coming and in the meantime, the house would be following the market down. My Buyer was willing to negotiate.
If I had been that Seller’s Realtor, knowing the state of the market and knowing his personal health situation, I would have stressed to him that low offers were common these days, it was an honor to have an offer at all and to do his best to work with this Buyer who was clearly interested in his house. It is often much better to get the house sold than to hold out in hopes of a better offer. Often the first offer is the best and waiting in a declining market can lead to a situation where the Seller is forced to sell way below his initial expectations.
The Seller wrote me back clearly insulted by the offer and told me he would counter but only a very small amount. He then said he had done a market analysis a year ago and his home was well-priced and clearly better than all the others active on the market. I wrote back telling him again that I had a willing Buyer and was glad that he would be making a offer. My Buyer and the Seller had been about $200,000 apart. His counter offer was only a few thousand off the list price. I presented the counter offer to my Buyer and she felt that since he was not really willing to negotiate the price, she was unwilling to make another counter offer. I suggested that he did make the effort to counter, even though it was a small amount and perhaps she should just make her best offer and see what happens. She felt the effort would be hopeless and refused to negotiate further. And so, a Buyer lost a home she liked very much and a Seller is still stuck in a home that is no longer a good fit.
Knowing the Santa Fe Real Estate market, as well as I do, it will be surprising if that Seller gets another offer any time soon. That house is likely to sit on the market until the Seller finally has to take something less than she paid. The sad thing is that my Buyer would have settled on a much higher price than that offered. She may have been willing to come up about $80-100,000 to market value but the Seller was so caught up in his emotion about his house that he could not see the opportunity or the danger of passing up this Buyer.