San Diego Real Estate FYI
Are you thinking of selling your home in San Diego (or anywhere else for that matter)? Here’s something you may not be aware of. When you put your home on the market and start to get offers, the first offer you get is often the best offer you’ll get.
While that may be surprising or seem untrue, I’m not just making that up. I’m actually speaking from my own experience as a listing agent and helping people sell their homes in San Diego over the last 12+ years. It’s also not just a San Diego thing, there are many stories from real estate agents all over the country that have experienced the same thing. Nobody knows for sure why this happens, but it does and it’s something you need to be aware of when selling your own home.
Holding out for better offers could end up costing you money, especially if no better offers come in and the buyer with the first offer (which turned out to be the best) moved on to another house. I’ve seen this happen and it’s a big setback and disapointment for the seller. But it’s a reality that can happen and something that you need to consider when choosing an offer to accept.
Home Selling Facts vs Myths
The San Diego real estate market has been crazy lately (as well as many other places across the country), with many homes selling well above the list price. While that’s a great thing if you’re the seller, it can also create unrealistic expectations while your home is on the market. Why is that? It would be easy to think that if some or many homes in your area sell above the list price, then all homes will also definitely sell above list price and you should reject or counter the early offers and hold out for a higher offer, right? Not so fast!
I’m not saying that your home won’t also sell above list price, but not every home does. There are factors such as location (down to the specific school district, neighborhood or street), age and condition of the home, timing of the market, etc. that can all affect how many buyers bid on your home at any given time, which will all play into the final sale price. Hopefully yours will sell at a great price also, but don’t be fooled by the myth that every home will usually sell above list price.
Perceived Value vs Appraised Value
When a buyer gets a loan to purchase a home, it needs to appraise at or above the sales price or the lender (mortgage company) won’t loan the money on the house. Accepting a bid above the list price won’t do you any good if it doesn’t appraise at that price, unless you have an all-cash buyer that doesn’t care about the appraised value, or the buyer with a loan is willing to pay the difference between what the home appraised for and the agreed upon price for the home out of their own pocket.
Banks don’t generally loan home buyers more than what the house is appraised at. If that happens and the buyer isn’t willing to come in with their own cash for the difference, you’re pretty much forced to lower the sales price to the appraised value.
No matter what anyone tells you to the contrary, there are no guarantees or pre-determining what your home will actually sell for. It’s basically determined by two parties, you and the buyer (and their lender if they’re borrowing to buy the home). That’s where trusting your REALTOR® and their experience come into play, and carefully considering their advice to list your home at a reasonable price in the first place. Their experience will also help guide you when receiving offers to give you the information to use when deciding on which offer to accept, reject or any counter-offers to make.
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Risks of Holding Out for a Better Offer
Back in the old days (way before my time in real estate 🙂 ) and before the internet became common with real estate websites and apps like Zillow, Realtor.com, Homesnap, etc., the only way to know what homes were available for sale was through a real estate agent, or REALTOR®.
Houses were advertised in the local newspaper by local real estate offices and also published for other agents in thick paper books, just like the old phone books (remember those?). So basically the only way for a home buyer to know what was available for sale in their area was through the local newspaper and real estate agents. The books weren’t updated constantly like websites and apps are today and there was no online search tool to quickly pull up a nice list of available homes.
Buyers would usually have to meet with their agent first to find out what homes they should go see, and I’ve even heard that in some cases buyers and the buyers agent would actually present their offer to the sellers and the sellers agent in person. As strange as that might seem compared to instantly and electronically submitting offers as is done today, that’s how it was.
So the point being here is that the process of buying or selling a home was a lot slower back then and the consumers or home buyers didn’t have all the tools at their disposal like they do today. Because of that there probably weren’t nearly as many (if any) bidding wars and it probably wasn’t as common for houses to sell above list price. However, the population in general was also a lot lower than today so there were logically less people looking at and bidding on any one home.
Technology Improving The Process
That was the precursor to today’s MLS (multiple listing service) and websites that subscribe to the MLS data to show home buyers what’s currently for sale. Obviously those old printed books couldn’t be updated daily like today’s MLS database. As often as they were updated, there was no “instant” internet database available for buyers to search themselves from their smart phone, tablet or computer and browse what was available in their location, price range and with color photos and virtual tours, etc.
So why am I going into all that history, when it doesn’t really matter to you today? Simply because when buying a home, knowing what homes are for sale is very different now and much more streamlined and available to basically anyone with an internet connection, unlike before when agents were basically the only people to have that information. That one little factoid or bit of history is what makes a huge difference for buyers in your local real estate market and how much homes actually sell for at any given time.
Knowledge is Power
While only a much smaller number of buyers would see the homes for sale back then, today virtually anyone can see all homes for sale that are remotely close to what they’re looking for. When a buyer knows about more potential homes available to them, that gives them more choices, which can also affect how they bid on your home. That buyer knowledge potentially gives them power they didn’t have before and changes things for home sellers today.
The Offer Process
With a much larger population than in years past, it would be logical to think that there’s most likely a bigger pool of buyers to bid on your home, and therefore a potentially higher sales price for you. With more bidders, it would be easy to think that you should simply skip the first bidder and wait for all the other offers to come in that will most definitely be higher. Possibly, but not necessarily.
First, selling your home is not the same as a public auction where everyone knows what the other buyers are bidding. It’s more like a closed auction; home buyers can find your home publicly on the internet and through your real estate agent, but that’s usually as public as it gets. From there, they consult with their agent on what they should bid for your home, then make an official offer. However, that offer is not public.
The buyers agent can ask the listing agent if they’ve received any other offers and what the best offer is, but most likely they won’t give out that exact information unless the seller has given permission or instructed their agent to do so. Their fiduciary duty is to the seller, and to do their best to get the highest sale price they can.
So how does a home buyer know how much to offer with basically no “for sure” information on their competition in a tight real estate market? A good buyers agent will suggest they submit the highest and best offer that they are comfortable with.
This is one very good reason why your first offer might be your best offer!
Depending on how much a buyer wants your home compared to every other home available in their price range, you may or may not get higher offers. When I’m working with buyers in a low-inventory market, I usually recommend that they offer their highest and best. That way if their offer is not accepted, they know they gave it their best shot and if they do get an acceptance they are still good with the price.
While it’s true that some less serious or motivated buyers will submit a low-ball offer (which in a low inventory market will only get rejected or no response from the seller) and hope that it gets accepted or that they’ll get a counter offer for only a little more, that’s not always the case. Many buyers just absolutely love a home and will do everything they can to get it, which starts with making a good offer.
Fact: As you can see, nobody knows for sure what the highest offer will be until all are submitted!
Because of that uncertainty on a buyers motivation though, it makes it possible (and very often probable) that the first offer you receive could very well be the best and highest offer you will get. It’s worth repeating that automatically rejecting the first offer or waiting for better offers may end up bad for you.
As I mentioned earlier, if you wait days or longer for more offers to come in after the first offer, there is a risk that in the time you are holding out from accepting it, your buyer will get impatient and move on to something else. Also, in a tight market many buyers submit more than one offer and they could receive an acceptance on one of their other offers and move on. If either of those scenarios happen and you don’t have any other offers as backup, your only logical choice is usually to lower the price to attract more buyers.
While I’ve stated several reasons why your first offer might be the best, it doesn’t mean that you should always accept the first offer no matter what. It’s definitely worth considering though when deciding on whether to wait for other bids or not. Again, this is where a good real estate agent comes in. They will know the current market and how things are trending to help you better decide.
Where To Start
Selecting a great real estate agent to sell your home and pricing it realistically in the current market while considering all of the previously mentioned factors like location and condition of home, etc. is the best place to start. Having your home priced well will play into getting the best offers first and the most money for you. So when interviewing and hiring a real estate agent and deciding on what price to list your home at, consider it all carefully – an agent’s experience and reputation matter!
If you or someone you know is thinking of selling a home, I would love to be considered in your search for a great REALTOR®. This is what I do full time every day and because I love it and work very hard at it, I’m very good at it. So it would be my honor to help you get the most for your home and make the home selling process as smooth as possible.
Call me today so we can discuss your home and what the current value is. I’m very happy to help!
Amy Ruiz, REALTOR®
Keller Williams Realty