By Kay Wilson-Bolton
February 10, 2006
There is a long-held tradition in real estate that your “first offer may be your best offer.” In today’s market, however, the opposite has proven to be as true.
Picture home sellers getting their home ready to go on the market and conversing with a neighbor who has friends who would love to live n the neighborhood.
The friends had recently sold their home and were having a hard time finding a suitable home to buy. Delighted to have the tip, they contacted the sellers who agreed to show them the house before it hit the open market. In order to avoid competition from other buyers, they made a “pre-emptive offer.”
Pre-emptive offers have become popular in low-inventory markets where multiple-offer competitions are common. A pre-emptive offer is one that is made early – either before a property is on the market or before the date the sellers are ready to accept offers.
Pre-emptive offers pose a dilemma for sellers. If they accept the offer, they’ll save themselves the details and predictable challenges of the marketing process. But price-wise, it’s a gamble for an aggressive marketing campaign, that includes the benefits of the multiple listing service, might bring a higher price and buyers who make pre-emptive offers are usually aware of this. So, their offers tend to be strong.
On the other hand, there’s no guarantee that a buyer whose pre-emptive offer was refused will be around when the sellers do decide to accept offers.
Predictably, if that buyer is around and he/she makes an offer, it could be for a lower price than initially offered if there are no competing offers at that time.
There are many examples of how dealing or not dealing with pre-emptive offices can have favorable and not so favorable results.
In one case, a seller decided to not look at offers until the marketing of the property had officially begun.
However, one persistent buyer insisted on writing a pre-emptive offer, which her agent delivered to the listing agent. Although the sellers were pleased with the offer for $150,000 over the list price, they turned it down. They felt it would be unfair to the other buyers who had wanted to make pre-emptive offers but who were told they had to wait.
The seller received eight offers. The accepted offer was for $5,000 less than the price offered by the pre-emptive buyer. The buyer who made the initial pre-emptive offer did not re-submit his offer.
The bottom line is that pre-emptive offers are risky for both buyers and sellers. Sellers who accept pre-emptive offers will never know if they could have sold for more on the open market. Buyers will never know if they could have paid less.
The side of caution requires that sellers look at offers in terms on reasonableness. This market has produced prices not thought of a decade ago and whether or not an offer is fair or high enough is subjective, for in all of us there is some element of excessive desire to acquire or possess more than we need or deserve.
As long as California remains a desirable place to live, these considerations will be with us for a while.
Kay Wilson-Bolton is the owner of CENTURY 21 Buena Vista and has been serving West Ventura County since 1976. She can be reached at 805.340.5025