Hello BP Community,
I need your advice on a situation I am dealing with currently, and I am trying to figure out the best possible solution or leverage to handle this, and I would greatly appreciate your advice. Thank you in advance!
The Situation is:
We bought a property in Maryland (wholesale) 4 months ago, and we fixed it up nicely, and we listed on the MLS with flat fee listing, so we are selling on our own and just paying the Buyer's Agent commission of 2.5%. We listed the house at $299,995, and the houses in that neighborhood (completely rehabbed properties) sold for $290k in the last 6 months, but obviously they don't have all the bells and whistles our house does (I know that's what most of the sellers think and say, but trust me, we checked out the properties around, and our property has all the things you can think of). Anyway, we listed the property about 4 days ago, and it generated a lot of interest, and we already got a couple of offers, here is my question:
All the offers from the agents are the same:
Full Asking Price with 3% Seller Subsidy
50/50 split of taxes
30 days closing
We countered back with 1% seller subsidy and all the other terms remaining the same.
Now, they countered back (and it's funny they all used the same strategy here):
They raised the full asking price to $305,000 but still keeping the 3% seller subsidy. (All agents are saying that their clients need the closing help)
My concern is what if we accept this offer, and the appraisal comes lower than our listed price.
I know we have a choice to either accept the low appraisal price or stick to our listing price, but what is the benefit to the Buyer's Agents raising the price and keeping the seller subsidy at 3%. I don't want to commit to 3% because that term will apply to the low appraisal offer as well.
What is my best strategy to handle this? Or, what leverage do I have? or, any negotiation strategy will be helpful.
Any advice will be much appreciated!
This is a normal occurrence and when flipping houses if you did your job right, so congratulations to you for doing a great job on the house!
To answer your question: it is very normal for a realtor to write an offer with a 3% closing cost tacked on top of a full price offer. I would prefer this 100 times out of 100 when I resale one of my houses. To answer your concern about appraisal, based on you stating that over the last 6 months similar houses that are not to the same level of finish has sold for 290k, I believe that you are going to be just fine. MOST appraisers will look at your market comps, walk your house, and if you are wise enough to meet the appraiser at your property when they walk it, you can mention there were multiple offers, they will see that the market proves that your property is worth what is being asked for it. I don't even think you need to meet the appraiser based on your numbers, but it doesn't hurt.
I would be more concerned if you said that houses in your area sell for 290k, and you had one crazy offer for 325k with 3% tacked on top and there are 4 other sales in the area that just sold and have the same finishes, etc. This is not the case, you are improving the market area because you have a much better house, and the price differences are not large. CONGRATULATIONS! Accept the offer, get through closing, and celebrate!
First thing - did you give the notice to each potential buyer that you are reviewing multiple offers? If not, you really should in order to avoid going under contract with multiple buyers if 2 decide to accept a counter at the same time.
Next, what's the real reason for the 3% seller subsidy? Is the buyer asking for a reduction because you are FSBO? Honestly, in this situation I'd ask for the same thing when representing a buyer who is using a loan - and I would push the "closing costs" angle, but I would expect some push back but you never know until you ask. Maybe go back with a specific amount you will pay for the buyer's closing costs. 3% is about 9k, so go back saying something like "seller will pay up to $XXXX closing costs".
Is it the same buyer's agent or agency representing multiple buyers? Sounds odd that the counters come back the same.
Is there something going on that in that area that makes you concerned that the appraisal will come in low? Even with all the changes in the appraisal industry over the last several years, I still see appraisals come in right at, or very very close to contract price more often then not. If it does come in low it's also an issue with the lender - since they will typically base their loan numbers and calculations an appraised value. Maybe a buyer has to come in with more money, or you lower the price. Either way, it doesn't have to be a deal killer.
Thanks Tarl and Blair for your advice!
@Blair Poelman - The only reason for my concern is that area has a lot of ramblers that have not been updated, and they range from anywhere between low 200s to fully rehabbed properties in the high 200s ($290k).
Also, yes, I have been letting all the agents know that we are dealing with multiple offers and all our counteroffers are being submitted to a set of prospective buyers and none of our offers are binding until the buyer signs the contract and the sellers countersign it.
I agree that asking for a specific dollar amount is better than a certain % for a subsidy.
I appreciate both of your help!
Let us know how it turns out, best of luck!
One more question - Do you think it is a good idea to add our terms as the following:
"The sellers want to net a total of $297,000, and in the event if the appraised value of the house is below the listed price, the Buyer assumes the responsibility of the difference in price."
Or, something to that effect.
You could but I wouldn't. What if the appraisal comes in at $330k (that's unlikely, but let's just play the what if game), and then the buyer falls off. Those agents you're dealing with, and every other agent at their agency will then know that you're bottom line is 297k, when your house is worth more than that.
Technically there is a code of ethics that should prevent that bottom line price from being spread around, but a lot of agents are cutthroat and lame enough to not care about confidentiality when it comes to getting a commission. Sad but true.
Thanks Blair! That is a very good point! I will definitely let you guys know how it went.
Thanks for all the help!
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