When home sellers get their first offer* they are very likely to be told by their real estate agent that the first offer is the best offer – and real estate agents state this as though it’s a statistically validated fact. It’s part of the real estate mythology that is repeated like a mantra. But is there any basis for it?
I’m always skeptical of anything that real estate agents repeat without thinking – especially a statement like this, which certainly seems self-serving. However, there is one consideration that actually gives this truism some credibility – especially in the current market.
When your new listing hits the market there is a pipeline of buyers that have been in the market for 3 months (for example) just waiting for something like this to come along. They’ve seen properties come and go quickly so they are conditioned to respond fast. You might get 12 showings in the first 2 weeks but after that initial burst you are only going to be picking up buyers new to the market – maybe another 1 -2 showings per week. And because the buyers coming along in the first two weeks are seasoned they are more likely to make a solid offer than the newbies that come along later. So if you get an offer in those first two weeks it might be another couple of months before another offer comes along and who knows if it’s going to be better or not?
However, the complete story is a bit more complicated. In reality, as with most things in life it depends – on a lot of things. Like it or not selling a home is more of an exercise in the randomness of crowd behavior than any other real estate agent is likely to admit. An awful lot depends upon what buyers are in the market at that point in time and what other competitive properties are for sale.
So when that first offer comes along you need to evaluate it carefully in light of all these various factors. I’ve seen it go both ways but I believe there are certain patterns. For example, if all of the following circumstances were to be in place then I would be inclined to believe that that first offer was in fact going to be the best one.
The first offer arrives towards the end of that initial flurry of activity and no one else is showing that much interest. That way you’ve had good exposure to the initial pipeline of buyers.
Interest has really died down since the initial flurry – i.e. it may be quite a while before you get another offer.
It’s not just a lowball offer. You need to have some confidence in your estimation of what the property can sell for in order to make this determination but that’s not always possible. Some properties are so unique that it really comes down to finding the right buyer and in those cases you will never really know if it’s a lowball or what it’s going to take to sell Michael Jordan’s dream home.
The offer is from a seasoned, serious, realistic buyer. They’ve been in the market a while and they understand the values. They’re not giving off that “I want to steal it” vibe. Really, this is just another way to get comfortable that they’re not lowballing you.
However, the fewer of these circumstances that surround that first offer the less likely I would be inclined to believe that it’s the best offer we’re going to get. Like I said earlier, I’ve seen plenty of cases where our sellers have held out for a better offer and got it.
*When I reference “first offer” here I’m talking about a best and final offer from the first buyer to submit an offer – i.e. fully negotiated. I would never suggest that you take a first offer without negotiating it – unless it’s full price.
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