Balance Your Offer Price and Costs

Home sellers judge Offers when given a choice, on the Price and Costs. We know a price is a number, a dollar amount. Some costs are dollars, but all costs are not measurable in hard numbers. The more severe risks are associated with contingencies or conditions. Uncertainty is a risk with subjective values. The higher the need for certainty, the more “expensive” your cost-contingency is to the Seller.

Is Your Contingency Costly?

I know it’s good for me if I get to choose the closing date. Of course, controlling the choice of a closing date could be valuable to the Seller. If it is, I can reduce the cost of my Offer, and increase its appeal to the Seller by granting the Seller the opportunity to select a closing date even if the time is only within a range of times. (Any day between the range of July 2, 2020, to July 31, 2020). The degree of value is unknown, maybe even to the Seller, but it will become known eventually. Freedom to choose is always essential. When you can defer the choice to the other side, you reduce risk and the cost of your Offer.

If it’s crucial, the Seller can counter. But they may not.

When I give you a choice to include or exclude this or that you could defer the decision to the Seller. Yes. If the Seller does not like what you proposed, they may send a counter offer. If the Seller does not counter and rejects your Offer to accept another buyer’s Offer, we can always start over on another property. Starting over means, you decide the subjective value of the cost.

Guessing Right Is Rare

We make our guesses on our knowledge, and on what we believe to be necessary. We make those opinions based on how important something is to us. As an example, I may think you should be willing to wait for me to prove that I have the money to buy your property. I may think thirty days is a reasonable time to expect you to remain in a holding pattern. If you think ten days is all you can tolerate, my opinion might be the one thing that prevents me from getting my Offer accepted. Guessing right is uncommon because we use our value judgments to guess. If I use your value judgment to guess, the odds of my guess being correct are significantly higher.

Balance Price and Costs

Paying more than we have to and less than we need to are regrettable actions. We all want to pay less than we had to. Unfortunately, we do not know the magic number of the “just-right price” until the Seller reveals their decision; and the Seller won’t decide until they have all of the facts. 

You’re Not in Competition When You Think Like The Seller

Keep this in mind: We don’t lose to another Offer. We drop out of favor by not taking advantage of all of our strengths to make our Offer less costly than other offers are to the Seller. I believe it is easier to write a quickly rejected Offer than it is to write an acceptable Offer. The easy offer requires no thinking and no understanding of the person on the other side of the table. I may not be able to offer the highest price but to beat someone on price, just reduce the costs related to your contingencies or the value of the lack of contingencies. 

Author: Tom Meyer, Owner-Broker, Essential Real Estate, LLC Madison, WI

The real estate transaction, disclosure, and confidentiality are the business of a Wisconsin licensee. It's in the transaction where the skill of the licensee, and their commitment to the law where the public is protected or placed at risk. What you see REALTORS do to brand themselves and their firms, promote their service, advertise, and process paper do not require a license. I believe negotiations to create and honor a real estate purchase agreement is where the agent has the greatest value in a transaction. Paying professional fee rates for the administrative services is a choice consumers deserve. Old business model driven commission rates are taxing the home equity of American home sellers. Essential Real Estate was created to put more money in the hands of the consumer by eliminating expenses for the firm and charging a fair price for the real real estate service.

2 thoughts on “Balance Your Offer Price and Costs”

  1. Tom Meyer – Very thought provoking and concepts that I’ve learned and put in practice with every offer I write.
    The end outcome for the seller goes beyond their equity and the amount of dollars they get to keep post closing. It’s most importantly how we as agents prepare offer terms and conditions that are most favorable to the seller and are able to jettison the transaction to a successful closing and leaves other competitors behind.

    Thank you for your thoughts and continuing to share and educate the real estate professionals and community.

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