Our real estate agent wants us to allow them not to present less than full price offers. Who does this help?

July 26, 2015

Listing tactics rejecting the presentation of offers lower than the listed price help no one.

People inspecting home

Reader Question: Hi Monty, I read your articles regularly and find them very helpful and now have a query myself. Our Realtor called us for permission not to present offers below asking price; we agreed, but I don’t understand it. Who does this help? Thank you for your assistance. Jan P.

Monty’s Answer: A listing tactic preventing a buyer from making an offer helps no one. Perhaps your agent is dealing with a specific individual or co-broke agent who has a long history of troubled transactions or unmotivated buyers. If that were the case, they should have explained the circumstances to you and limited this strategy to one situation. But even then it may depend on specific circumstances, such as the robustness of the market.

Otherwise, there is no good reason that comes to mind for this request. Negotiation on price, which requires time, effort and patience very often results in a conclusion that is satisfactory to both buyer and seller. The very best buyer for a home often will want to negotiate, which is normal and reasonable. That same buyer may react negatively to a marketing strategy of this sort and simply move on.

Value is a moving target

One of the myths of real estate is that a home is “worth” a fixed price. The reality of the marketplace tells a different story. It is common for real estate transactions to fail after an offer is accepted. Failures occur when financing contingencies or inspections cannot be met. When the home comes back on the market for the second time, it rarely sells for the same price. It will sell for more or less. Every home has a range of value that is described as the lowest price one should accept, and the highest price one can expect. Careful evaluation of comparable sales, competition, and market statistics are studied to develop the range. Feedback from the marketplace can be a cause for adjustments.

The negotiation stance a potential buyer often takes will depend on their circumstances and the state of the marketplace. For example, if their furniture is on a truck and homes in their price range are in short supply, there may be little negotiation without such a restriction as “take it or leave it.” While you may be thinking, “take it or leave it,” uttering the words invites the response, “OK, I’ll leave it.”

Agent motivation

There are several possibilities as to what the agent may be thinking. For example:

  1. Agents may do this if they are insulted with an offer lower than the price they believe appropriate for their seller. They are trying to defend their opinion, but unwittingly hurting you and themselves. A prospective buyer may interpret the strategy as “do not waste my time,” or, just trust me” which is an attempt to take negotiation out of the equation. If the marketplace does not agree with the strategy, the listing expires unsold. No one wins when this happens,
  1. The agent may be trying to save the time it takes them to work through a negotiation, which often may take two or three, even more counter offers to resolve concerns and bring reasonable people together. They may be thinking “this is a hot market, and people are clamoring to buy this house, so it makes no sense for me to waste time dealing with someone who wants to negotiate.” Listings can and do expire in hot markets.
  1. The agent may have their prospect interested in the house that cannot view it for some time into the future. The agent understands this tactic could slow other buyers down. If this were the case, they are doing this for the chance to double their income with both the listing and selling commission.

Best practices include negotiation

There are many attributes and skills necessary to employ during the real estate sales process. Negotiation skills are one of the real estate agents primary duties on a client’s behalf. When an agent cannot or will not utilize a particular skillset, the client is at risk for degradation in service. The ability to negotiate successfully can make a big difference in the outcome of a transaction.

Consider asking the agent for their reasoning behind the request, and listening carefully to their answer. You most likely will recall earlier conversations, and with the information provided here, be in a better position to draw your conclusion. You may even find yourself agreeing with them.