Extreme(ly Smart) Home Selling: Reverse Offers
At the beginning of the housing crisis, sellers turned to gimmicky tricks like YouTube love letters about their homes and burying St. Christopher's figurines upside down in the front yard to try to move their homes off the market. These days, though, sellers are getting smarter and more strategic, turning the transaction on its head to get buyers off the fence with a phenomenon called the reverse offer.Usually, the buyer makes an offer for a certain price and on certain terms. A reverse offer goes in the opposite direction: from seller to buyer. In some cases, a seller whose home has been on the market for ages with lots of viewers, but no offers, may enlist their agent to go back and approach several or even all of the buyers who have come to see the property, and make an offer to the buyer. In other scenarios, the seller's agent extends an offer to a particular buyer who has come to see the property multiple times and seems very interested, but has been hesitant to make an offer.
Reverse offers generally offer to sell the home at a price lower than the list price, and they often sweeten the pot by throwing in added incentives like paying some or all of the buyer's closing costs, buying down the buyer's interest rate, paying for HOA dues or fees or even throwing property like flat-screen TVs, cars or other valuables into the deal.
Evanston, Ill., real estate agent Alan May has used reverse offers to great success to move a couple of his listings, and has found them to be so effective at getting a hesitant buyer to make an offer that he has nicknamed reverse offers "pre-emptive strikes." May recalls a particular listing that was "languishing on the market," but had been shown repeatedly to the same couple. May's seller clients extended a reverse offer to the buyers, who he describes as very "tentative," and ended up closing the deal at a 2% discount from the list price. As his sellers' next step was a 3.5% price reduction, May's clients felt that the reverse offer scored them a "win-win."
Best practices for sellers making reverse offers include:
• Give the buyers a short period of time to respond. The whole point of a reverse offer is to create urgency where the buyer currently feels none. Extend a reverse offer with the caveat that it is only good for a day or two, to push the buyers into moving quickly. Similarly, if you have extended the reverse offer to multiple buyers, let them all know that this is the case and that the first buyer to bite takes the house.
• Great candidates for reverse offers include sellers facing lots of competition. If your home is nearly identical to neighboring homes for sale at the same price, or you are struggling to position it competitively with foreclosures and short sales in the area, consider making a reverse offer. A proactive, reverse offer differentiates your house in the minds of home buyers and, again, creates urgency to act on the part of buyers who otherwise have so many homes to choose from that they feel they have all the time, choice and bargaining leverage in the world.
• If one buyer has viewed your home repeatedly, check in with their agent before making a reverse offer. Ask your listing agent to contact the broker for any buyers who have made more than one visit to your home, to inquire into what is keeping them on the fence. With May's listing, the buyer's broker revealed that the wanna-be buyers loved his clients' house, but had not even put their current home on the market, and doubted the sellers would take an offer with a contingency for the sale of their home. This information empowered the sellers to make a reverse offer that resolved the buyer's problem - it gave them 90 days to close escrow and a contingency for getting their home sold. Boost the likelihood of making a successful reverse offer by making sure the offer addresses the issues that have made buyers hesitant to pull the trigger.
Critics of the reverse offer express a concern that it may make a seller seem desperate. However, when you talk to home buyers on today's market, their biggest beef is sellers who are unrealistic and inflexible, not sellers who seem overly motivated to sell.
No serious home buyer gets turned off by a seller who seems willing to go the extra mile to help them solve the problems that are stopping them from buying a home. Also, a reverse offer doesn't have to chop tens of thousands off the home's list price to work -- a percentage point or two can often do the trick. In any event, sellers who extend a reverse offer don't limit their options for responding to low-ball offers from the prospective buyer in any way; if the buyer senses desperation and comes back with a low ball offer, the seller can still take it, counter or leave it, just like they would have been able to do before making the reverse offer (but they end up with a buyer, which they didn't have before the reverse offer).