Apparently there are lots of buyers in the first home market, and not so many sellers, which is leading to competition for houses. In some cases, several offers are received on a property, so the potential buyers are in a competitive bidding situation. In these cases, rather than conducting a silent auction, each buyer is asked to submit an offer, and the seller chooses which offer she or he likes best. In effect, the purchase offer becomes a closed tender.
So what’s a buyer to do?
Kiri Barfoot, of Barfoot and Thompson, said prospective buyers needed to realise there was no room for negotiation after envelopes were sealed and buyers had to put their best offer forward.
Actually, that’s not true. There is more room for negotiation after the envelope is sealed, provided that the vendor chooses you as the people to talk to first.
Buyers need to do something a little more complicated than just putting in their best possible offer. They need to think about who else might be making an offer, and think about what the property is worth, and think about what they can afford, and put in an offer that puts them at the top of the list, so that they will be the person that the seller elects to negotiate with.
We have been in competitive offer situations several times, and each time, we have put in an offer. It’s never a final price. The vendor is still free to negotiate, and in some cases, she or he has elected to do so. A couple of times we were able to come to an agreement, but a couple of times, we walked away, because the vendor wanted more than we thought the property was worth. And at that stage, the vendor went back to the second highest offer.
So exactly why would real estate agents want to advise potential purchasers to make their *best* offer? Well, duh. Because they want to get the best possible price for the property, because then they earn more. Not necessarily a lot more, but once word gets round that they sell properties for outrageous prices, then they get more listings, and then they get more sales and they earn more again.
To be fair to real estate agents, they are supposed to work for the vendors. The people selling properties pay the agents’ fees, not the purchasers. But that should surely tell purchasers that it is not a good idea to take real estate agents’ advice about the best strategy for purchasing.