July 21, 2008

Ocracoke Island Real Estate: Your first offer is usually your best


A current topic of conversation, for not only real estate agents but the general public, is the state of home sales. As the rest of the country faces a slump in sales altogether, our experience on the island is that as prices drop, the sales pick up. We seem to have a pool of buyers who maintain a passion for the island.

We’ve been lucky to have an emotional component in the draw to the Ocracoke market. Just today, I heard a “soon-to-be resident” of the island describe the rush of tears as she came up over the dune and witnessed the sun rise over the ocean. The natural setting, the people, and the sense of community pull at the heartstrings of our buyers. We are a unique market in some ways. In the workings of a real estate negotiation, we face common issues with the rest of the country.

My business partner, Daphne Bennink, caught an interview, with a real estate agent from New York, on a recent morning news program. The essence of the conversation centered on advice for sellers in a down turning market. Some of the points that she covered were familiar. 

Over the years, my fellow agents and I have had more than one discussion, with sellers about the difference between comparable sales and what that seller believes is the value of their property. It is understandable that sellers will see their home as the Taj Mahal.  Our familiarity with recent sales often indicates that the market will not support such an asking price. Besides having an emotional attachment to their home, sellers will often pick up a listing flyer and match their home to other listings on the island.

“Well if so and so is asking X, then I should ask Y because my house is nicer than theirs,” the seller will say.

The critical piece that sellers forget is that listing prices are not selling prices. A list price is merely an indication of what a seller hopes to see on a contract. Listing prices may not reflect market value. Market value is the price that a ready, willing, and able buyer is willing to pay and a seller is willing to accept.

Point No. 1. Sellers need to set their list prices based on the market, which implies having the agent provide comparable sales. The harder fact to accept is that market value might not be where the seller would like it to be.

No one needs to be told that it is a buyer’s market. The inventory of properties listed for sale is staggering. If sellers want to sell, rather than advertise their home, they need to lower their listing prices to be competitive. Ultimately, the seller may also need to lower expectations when in the throws of negotiating a contract or responding to the results of a home inspection. In this secondary housing market, buyers are not in the desperate position. If sellers want to move on in their lives, they are the ones motivated to compromise. These conditions make it ripe for a buyer to capitalize on a “good deal.”
Point No.2. Don’t take offense at a buyer’s low-ball offer. This is how the game is played. It might seem like a personal attack, but if sellers can disconnect from the emotional attachment to the property and any related hopes for a windfall, they will see that what is left is merely an offer to buy.

Point No.3. The worst mistake a seller can make is to not counter a low offer. It does not cost anything to make a counter offer. The key for the seller to remember is to keep the buyer engaged in a negotiation. I describe that as “a bird in the hand” (as opposed to two in the bush). An owner’s counter should be low enough to entice the buyer in, but high enough for the seller to be content with the outcome. Keeping a buyer at the negotiation table provides the opportunity for the selling process to continue to move forward.

The final point made in this television interview is one that has supplied me with a lot of food for thought.

Point No. 4. A seller’s first offer is, nine times out of 10, the best chance to sell the property. I’ve spent a lot of time pondering the why of this statement, and I have come up with two ideas.

When a home is listed for sale, the agent gathers all pertinent information on the property, such as the tax card, the survey (if available), the septic permit, a floor plan with room measurements, a rental history with expenses, a copy of the title insurance policy, and I’m sure the list could go on and on. The house is shown, and the process of the buyers reacting to the layout, décor, or size is hopefully repeated over and over. These superficial responses to the home are communicated to the seller. The seller might be prompted to paint a room or make an obvious repair.

Then the first offer is received and negotiated. The buyers have made a choice, and they begin to see themselves in the home. At that point, the buyers are hooked and the sellers imagine their proceeds. As the selling and listing agents move towards closing, they schedule the various inspections and required services, along with notifying the chosen closing attorneys. The biggest test for any contract is the results of a home, septic, or termite inspection. There are facts about a property that surface only as a result of these in-depth investigations of a home.

Once those conditions are uncovered, they become material facts that an agent is obligated by law to transmit to any subsequent buyer. They are issues that do not go away. If they are not dealt with in the current transaction, they will surface again in the next. Because the buyer is emotionally in the ring for this house, the seller would be advised to accept or negotiate the repair requests of the buyer. The next buyer might not be so “hooked.” The next buyer might see the repairs as more of a burden than simply as a hurdle.

My other idea about this fourth point is something that I have been watching since the start of my real estate career. I remember a home that went on the market, back in the mid-‘80s. I was impressed with the listing price, believing that the sellers were subject to wishful thinking. There might have been some offers, but with it not being one of my listings, I couldn’t really say. After having not sold for two to three years, the property became “dogged.” The price might have been dropped slightly, but the buying public was paying attention to the fact that this one was not selling. When it finally went to closing, it was at a price that was way below what it should have sold for, had it been priced correctly in the beginning. I’d give my eye teeth to know if there had been offers in the first year that were totally rejected. I think that this might have been a perfect example of the agent’s premise.

I’m sorry to say, for the sellers in this market, that the upper hand in real estate transactions today is with the buyers. Sellers have two choices. They can wait for the market to turn around before selling or they can accept this state of the market and move on in their lives. Each side in any deal likes to believe that they have won something. Maybe the prize for the seller is the chance to take some money and run. 

(B.J. Oelschlegel has lived on Ocracoke Island for 30 years and has worked in the real estate business for 26 years.  She is a broker with Ocracoke’s Lightship Realty. You can reach her e-mail at [email protected])


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