When a property comes on the market and the sellers receive an offer immediately, their first instinct may be to think they should not accept the first offer that comes along. Many times my seller client will respond to early offers with, “Maybe we aren’t asking enough for our property.” Below is an analogy I like to use to explain this real estate phenomenon.
Let me preface my explanation with saying, before listing the property sellers should do their homework to price the property according to the current market conditions and to meet their objectives for selling. If the property is priced well to begin with, then the following analogy can hold true.
When a property is newly listed and brought to the open market, there will be some amount of demand for the tract. The strength of that demand is difficult to determine before the property is exposed to the public. Buyers for the property can be compared with bulls in a corral. When a property hits the market, the gate to that corral swings wide open. Sometimes a whole herd of bulls may come charging through the open gate, or maybe there are only one or two bulls that run out. When sellers find themselves in a multiple offer situation right out of the gate, it can be a good opportunity to get more than the asking price for the property. When they only receive a single offer it can be confusing to determine if this is actually going to be their highest and best offer.
I witnessed this on a longleaf pine tract that I listed this spring. Within two days of putting the property on the market we had a 92% offer on the property. The buyer had always wanted to own a longleaf pine property for conservation purposes. My sellers just knew that they shouldn’t take this first offer and that more would follow. It has been 4 months and we have had only one other showing on it. I tried explaining this concept to the seller then, but they chose to pass on the offer and wait for the next offer.
It is often difficult to determine the strength of the demand for a property before putting it on the open market. In my area, good listings are getting harder to come by and there is some pinned up demand from buyers. When the gate to that corral of buyers swings open, hopefully there will be multiple prospective purchasers, but if only one buyer comes out strong do not make the mistake of passing on the offer in hopes of the one right behind it. Sometimes the first offer really is the best offer.
Written by: Jonathan Goode– Accredited Land Consultant (ALC) and licensed broker in AL and MS