How To Get A Seller To Agree To A Much Lower Price

21250845.jpg

This piece of info just came in from the NY Times. Does anyone here remember house shopping during the days of the rapidly escalating prices circa early 2000′s? Agents with buyers wrote very personal letters to sellers in the hopes of pitching their clients’ bids. I remember my agent at the time suggested it was a good idea to go on a trip to the client’s yard sale for a little meet and greet. (The bid still fell through.)

But, anywhoo, this NY Times article talks about a new kind of reality check letter. The letter pitches the reasons why in real estate market terms, the potential buyer is placing a reasonable bid (even if it’s say, so far below asking price that it makes the seller pause to make sure his eyesight is okay). Check out some of the lovely prose yourself.

Dear Seller:

I’m writing to let you know that I would like to make a bid on your property. I love the area and am committed to buying a house nearby. And your home fits my needs.

But given that my offer is well below your asking price, I also feel I owe you an explanation.

First, consider the big picture. Nationwide, home prices in the first quarter of 2008 fell 14.1 percent compared with the same period a year earlier, according to the Standard & Poor’s/Case-Shiller U.S. National Home Price Index.

That’s the biggest decline in the 20-year history of the data. And just in case you’re wondering, during the housing downturn of the early 1990s, the decline was never worse than 2.8 percent.

Not only that, earlier this month, the National Association of Realtors pointed to the huge number of existing homes on the market. As of the end of April, the total number was 4.55 million. At the rate people are buying right now, that represents an 11.2-month supply.

So buyers have options right now. A lot of them. I’m no different. Your home is great, but it isn’t unique. Few homes are. I know this may be hard to hear, since you’ve spent years creating memories here. But you may be waiting a long time if you hope to find a buyer with the same emotional connection that you have.

My mindset is hardly unique. We’ve all been reading the headlines. The accompanying articles appear prominently in major newspapers and sit on the Web pages where people check their e-mail every day. Everyone sees them, and the psychological impact is real.

Has your real estate agent laid any of this out for you? Maybe so, and you didn’t want to believe it. But it’s also possible that your agent, afraid of offending you and losing the listing, simply doesn’t want to initiate that sort of discussion. It may be worth sitting down for a candid reassessment.

It will be tempting to view my low bid as an insult. Please don’t make that mistake. Your home is genuinely appealing, and I wouldn’t have written this note unless I was serious about buying it. Getting a firm offer in this market is an accomplishment. So congratulations!

Oh, and one more thing. You presumably need someplace to move. My guess is that you’ll find these same points compelling when it’s your turn to buy. You just might succeed in buying for a better price, too.

I look forward to hearing from you soon.

Yours Truly,

The Realist

What do you all think? Is this worth a try? A bunch of crock? Comments are always appreciated. My personal take is the letter was pretty good until it congratulated the seller for getting an offer. That came off kinda patronizing to me.

With that, I leave you with a few LAX properties where the sellers are dropping the price.

Playa Del Rey

7740 Redlands, #G3095/2bd, 2bth/$430,000 to $420,000

Playa Vista

6011 Dawn Creek, #7/3bd, 2.5bth/$879,000 to $849,000

Westchester

6906 W. 84th Pl./3bd, 1bth/$748,000 to $709,000/

  • Krystal Solomon

    As a seller, it comes down to the bottom line, not a letter. The entire letter is condescending. If your home is on the market, you are painfully aware of the current market conditions. A letter that reminnds you of what you know is rude and not likely to make a seller choose your offer.
    Bad idea.

  • http://www.thishikingtrail.com candice

    I’ve thought of writing letters, but the only way I would do it is to include comp type research. All the info in here is too general. All the stats are national level. If I were to write it to really sway someone it would be specific to the zip code. Of course, I haven’t actually written a letter yet.

  • http://www.redfin.com Christina Chan

    Krystal -

    Agreed. I do believe it does come down to the bottom line for the seller.

    In my view, this letter might be more appropriate (with some tweaks) for someone who has priced his/her property above market value and hasn’t fully come to terms with market reality yet. Having seen what people price at in the areas I cover, there are a lot of those folks out there.

    As a seller myself, I might take to a letter like this if the price were moderately reasonable, had less of a condescending tone, and was full of real and accurate stats. And then I’d counter back with something I thought was a little more reasonable.

  • http://www.redfin.com Christina Chan

    Candice-

    Thanks for the comments.

    If anyone has tried this kind of letter with or without success, please share!

  • DF

    The real challenge in this market is that comps are no longer (if they ever were) a meaningful measure of a home’s actual value. Comps were in the past seven years a primary driver of housing price hysteria because one overinflated sale always generated evidence that another was justified. The Case-Shiller index is the closest thing we have to an objective indication of what home values really are over time.

    So consider this for a data-based proffer to a potential seller. “I would love to buy your house, but as these statistics show, it is still priced substantially over its true historical value. [Insert numbers/graphs/charts here.] I am willing to offer you the value of this home as measured by the Case-Shiller home price index, adjusted for inflation. This nets you a solid 3-5% YOY appreciation while assuring me a reasonable price.”

    Of course, because sellers tend to believe their homes are always worth more than statistics suggest, and because many sellers are upside down thanks to HELOCs and buying at inflated prices in past years, I very much doubt this would work. Still, if our real estate market were tied more closely to economic predictions, I doubt this bubble mess would have happened.

  • http://www.redfin.com Christina Chan

    Ah. Interesting way of looking at it, DF. And a nice alternate point of view.

    -Christina

  • Jack

    Krystal

    You make some valid points. The problem is that you have taken the position of logic and reason. Many people look at their houses as extensions of their persona, a low offer can be , for many, like a cold rejection or an insult to their appearance. They need that assurance that “It’s not you, it’s the market” so don’t be offended and realize you’re not alone.

    my 2 cents

  • http://www.redfin.com Christina Chan

    I think in most sales transactions, coming in with hard facts and knowledge of current market conditions (along with a little gentle ego boosting) does help seal the deal.

    This is a bit off the topic, but I tried the same type of tactic purchasing a car a few years back- no letter, just verbal negotiations, of course. I was clear I wanted the car, but was ready to let it go it they didn’t sell it to me for “market value.” I had the facts on hand and the numbers on hand to back up my case. I got my price.

  • RED

    The only reason to write a letter, in a buyer’s or seller’s market, is to plead one’s personal case. It is a personal touch done to add to an overall package, to tell the seller something the numbers on the page don’t say on their own. To use it to “explain” the market to the seller can only be seen as condescension.

    Perhaps it would be better if addressed to the seller’s agent, rather than the seller, in an attempt to get the agent to talk some sense into the seller. But even that is a stretch.

  • Marcy

    Data based letter, long-shot maybe, IF I needed to move soon. I say maybe because unless I’m offering cash, it’s my agent’s job to sell my offer…or not. I’ve never fallen so in love with a place that I felt the necessity to tap-dance in order to try and close the deal. Never come across a single place worth doing that for.

    I see no need for letter writing to explain an offer, honestly. Patience can get you more than you’d hoped for in this market.

  • rick

    The letter is not only condescending, as Krystal points out, but it’s a lecture too. Why would you want to lecture the seller on top of what you know is a weak offer? The terse statements cut like knives as the voice turns from being apologetic to accusatory. Funny thing is that I can agree and sympathize with the message but the delivery is poor and bitter.

    I would convey the same message by saying (in a friendly tone) that the offer was written based on a balance of value and current conditions, and that it was a serious intent to purchase.

    There’s alot of bitterness out there right now, and cutting people at the knees (or encouraging others to do it with poorly written letters) will not foster the kind of healing the market needs right now.

    Just let these properties rot!

  • diaph

    anyone reading this NY Times letter closely can see that it is ‘tongue in cheek’. write a letter like that to even a desperate seller, and he will slam the door in your face.

    which is not to say that buyers are not empowered today. and unfortunately, agents continue to live in what ‘used to be’, unable to accept the fact that their hefty commissions of the past few years will be drastically reduced for a very long time. it all boils down to GREED.

  • http://losangeles.redfin.com/blog/author/christina.chan Christina Chan

    Thanks for the comment, diaph.

  • Pingback: Avoiding Debt: What Will It Take? | Redfin Los Angeles Sweet Digs