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I have to start this post by disclosing I am a huge baseball fan and an even bigger fan of the Chicago White Sox. Last week, the White Sox got outbid in their pursuit of one of the best free agent players on the market. After my initial anger and disappointment, I started to read about the offer process and it was eerily similar to a real estate transaction. With spring and baseball around the corner, I thought this would be a fun take and lesson about real estate negotiation.
For my non baseball fans out there, let me give you a little back story. The player involved was Manny Machado. Machado, is a perennial all-star player and widely considered as one of the 10 best players in the game today. He is what's called a "generational talent". A player that rarely becomes a free agent, let alone at an affordable price. Many experts thought that by signing Machado, the White Sox would not only immediately improve this year, but he would help them contend for championships in the near future. He was considered a "perfect" fit.
What does this have to do with real estate? Imagine Machado as your “dream” home. You find the absolutely perfect property, it’s what you’ve been dreaming of, has everything you’ve ever wanted and is within your budget. But it’s a buyer’s market and the house has been sitting on the market for a few months. Instead of going after the home aggressively and securing your perfect home, you decide it’s more important to get the home on your terms. Your Realtor reminds you that this is the house you’ve been searching for and it’s a good deal at the listed price. Based on the days on market, you presume there’s not much activity and come in with a lower offer refusing to bid against yourself. The seller is not willing to go that low and the house continues to be marketed to other potential buyers.
You tell your Realtor to leave the offer open and check back often to see if the seller has changed their mind. The seller holds firm and acknowledges there are still showings and interest in the home. You decide to hold your ground, thinking that the seller could be “making up” the showings do get you to change your offer.
A few more weeks go by and with the Spring season around the corner and more homes getting ready to hit the market, you feel more confident that the seller will eventually come down to your price. Then your Realtor calls, a buyer who’s been interested in the home but thought it was out of their price range, spoke to their lender again and found out they could actually afford the home. They immediately submitted a “strong” offer. The seller asks for highest and best from both buyers. You’re conflicted as this is your “perfect” home but still feel that you can get the house at a better price by getting creative with incentives. You offer more earnest money, waive your home inspection and offer to close quickly, but keep your offer price the same. Feeling confident you tell your Realtor to submit that offer as your highest and best. A few hours go by and your agent calls with the news. The seller accepted the second offer. The offer, while still containing a home inspection and longer close date, still offered a higher net price to the seller. You’re devastated knowing that you “perfect” home has just been sold to another buyer.
This is similar to what happened to the White Sox. All along they felt they had the lone offer in and felt they were in a good position to close the deal. Even though the seller (Machado) told them it would take a higher offer and the “Net” amount was most important. The White Sox knew he was the perfect fit, but refused to come in with their strongest offer. Enter the San Diego Padres. All along they thought Machado was out of their price range . When they checked in and found out the “list” price, they were surprised he was within their budget. They immediately submitted their strongest. The White Sox held fast and tried to get “creative” with their offer by offering incentives, even though they new the “net” amount of the offer was most important to Machado. In the end, Manny Macahdo is a San Diego Padre and the White Sox are left wondering what went wrong.
While this was a baseball transaction, it shares similarities to many real estate transactions. As buyers we have a tendency to overthink things and let emotions rule. We get so wrapped up in trying to get the best deal, we overlook the fact that, maybe, it’s already a good deal. In today’s Northwest Indiana Market, it's not uncommon to find multiple offers on homes. Before you start your home search, lay out what is important to you in a home. Discuss with your agent the items you can’t live without and what items you can make concessions on. This will help your Realtor guide you in negotiations. I’m not telling you to go out and pay full price on your next home, but don’t get so blinded trying to secure a “good” deal that you lose sight of what’s most important to you. In today’s market, making an initial, strong offer can go a long way in securing your “dream” home.
If you want to discuss the Northwest Indiana Real Estate market or talk some baseball, contact me at 219-306-0333.
Have a Great Week!