Why buyers offers don’t get accepted. Episode #325
Todd and Oana talk about why buyer’s offers don’t get accepted and then how they can improve their circumstances. Buyers have been making offers in the Las Vegas real estate market and been frustrated with their efforts.
Todd: Hello. Welcome to Todd Miller TV. I’m joined here today with Oana and the question today is, “Why do people make the bidding process on a house harder than it has to be?” meaning they stress about how much they should offer. Are they overpaying? They really like the house and they just make it harder than it has to be.
Oana: Well, because it’s about money.
Oana: OK? And money is a big stress factor in most people’s lives. People don’t want to feel like they’ve overpaid.
Oana: People want to get the best deal, whatever that means to them. People don’t want to feel like they’ve been taken advantage of.
Oana: So there are a lot of emotional issues involved rather than looking at the property and saying, “Hey look, this property makes sense. It fits my needs. To me the property is worth X and this is what I’m going to pay for it.”
Todd: OK. So how does that fit into what – because you said it’s in their head but I mean that’s a good point because – how do they get through that? I will give you a good example. We saw a house in the MLS that we took a client out to in the beginning of the week. A hundred and forty-five thousand but the house was really super upgraded. It was beautiful. It was like way overdone on the inside and at one point this house was worth 300,000. They were stressing over, “Well, what if I have to go all the way up to 160 or what if I have to go a little more for it? I don’t want to overpay even though in the past it was worth way, way more.”
Oana: Right. The past is in the past. The future we don’t know about. What we’re talking about is today.
Oana: Look, if the asking price is 145 and what’s happening in that neighborhood is that there’s nothing else available on the market and there is a lot of demand and they really like this house. The features of the house make it worthwhile for them.
If they’re not paying cash, if it’s about a mortgage payment, then the difference on the payment is nominal for the amount of pleasure that they’re going to get out of having this home with extraordinary upgrades.
So at that point, it makes a lot of sense. If they’re paying cash for the property, it still makes sense because like we just talked about, if there’s nothing else on the market, then as soon as they close on this property, then that is the new norm. The next person chances are will get similar or more money for their property even though it may be less upgraded simply because there is no inventory and sellers have a lot of power right now.
Todd: I want to really quick talk about California buyers meaning people that live in California that are coming here. They tend to be really easy because they see the prices and go, “Oh my gosh, you mean all we have to do is go up to 270 to get the house? Really? It’s a beautiful house. I mean this house where we live would be 600,000, 700,000,” and they outbid everybody and get the house.
Todd: And they have no problem with it. They’re just like we show them hey, 2006 it was four something and this is what it is today. We don’t know what it’s going to be worth tomorrow but they’re like oh, we’re fine with it. It’s good.
I mean then you have other people who are like they stress over the $2000 more what they got on the house which is like 12 bucks a month more in mortgage payment or something maybe.
Oana: Right. So then we’re talking about people’s individual personalities.
Oana: Rather than the value of the property. That’s not really discussing that property. It’s just discussing the person’s individual personal financial issues.
Todd: But you said that’s in their head. But don’t you think that if they come from a market where they’ve been programmed to believe that real estate has a certain value and they come here and it’s much less, that they think they’re getting a smoking deal and they’re super happy?
Oana: Exactly, because again it’s in their head. One way or another, it’s still in their head because the values are to some extent within a range in the market.
Oana: And that’s just what they are. But people’s perception of value is clearly something that they bring with them from their life experience. So if you’re coming from California where real estate tends to be more expensive, then you think to that as a deal.
If you’re coming from maybe a rural area where real estate is far less expensive, then you might think that this is outrageous. So again we bring our experience to the table and we make choices, particularly financial choices based on our life experience.
Todd: OK. So what advice do you give somebody who is making offers on a whole bunch of properties? Maybe they’re not getting anything. They’re getting frustrated because they say, “Well everything I offered $5000 more than the list price and I haven’t gotten anything yet.”
Oana: It’s going to take more than $5000 of your list price clearly.
Todd: OK. All right.
Oana: Look, pick out properties that maybe don’t have offers on them. Maybe they have been on the market for a while. Pick out properties that you like and determine what that property is worth to you and don’t worry so much about what the asking price is because the asking price may be 180 but you’ve seen houses that are not anywhere near as nice as this for 200.
Don’t be afraid to offer the 200 because clearly it’s worth that because you’ve just looked at other properties that are 200 that are not as nice as this one.
Todd: OK. Good. I think that’s good advice. All right. So thank you very much.
Oana: You’re welcome.
Todd: For being on the show. That’s my update for today and I hope to see you on another video. Thanks.