Short Offer Deadlines Lead to Increased Escrow Cancellations
When it comes to most people’s largest financial transaction, it does not pay to rush. When it comes to a decision with so much money as well as one’s entire way of life riding on it, forcing a buyer to make a decision in just a few days (or less) is not reasonable, therefore it should not be unexpected to find out that the buyer got cold feet and wants to cancel. However, this is often what happens when listing agents and sellers force an offer deadline within 4-5 days of listing a property.
It is understandable that a home seller wants to minimize time on the market, reduce wear and tear, and create the most possible leverage for their asset, however the way their agents often go about creating these results is often short-sighted. For instance, I recently saw a property that was listed on a Tuesday and they placed the offer deadline on a Sunday. This is not ideal for multiple reasons. Firstly, while this property was priced to sell, five days from first becoming aware of the listing until there are no more showings is not long enough to expose the property. Secondly, a buyer who views the property on Saturday or Sunday will likely not be able to get their loan pre-approval letter until Monday and, even if they can, the turn-around time is extremely short. Thirdly, even if a buyer sees the property in time and has all ducks in a row, forcing them to make such a quick decision, often going above their comfort level on price and shortening contingencies in a competitive environment leads to frequent occurrences of cold feet.
When I list a property, I find an offer deadline to be a good strategy in certain situations, however the deadline date is never less than 10 days from the date it hits the market. Also it does not occur on a weekend, allowing people to contact their bank and get a pre-approval letter on a Monday. I will normally put the property on the market on a Thursday or Friday and then make the offer deadline Monday or Tuesday of the week after next. This gives buyers ample time to see the property, sometimes more than once, and make a well-thought out decision. Sometimes an offer comes in right away and that buyer is annoyed to have to wait. I understand, and since we have not committed to that buyer, we expect no loyalty to us, but if they wait and hang in there, when we finally select their offer it is much more likely to stick. If someone comes in right before the deadline and is forced to rush, I feel like that is rarely the best offer, even if it looks like it on paper. Once offers are collected, I will always recommend issuing a counter offer, even if it is just for terms or to ask for the “best and final” price. We want to them to think their offer isn’t far and away the best one that it would be accepted right away and need to make sure they come back.We might even get a little more money if we ask. If they do, they really know they want to buy it. As a result, I almost never have failed transactions.
I see this mistake being made time and time again and it is frustrating when I am representing a buyer and we have to do a fire drill to make an offer quickly and if the buyer gets it, they’ll feel like they overpaid and find flaws and reasons why they shouldn’t buy it. Psychologically, they resent being forced to make such an important decision quickly and that is the genesis of buyer’s remorse. Of course, as their agent, when I need to tell the listing agent everything they want to hear to help get the offer accepted and stake my reputation on its success, I certainly don’t like having to cancel the transaction and eat my words because a buyer changes their mind. My reputation and relationships with other brokers are extremely important, so having to do this is never great. This takes an emotional toll on the buyer, with this emotional roller coaster sometimes making them want to pause their home search. This hurts the seller most of all by taking away any momentum and leverage they did have. I truly feel bad for everyone when that happens. It is unfortunate that we ever need to be put in that position, but failure to understand psychology or being patient enough to take the proper time to make an important decision is a quality that fails many of my colleagues.