The stereo-typical image of estate agents is that of ‘wheeler dealers’ (and ‘divas’) in Ted Baker endurance suits and Channel handbags driving branded Minis by day and shiny Mercs by night, expansive with asking prices and expensive with fees.
Notorious for talking up their properties, hitting the phones and scanning emails in pursuit of a fast & high sale.
Yet we love them – especially when we become vendors: Why?
You see we want agents like Lord Sugar on speed, quickly dispatching time-wasters with a pointed finger and a two-word send off, as they inexorably move to clinch that deal.
But what are some things you need to be aware of?
Particularly when they are cajoling us into buying or when scanning through the online portals like Rightmove -that lie behind the sharp suits and commission charges?
It’s worth understanding agents’ jargon so that you can identify seller expectations:
Firstly, pricing prefix.
Offers In Excess Of (OIEO) Meaning:
An ‘offer in excess of’ is a marketing technique to try and force buyers to offer over certain amount regardless of whether the building is worth the extra cash.
It generally means “I know better and I’m desperately not wanting to accept the Estate Agents advice on what my house will sell for” This is a little like the description of ‘Fixed Price’ that’s sometimes quoted i.e. the vendors don’t want to negotiate and the ‘OIEO’ is the lowest price which they can accept.
Of course, that’s up to them, right? You might even be quite happy to bid over that figure? However, if your intention is to bid below, then just go ahead and make it – what have you got to lose?
Would your offer be declined if it’s just a pound below their ‘reserve price’? How about a thousand, or ten thousand below? You don’t know and, probably, neither do they.
What if the vendors have no other offer?
Or, perhaps, one or two offers way below yours? In reality, the ‘OIEO’ is often used as an under-valuation trick, to price the property very low to generate mass interest which in reality is much lower than the seller is likely to accept.
Offers In The Region Of (OIRO) Meaning:
This gives the buyer a rough idea of the asking price: the vendor would love something higher but are willing to accept something a little lower.
As a result, it encourages buyers to believe that the seller is more willing to negotiate and for the seller – they have more flexibility and likelihood of achieving a price over and above asking price in the event that there is a lot of interest in the property and multiple purchasers suddenly competing for the property.
So How Much Should You Offer On A Property That Is ‘Offers in Excess Of’ or ‘Offers in the Region Of’?
Going back to what my dad said when I was a kid and asked, ‘What’s that worth, dad?’: ‘something is worth what somebody is prepared to pay for it Rob!’
- Competition: the factors that affect price will generally dictate how much you should offer. How much competition is there and how quick does the seller need to sell? If the seller is facing financial ruin and repossession and needs the money within 4 weeks, they are more likely negotiate on price than if they had 20 viewings in the first week and 15 offers in the pipeline at more than asking price, but delaying the sale as a result of multiple (interested) parties.
- Seller expectation: Just because the seller is asking for a certain price, doesn’t necessarily mean it’s worth that amount. Many have high expectations that far outweigh the reality of what the market is willing to pay.
- Paying Asking price: There are times when the property is competitively priced and it’s your job to know whether to pay ‘under’ or ‘over’ this amount, particularly if you can spot the opportunities that most investors miss, either by enhancing the value through a refurb or something larger like a development project.
- ‘This is not an offer, offer’: You can always test close a VERY low offer without offending or upsetting any agents or vendors, AND have your offer taken seriously and/or put forward
Cutting Through The Patter
The key principle to remember is this: regardless of the stated price prefix, the property is only worth to you what you are prepared to pay for it.
Yes, the property may be priced a certain way but it doesn’t necessarily mean that e v e r y buyer out there will agree: it’s only guidance as to what was in the seller’s mind, and that of their estate agent, when they put their property on the market.