Raise your hand if you remember the first person who won the million-dollar grand prize on “Who Wants To Be A Millionaire?”
I sort of do.
It was a man. Middle-aged, white, nerdy, cocky, and certainly with a flair for the dramatics.
I believe the question was about which United States president appeared on a comedy show from the 70’s or 80’s.
The contestant asked to use his “lifeline” and phone a friend, and he called his father. Except once his father picked up, he didn’t ask his father for help, but rather said, “Dad, I don’t really need your help, I’m just calling to tell you that I”m going to win the million dollars because the answer is Richard Nixon and that’s my final answer.”
(cue the lights and balloons)
Despite Regis Philbin religiously asking every contestant, for every question, “Is that your final answer?” Regis didn’t ask the contestant this time.
It would have ruined the moment. And oh, what a moment!
Alright, I found the video:
I think I did pretty well, going from memory.
I didn’t remember that long pause when the audience clapped, but this is definitely a man who is both “nerdy” and “cocky,” so I was right about a couple of things!
This was twenty-three years ago, for those who want to feel old today.
I remember watching this live, with my Dad, and he was screaming, “It’s Nixon!! Nixon!”
Then when the contestant, John Carpenter, said to his own father on the phone, “I don’t need your help and I’m going to win the million-dollars because it’s Richard Nixon,” my dad said, “Oh, look at this cocky bugger.”
After the music played, the lights shone down, and the buzz subsided, my dad said, “Regis didn’t confirm it was his final answer. Boy, I wonder how this would have gone down if he was wrong.”
Some of you reading this today weren’t even born when this show came out, but I can tell you from experience that of all the shows that captured a nation, this is near the top of the list. Just as the original “Survivor” show captivated everybody, in every country, where it was played, so too did “Who Wants To Be A Millionaire.”
Survivor changed reality television forever.
Who Wants To Be A Millionaire changed game shows forever.
Both shows, together, helped change television forever too.
And if “Who Wants To Be A Millionaire” was remembered for one thing, it would be the quote, “Is that your final answer?”
In real estate, we hear the words “final offer” very often. In fact, a majority of negotiations (in this case, a market where the list price is negotiated down and not up), there is a “final offer” of some sort.
But what is a final offer? What does it mean? And does it have any legal backing?
First, consider when and why a person makes a final offer, whether that’s a buyer or a seller.
Chris was telling me this morning, “The listing agent and I both know that we’re going to get a deal done at $1,400,000, but I can’t offer that to start.”
As Chris put it, “Because to walk the road and to know the road are two different things.”
If a property is listed at $1,550,000 and you offer $1,400,000, “final offer,” it’s not nearly as likely to culminate in an agreement as if you were to offer $1,300,000, sign back a few times, and land at $1,400,000.
It seems unnecessary, right?
But the “take it or leave it” right off the hop is often the wrong approach.
For starters, you want to avoid eliciting emotions in a negotiation, unless you can use it to your advantage. In a hot market, with multiple offers and the proverbial “bidding war” breaking out, a listing agent can assume that the buyers’ tensions are high, as are emotions, and use this to his or her advantage. But in a market that’s balanced, where the buyer is actually offering under the list price, the buyer and buyer agent want to avoid getting the seller hot and bothered, which might result in that seller responding with emotion, rather than logic.
Offer $1,400,000 on that $1,550,000 listing, tell the listing agent, “This is our first, best, and final offer,” and most sellers will take that personally.
Offer $1,300,000, tell them, “This is our starting offer, we’ve got room here,” and you can make the seller and the listing agent feel empowered, and use that to lead them to where you want to go.
The second reason why you might not want to open with your “take it or leave it” offer is because nobody ever believes that.
An overwhelming number of negotiations end up meeting in the middle, simply because this is deemed to be “fair,” regardless of the circumstances.
So offering $1,400,000 on that $1,550,000 listing, with a “take it or leave it” attitude, is going get the seller emotional, it’s going to be deemed unfair, and you’re going to have a seller that doesn’t believe it’s actually your final offer.
Now, what is a “final offer?”
Is there any legalese attached here?
If you submit a “final offer,” is it carved in stone? Does it have to actually represent your final offer?
Last week, many of the readers took me to task for explaining how some negotiations work, before they’ve even started. The truth is: top real estate agents aren’t just good at negotiating when they have an offer in hand, but rather it’s how they converse with other agents at all times that elevates them
Last year, I had clients interested in a midtown listing, and the listing agent is one of top in the country. I called her to talk, and before I could really say much of anything, she said, “David, just to let you know, there is zero flexibility on the price here. I have way too much interest, so honestly, they won’t come down a penny.”
That’s called “anchoring.” She got her price in there first.
Before I could say, “We were thinking about bringing you $2,500,000,” she ensured that her price was the one anchoring the negotiation.
What negotiation, you might ask?
We hadn’t produced an offer yet! But the negotiation begins from the moment any buyer agent contacts any seller agent. Even when you’re making small talk about your workout this morning, your darling children, or your Thanksgiving turkey, trust me when I say that you’re negotiating.
We ended up bringing her an offer of $2,500,000 and she signed it back to us $30,000 under the list price.
So I would ask the readers from last week: was she being unethical when she said that the sellers wouldn’t take less than the list price? She wasn’t being “honest,” was she? And what about the other interest that she had? Where were those people?
This is all part of negotiating, and most agents understand that so-called “line” that the readers were mentioning last week. Where is the line? Where does it become unethical and where is it simply part of the job?
Here’s something I saw on Instagram on the weekend:
I thought this was hilarious.
But I get it.
I fear that some people don’t get it, and don’t ever want to.
An apple and an orange are both fruit, but they’re different.
Last week, clients of mine made an offer on a house for $120,000 below the list price. The sellers signed back $35,000 under the list price.
Their sign-back to us expired at 11:00am the next day.
The listing agent texted me at 9:30am and said, “Just to let you know, there was an 8:00am showing and it was their second showing. They’re literally waiting to see what you guys do with that sign-back.”
She’s insinuating that if we let the offer expire, and/or sign the offer back, that the door is open for this other agent to submit a competing offer. She’s hoping that I’ll take her little nugget of info to heart, and my buyers will accept her sellers’ counter-offer.
Was she telling the truth? Was there a showing at 8:00am? Was it a second showing? Were the buyers interested? Were they waiting for us to open the door so they could compete?
And who cares?
We didn’t let it phase us.
We signed the offer back to them and provided a 50-minute irrevocable.
They accepted the offer and we bought the house.
So I go back to my initial question about a “final offer.”
What the heck is a final offer?
My cynical side believes that the words “final offer” are the same as the words “good faith.”
People say things like, “We’re negotiating here in good faith.”
Or they say, “We made our offer last night in good faith.”
As opposed to what? Bad faith?
Do we need to specify the type of faith in which an offer is made? To specify that the offer is in “good faith” would mean that a large enough percentage of offers are made in bad faith, such that a distinction simply must be made.
But then when is a person negotiating in “bad faith?” What the heck does that mean?
I laugh when I hear “good faith” because the words are meaningless, but so too are the words “final offer.”
No offer is truly final because it’s not legally-binding.
Let’s say a property is listed at $500,000.
My buyers offer $450,000.
The sellers sign back at $495,000.
My buyers sign back at $461,500.
The sellers sign back at $490,000
My buyers sign back at $471,000 and I tell the other agent, “This is our final offer.”
What does that mean?
Legally speaking, it means nothing.
Practically speaking, it means nothing.
It’s supposed to mean, “take it or leave it.”
It’s supposed to mean, “If you don’t accept our offer, we are walking away and never coming back.”
But there are individuals out there that believe there’s some sort of ethical precedent attached here. You can’t say it’s your final offer if it’s not.
In this situation, what if the buyer would, in fact, come up to $475,000, and I tell the other agent, “This counter-offer of $471,000 is our final offer.”
Is that unethical?
I mean, I’m lying.
Or, maybe, just maybe, I’m negotiating.
So let’s say that the seller receives our “final offer” of $471,000 and doesn’t want to accept.
That’s it, right?
The seller can’t legally sign back our offer of $471,000 at, say, $485,000, because it was our “final offer?”
That would be ridiculous.
They can sign back at $485,000.
But we can’t accept, right? Because we provided our “final offer” of $471,000 already?
That too would be ridiculous.
The words “final offer” are meaningless. They are merely words used in a negotiation, sometimes they hold true, and sometimes they don’t.
I mentioned in a previous blog post that we made a “bona fide,” um, “good faith” offer on a property that had been on the market for three months, re-listed multiple times at the same price, and the sellers gave us an unrealistic sign-back. In that case, we told them our “final offer” was $1,600,000, and we meant it. In fact, we demonstrated that we meant it when we walked away from that negotiation and bought a different house on week later!
It’s up to both the buyer and the seller in any negotiation to decide what a “final offer” truly means when they’re presented with it.
On the flip side, if a seller provides a “final offer” to a buyer, that buyer can still reject the offer and provide a counter-offer. The seller could say, “I’m not interested anymore,” and refuse to negotiate. The seller can do whatever he or she damn well pleases! And if the buyer wants to re-offer the same price that the seller last countered at, the seller is under no obligation to accept it.
There’s a reason that Regis Philbin asked every contestant on Who Wants To Be A Millionaire, “Is that your final answer?”
For one thing, it was catchy. It was dramatic. It allowed the camera to zoom in as the music played.
But more importantly, they needed some sort of agreement and understanding, since the whole interaction was verbal.
Not only that, the $100 question was always something silly like, “A magnet would most likely attract the following,” and the options would be metal, plastic, wood, and the wrong man. So because the contestants goofed around and laughed at the initial questions, often musing, “Oh, yeah, the wrong man,” when there was serious money on the line, Regis needed to double or triple-check by confirming, “Is that your final answer?”
What could have also worked, but made for far worse television? The contestant signing a document under seal.
But that’s not nearly as fun, and that wouldn’t have been as punchy as, “Is that your final answer?”
My analogy isn’t perfect, but it’s meant to prove a point.
“Paper talks,” in real estate. A signed offer is the only guarantee, and the rest is just rhetoric…