Tired of waiting, some sellers are making offers to seemingly interested buyers who may hold back because of "Minnesota Nice."
Steve Mitchell was trapped between two homes: the retirement lake home in Missouri he was eager to build and an expensive house in Apple Valley that he couldn't sell.
So when a family expressed interest in the $475,000 house, but indicated that it was beyond their budget, his agent suggested something radical: Make them an offer.
"What did we have to lose?" said Mitchell, who dropped the price to $450,000 for the family.
The prospective buyer countered, and after some back-and-forth negotiations the two parties had a deal at $456,000, which included Mitchell paying $11,000 in their closing costs. "We would have liked to have gotten more," he said. "But in the end it worked out as good as we could expect."
At a time when buyers have more choices -- and inertia -- than they've had in decades, "reverse offers" are becoming increasingly popular among exasperated homeowners eager to get a move on. It's also a way, some agents say, for sellers to make prospective buyers feel like they're getting in on a deal that no one else is going to get.
It's a last-ditch strategy in one of the most prolonged housing downtowns in decades. As 2010 draws to a close, the number of homes sold, based on a rolling 12-month average, has fallen for six straight months while median prices have stagnated with little sign of recovery.
Mitchell's agent, Kary Marpe, said he's presented prospective buyers with reverse offers four times and has been successful twice. "We're just trying to get them to swing our direction," he said. "Not every seller wants to do it, but it's a good way to get dialogue started."
Getting buyers and sellers to talk to one another is particularly difficult in the current market. Home sales during November fell more than 30 percent at a time when inventory levels have steadily risen, giving buyers lots of choices and little incentive to make an offer.
Tara-Nicholle Nelson, a national real estate expert with Trulia.com, says that reverse offers seem to be unique to the Twin Cities metro area, in large part because it's a market in which sellers tend to initially price homes aggressively, but quickly drop the price. In fact, more than 40 percent of all sellers -- consistently the highest in the nation -- in the Twin Cities metro area have offered at least one price reduction, according to Trulia.com.
Because houses in this market tend to be priced so much higher than the actual selling price, agents say that reverse offers are an effective way to give prospective buyers a better sense of a seller's bottom line. A sales manager for Edina Realty said that in one office he estimates that 10 percent of agents have tried reverse offers at least once.
For example, Dennis Guldseth, an agent with Coldwell Banker Burnet, had clients who had found the perfect house, but who couldn't close on it until they had sold the house they already owned. So when they heard that a couple who already looked at the house they were selling was coming back for a second showing, they decided to present them with a written purchase agreement that included a hefty price reduction in hopes of getting them to seriously consider the house.
"In this market you have to think outside the box to make things happen," Guldseth said.
Kathy Rauth, who sells for Edina's Chanhassen office, said that in her experience it's a strategy that works best if the only thing holding back a buyer is price, but that it can also create a sense of urgency when none exists. "I'm hearing about it more and more," she said.
She's made reverse offers for three clients, including a woman who was trying to sell a townhouse in Eden Prairie, which was similar to several others that were on the market. So when a prospective buyer looked at it several times, but didn't make an offer, Rauth asked the seller, Susan Turbis, to write up a purchase agreement that they could present to the buyer.
Turbis said that it was a brilliant way to divert the buyer's attention from all the other competition. "It was counterintuitive," she said. "But I was ready to make something happen, so I said, 'Let's try it.'"
Rauth said she thinks many prospective buyers are afraid to make a lowball offer that might offend the seller. "It's the 'Minnesota Nice' thing," she said. "This way I get my seller to do their own price reduction."
Jim Buchta • 612-673-7376