What Does OBO Mean in Real Estate?

Have you come across listings with “OBO” and found yourself scratching your head about what it means? 🤔

Don’t worry! I’ve got your back. Here’s everything you need to know about “OBO” and how you can use it to your advantage, whether you’re a buyer or a seller.

1. What is OBO and how it is used?

Understanding how OBO works can help both buyers and sellers.

1.1 OBO in Classified Ads 

1.1.1 OBO in Classified Ads – What does it mean for you as a buyer!

What does it mean for a buyer ? What should a buyer do when there is OBO in the listing?

Well, it means that seller is not rigid on the listing price, and will entertain other offers as well. Which means, it’s time for you to say…

Here’s how you can make the most of it:

1.1.1.1 Research Fair Market Value:

Before making an offer, do your homework. Research similar properties on classifieds to understand their fair market value. Once you understand the market value of the property, you can negotiate to drive down the price from the seller’s initial demand.

1.1.1.2 Start with a Reasonable Offer

When you find an item or property listed as “OBO,” don’t hesitate to make an offer. Begin with a reasonable bid, reflective of the property’s fair market value bracket (based on initial market value research), but still slightly below the asking price. This approach signals to the seller that you’re serious about making a deal.

1.1.1.3 Be Prepared to Negotiate

Negotiation is a key aspect of any transaction. When you make an offer, be prepared for a counteroffer from the seller. Leave room for negotiation by offering a price slightly below the asking price, but be flexible in your approach. The goal is to find a mutually beneficial agreement that satisfies both parties.

1.1.2 OBO in Classified Ads – Seller’s Perspective

As a seller, listing your item or property as “OBO” can attract a wider pool of potential buyers and increase your chances of making a sale. Here’s how to navigate this strategy effectively:

1.1.1.1 Set a Realistic Asking Price

Before listing your item as “OBO,” research comparable listings to determine a realistic asking price. Setting the price too high may deter potential buyers, while pricing it too low could lead you to settle for less than the real worth of the property.

1.1.1.2 Be Open to Offers

Be open to other offers as well, that don’t match your asking price. Remember, the goal is to find a price that works for both parties, so do not outright dismiss offers.

1.1.1.3 Consider Counteroffers

When you receive offers below your asking price, don’t immediately reject them. Instead, make counter offers within a reasonable range. This allows both parties to negotiate and discuss, raising the chance of striking a deal.

By adopting a proactive approach and remaining open to negotiation, sellers can maximize their chances of closing a deal and achieving their desired outcome of selling the property quickly and efficiently.

1.2 Can you Use OBO in Sales and Negotiations?

Hell Yeah! Think about it, you’ve got a home to sell, and based on averages, at least a 1000 people will show some basic level of interest. Now you need to sell it quickly and move on to the next thing.

Isn’t it logical to ask your demanded price, or, a slightly lesser price which would be offered as the “best offer” out of at least 100 offers? That one offer, the highest of all and closest to your asking price, is the “Or Best Offer” or OBO. When you set OBO on a listing, you are opening your listing to that best offer.

1.2.1 Why “OBO”?

1. For Sellers: Using “OBO” allows sellers to be flexible with their prices. They can start with a listed price but are open to offers. Imagine you’re selling a bike for $200, but you’re willing to take $180 if someone negotiates.
2. For Buyers: Buyers can suggest a price they think is fair. If you see a gadget listed at $50 with “OBO,” you might offer $45, hoping the seller accepts.
3. Dialogue Starter: “OBO” invites conversation. It’s like saying, “Here’s my price, but let’s talk.” This can lead to a price both parties agree on.
4. Increasing Market Reach: Listings with “OBO” attract more buyers who love the chance to negotiate. It’s like a magnet for bargain hunters.

1.2.2 Causes and Reasons for Using OBO

In fluctuating markets, “OBO” helps sellers stay competitive. If prices in your area are all over the place, being open to offers makes your listing more appealing. Also, if you need to sell something fast, “OBO” can draw in serious buyers quickly. It helps clear out items that might otherwise sit unsold.

1.2.3 How OBO Helps

“OBO” gives buyers a chance to propose a price that fits their budget. If you’re looking at a $100 item, offering $90 might just land you the deal. Negotiations help buyers understand how flexible the seller is. If a seller lists an item for $300 “OBO” and accepts $280, buyers learn the realistic price range.

1.2.4 Comparisons with Other Strategies

1.2.4.1 Fixed Pricing vs. OBO:

• Fixed Pricing: The price is set and non-negotiable. It’s straightforward but inflexible.
• OBO: Offers flexibility and negotiation. It’s like having a conversation about the price rather than a one-way statement.

1.2.4.2 Auction vs. OBO:

• Auctions: Bidders compete, and the highest bid wins. It’s fast and often final.
• OBO: More personal and collaborative. You negotiate directly with the seller. It’s less competitive but allows for tailored agreements.

Imagine you’re selling a used car. You list it for $5,000 OBO. You get 8 offers ranging from $4,200 to $4,700. You counter the person offering $4,700 with $4,500, and after some discussion, they accept. You’ve sold your car without the rigidness of a fixed price or the intensity of an auction!

1.3 OBO in Online marketing place

Online marketplaces have changed the way property transactions work. A 2-click process directly takes you to a property listing on a website, where you read through the main points and the price to make a first level decision. Now this is where OBO comes in. If a buyer sees a property listing on an online property marketplace that they might not look into due to a seemingly high price tag, seeing the OBO might open their mind to the listing. Here’s how “OBO” influences transactions in online marketplaces:

1.3.1 The Benefits of OBO:

• “OBO” allows sellers to adjust their pricing strategy quickly, catering to changing market conditions and buyer preferences. Listings with “OBO” tags may attract more attention from buyers.

• Buyers can easily negotiate and get bargain deals on OBO listings. “OBO” allows buyers to negotiate openly and leverage the option of choices from other listings.

• Sellers can leverage “OBO” to adopt a flexible approach to pricing. “OBO” can be helpful for sellers looking to clear excess inventory quickly.

Source: 1,2,3,4

2. OBO in Real estate

OBO listings provide a platform for buyers to submit offers below the listed price, initiating negotiations with sellers. This flexibility encourages dynamic interactions between parties and makes for a better approach to pricing.

Successful OBO Strategies:

• Strategic Pricing: Sellers should set initial asking prices that reflect the true value of their properties while allowing room for negotiation.
• Effective Communication: Open and transparent communication between buyers and sellers is paramount in OBO negotiations.

Consumer Behavior Studies:

• Anchoring Effect: Research by Harvard Business School suggests that using “anchoring,” which involves stating an initial high price followed by concessions, can influence negotiation outcomes. This aligns with the concept of OBO, where the seller sets an initial price but remains open to lower offers.

2.1 Incorporating OBO in Property Descriptions

By now, we know that adding OBO and OBO-related add-ons to a listing can have a great impact. Now, you’ll see why it happens. Here’s a list of pointers on how OBO can enhance a listing or an advert, along with examples to help you understand the difference at a very basic level. OBO opens up the possibility for negotiation and helps open both parties to a discussion. Read on to understand ways to add OBO to your listing.

Highlighting Negotiation Potential:

• Emphasize Flexibility: Begin by highlighting the flexibility offered by OBO.
• Inviting Offers: Encourage buyers to make offers based on their perceived value of the property.

Showcasing Value and Opportunity:

• Emphasize Value: Showcase the value of the property while underscoring the potential for a favorable deal through OBO.
• Create Urgency: Create a sense of urgency by mentioning that the property is priced to sell quickly with OBO.

Providing Clarity and Transparency:

• Clarify Process: Provide clear instructions on how buyers can submit offers and engage in negotiations.
• Set Expectations: Manage buyer expectations by explaining that while the seller is open to negotiation, offers should still be reasonable and reflective of the property’s value.

2.1.1 Example 1: Cozy 2-Bedroom Apartment with Flexible Pricing Options

Price: $250,000 OBO

Location:

123 Main Street, Cityville, Texas

Description:

With two spacious bedrooms, a modern kitchen featuring stainless steel appliances, and a cozy living area bathed in natural light, this apartment provides an ideal space for urban living.

What sets this apartment apart is its flexible pricing options. Priced at $250,000 with the option for OBO, buyers have the opportunity to submit their best offer and negotiate a price that works for them.

2.1.2 Cozy 2-Bedroom Apartment in Prime Location

Price: $250,000

Location:

123 Main Street, Cityville, Texas

Description:

Featuring two spacious bedrooms, a modern kitchen with stainless steel appliances, and a bright living area, this apartment is perfect for individuals or small families seeking urban living with all the comforts of home.

Enjoy easy access to local amenities, including shops, restaurants, and parks, as well as convenient transportation options for commuting to work or exploring the city.

The first listing is an OBO listing, which clearly shows that the seller is open to negotiations. The buyer understands based on two similar listings that the one with OBO clearly has room for price reduction and would automatically pursue it first, giving the first listing an OBO advantage.

2.2 OBO Strategies in Real Estate Negotiations

2.2.1 OBO Strategies in Real Estate Negotiations

OBO specially plays a crucial role in real estate transactions. Adding the OBO option to a real estate listing opens the possibility of negotiations for the prospective buyers. This can directly translate into higher number of offers. Real estate transactions are high ticket transactions, and every buyer and seller understands that there is some room for negotiation in the pricing based on different aspects. OBO attracts the buyers more than non OBO listings because they understand that there’s a better deal to be had.

2.2.1.1 OBO Strategies for Buyers:

1. Conduct Market Research: Before making an OBO offer, research comparable properties in the area to determine a fair market value.
2. Avoid Overly Lowball Offers: While OBO allows for negotiation, submitting excessively low offers can deter sellers and hinder productive negotiations.
3. Highlight Offer Strengths: When making an OBO offer, emphasize any strengths that may appeal to the seller, such as a quick closing timeline or flexible terms.
4. Make Reasonable Offers: Strike a balance between presenting a strong offer and leaving room for negotiation.

2.2.1.2 OBO Strategies for Sellers:

1. Specify Price Range alongside OBO in Listing: Clearly indicate a price range or acceptable offers alongside the OBO option in the listing.
2. Market Property Effectively: Showcase your property with high-quality visuals and detailed descriptions to attract buyer interest.
3. Respond Promptly to OBO Offers: Treat all OBO offers with respect and professionalism, regardless of their initial terms.
4. Maintain Negotiation Opportunities: Even if an initial OBO offer is below expectations, keep the lines of communication open and negotiate in good faith.

2.3 Examples of successful negotiations using OBO

As per various conversations on different online forums, it is evident that OBO or “Or Best Offer”, is quite open to interpretation in relation to how much negotiation is the seller open to. While some buyers may see it as an opportunity to present lowball offers, others may judge the product or service on offer based on its aspects and then make an informed offer.

In case of real estate transactions, however, since there are a lot of aspects to study, there is a proper line that can be drawn between lowball and informed offers, thereby allowing sellers to put OBO on their listings with more confidence. Serious buyers on other hand, also feel more confident putting in offers on OBO listings for their benefit in a real estate transaction as they see more chances of their offer being entertained more seriously.

Source : 1,2,3

 3. OBO in Business and Finance:

3.1 Flexibility in Pricing:

• Dynamic Negotiation: OBO provides flexibility in pricing, allowing buyers and sellers to engage in dynamic negotiations to reach mutually agreeable terms.
• Tailored Solutions: OBO allows parties to customize deals to their specific needs and preferences.

3.2 Market Efficiency and Transparency:

• Enhanced Market Efficiency: OBO promotes market efficiency by facilitating price discovery and encouraging active participation from buyers and sellers.
• Price Transparency: OBO transactions contribute to price transparency in financial markets by publicly displaying offers and allowing interested parties to gauge market sentiment.

3.3 Risk Management and Mitigation:

• Risk Hedging: OBO can be a risk management tool that lets businesses keep their options open for their products and services in case of adverse market conditions.
• Contingency Planning: OBO offers businesses a contingency planning mechanism to navigate uncertain or volatile market environments.

3.4 Strategic Decision-Making:

• Strategic Positioning: OBO empowers businesses to strategically position themselves in the marketplace by offering competitive pricing and attractive terms.
• Negotiation Leverage: OBO provides businesses with negotiation leverage, allowing them to negotiate favorable terms and secure advantageous deals.

As per research by NAR, 12% of homebuyers expect their realtor to help with negotiations, which means, that adding OBO to a listing can greatly improve a seller’s chance of attracting more offers.

Source: 1,2,3

4. FAQs

All said and done, OBO is a great tool for both the buyer and the seller, making it useful for both ends of a deal. While buyers can explore opportunities for savings and customization, sellers get opened up to a wider pool of potential buyers and higher market visibility.