Lindsay: my husband and I have been looking for a home for the past few months and we are determined to get a fantastic deal. Our agent is not in agreement in how we want to negotiate when we find the property we want to buy. We want to start by offering $40,000 or $50,000 less than the sellers are asking and see how low we can buy the home. Do you advise buying a home this way or would you negotiate in a different way?
Tara
Tara: after reading your question and discussing it with some of my colleagues I would start by defining “market value.”
Market Value: is an estimate of the market value of a property, based on what a knowledgeable, willing, and unpressured buyer would probably pay to a knowledgeable, willing, and unpressured seller.
I think the most important words in the definition are knowledgeable and unpressured. Many feel that the way to purchase real estate is to offer a low price and then work their price up to an acceptable number. Sometimes this works and other times it either hinders the process or totally stalls it.
Lets cover a few local facts:
- In our local area when homes sell they sell for 98% of the asking price.
- In our local area 75 homes have reduced their prices in the past week.
- 83 homes have been taken off the market not sold. (terminated or expired)
So we are now “armed” with valuable information. We know how fair market value is defined and that homes are selling for pretty close to full asking price. (this would be another definition of fair market value) Also, many homes are coming off the market not sold. This tells us that there are many overpriced homes on the market and the ones priced accurately are selling.
The million dollar questions are: 1) how do we proceed when we find a home we want that is listed too highly? 2) What do we do when we find a home priced at or below market value?
Properties are unique and each brings not only bricks and mortar into the sales mix but also a seller with a unique situation. Some sellers have the attitude that they will move if they get a price over market and others have financial issues causing the price to drop to a point that will cause it to sell quickly. Doing some investigation usually helps in finding the best strategy. The one thing to remember is that all situation are different. This is where experience pays off in either securing a property that is below market value or negotiating a fair price with a seller asking more than market.
When the buyer finds a home that appears to be overpriced and is considering an offer that is dramatically below the asking price, the approach is different than if the home is price realistically. Gathering information helps you create a strategy and a plan to establish how to buy the home at market value. Having your agent talk with the listing agent might give some reason for the price. Sometimes homes are priced too highly due to an error the agent has made. In the end the best approach is to offer what you feel is fair based on recent comparable area sales. It is always hit and miss as to how successful you will be in your attempt to have an offer accepted. This is where an experienced agents skills shine. There are times that no matter how good the strategy is that a seller will not entertain a reasonable offer, so be prepared that this may influence the outcome.
When you encounter a home priced at market value or below the strategy changes dramatically. I was recently in a offer situation where a home hit the market and the day the seller was entertaining offers there were 4 in total. We offered $10,000 over asking and in our opinion we still negotiated a good deal for the home. On a regular basis, homes are placed on the market at really amazing prices and the strategy at that point becomes one of moving quickly and offering a very fair price with a clean offer.
When a buyer offers on a property, they enter not only into a contractual exchange with the seller but also a relationship with them. What I mean by “relationship” is that how the buyer manages the negotiation process can smooth the process, hinder it, or actually put a stop to the negotiations. An offer that is viewed as a “lowball” really sets the tone of how the negotiating process will play out.
Buying a home should be a fun process. The many “speed bumps along” the way can be smoothed out using an experienced agent. The more educated you are as a buyer means that if you encounter a home you like, you become an integral part of the process. I have had some of the best ideas come to me from buyers I have worked with when attempting to buy homes. Good luck with your home search and when you find that perfect home, I hope it is at or below market value and the negotiation process is a smooth one. Tara, more info on buying homes can be found at my online home at www.soldbylindsay.com
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Lindsay: my husband and I have been looking for a home for the past few months and we are determined to get a fantastic deal. Our agent is not in agreement in how we want to negotiate when we find the property we want to buy. We want to start by offering $40,000 or $50,000 less than the sellers are asking and see how low we can buy the home. Do you advise buying a home this way or would you negotiate in a different way?
Tara
Tara: after reading your question and discussing it with some of my colleagues I would start by defining “market value.”
Market Value: is an estimate of the market value of a property, based on what a knowledgeable, willing, and unpressured buyer would probably pay to a knowledgeable, willing, and unpressured seller.
I think the most important words in the definition are knowledgeable and unpressured. Many feel that the way to purchase real estate is to offer a low price and then work their price up to an acceptable number. Sometimes this works and other times it either hinders the process or totally stalls it.
Lets cover a few local facts:
So we are now “armed” with valuable information. We know how fair market value is defined and that homes are selling for pretty close to full asking price. (this would be another definition of fair market value) Also, many homes are coming off the market not sold. This tells us that there are many overpriced homes on the market and the ones priced accurately are selling.
The million dollar questions are: 1) how do we proceed when we find a home we want that is listed too highly? 2) What do we do when we find a home priced at or below market value?
Properties are unique and each brings not only bricks and mortar into the sales mix but also a seller with a unique situation. Some sellers have the attitude that they will move if they get a price over market and others have financial issues causing the price to drop to a point that will cause it to sell quickly. Doing some investigation usually helps in finding the best strategy. The one thing to remember is that all situation are different. This is where experience pays off in either securing a property that is below market value or negotiating a fair price with a seller asking more than market.
When the buyer finds a home that appears to be overpriced and is considering an offer that is dramatically below the asking price, the approach is different than if the home is price realistically. Gathering information helps you create a strategy and a plan to establish how to buy the home at market value. Having your agent talk with the listing agent might give some reason for the price. Sometimes homes are priced too highly due to an error the agent has made. In the end the best approach is to offer what you feel is fair based on recent comparable area sales. It is always hit and miss as to how successful you will be in your attempt to have an offer accepted. This is where an experienced agents skills shine. There are times that no matter how good the strategy is that a seller will not entertain a reasonable offer, so be prepared that this may influence the outcome.
When you encounter a home priced at market value or below the strategy changes dramatically. I was recently in a offer situation where a home hit the market and the day the seller was entertaining offers there were 4 in total. We offered $10,000 over asking and in our opinion we still negotiated a good deal for the home. On a regular basis, homes are placed on the market at really amazing prices and the strategy at that point becomes one of moving quickly and offering a very fair price with a clean offer.
When a buyer offers on a property, they enter not only into a contractual exchange with the seller but also a relationship with them. What I mean by “relationship” is that how the buyer manages the negotiation process can smooth the process, hinder it, or actually put a stop to the negotiations. An offer that is viewed as a “lowball” really sets the tone of how the negotiating process will play out.
Buying a home should be a fun process. The many “speed bumps along” the way can be smoothed out using an experienced agent. The more educated you are as a buyer means that if you encounter a home you like, you become an integral part of the process. I have had some of the best ideas come to me from buyers I have worked with when attempting to buy homes. Good luck with your home search and when you find that perfect home, I hope it is at or below market value and the negotiation process is a smooth one. Tara, more info on buying homes can be found at my online home at www.soldbylindsay.com