Dennis & Sunshine Smith
How do you decide what price
to offer on a San Diego Home?
Print out for easier reading.
The price of a home is the classic battle: the seller wants the most money possible and the buyer wants to pay the least possible. Buyers almost always think the price is too high and sellers almost always think the offer is too low. Then we have to add in the market trends: going up or going down.
Years ago, when the real estate market was in the doldrums, buyers rarely made full price offers. Today, in areas where the market is active, offering full price might not be enough if several other buyers are bidding against you for the property. It's important to have an understanding of the market conditions at work in the area where you want to buy if your aim is to make an offer that will lead to the successful negotiation of a home purchase. If you offer too low a price, you could risk losing the property to another, better educated buyer who's knowledgeable about current market values. Or you could risk insulting the sellers with such a low price that you then have difficulty negotiating with them at all. For example, one buyer decided to start with an initial offer price that was 10 percent lower than the list price even though the property had been on the market for less than one week. This was several years ago when the real estate market was recovering from the last recession and buyers still expected sellers to make large price concessions. The buyer saw no harm in asking for a discount off the seller's list price, even though the property was new on the market. The seller was so enraged by what he perceived to be an insultingly low offer that he threw the buyer's agent out of his house and refused to respond to the buyer's offer.
This is an extreme case, but it's not uncommon for a seller who's insulted by a buyer's offer to counteroffer back with a very high price. If you think that a property is over-priced for the market, you might have a better chance negotiating a price discount after the property has been on the market for awhile.
FIRST-TIME TIP: Before you make an offer, ask your agent IF and for how much list prices on similar homes are being discounted when they're sold. Although any given home sale may deviate from the norm, this information can provide a gauge. For instance, if similar homes have sold for within 5 percent of the list price, and you think the home you're considering is well-priced, you might offer 6 to 7 percent below the list price which leaves a little room for negotiation.
Another variable to take into account is how long the listing has been on the market. If the property is new on the market, and there is a lot of interest from other buyers, you should be more aggressive with your initial offer price than you'd be if the property had been on the market for months with no interest.
A big problem facing today's buyers who are attempting to buy in a strong seller's market is how much over, not under, the list price to offer when there are multiple offers. There's no magic formula that will guarantee results every time. Your best bet is to base your offer on the same sort of market data you would use to arrive at a price in any market. Find out how much over the asking price similar homes have been selling for and make your offer accordingly. When you're up against formidable competition, be prepared to make your first offer your best offer. You may only have one chance to attract the seller's attention.
THE CLOSING: It's wise to set limits so that you don't pay more than you can afford or more than the property is worth. But, don't lose out for a few thousand dollars. In the long run that amount is less than the cost of a can of Coke a day.
Oh, by the way, if
you know of, or talk to, a friend or relative who is considering buying or selling Real
Estate, please let me know so I can offer them the same valuable service I give to you.
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