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How do You decide What Price to Offer?
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.
*Article by Dennis Smith, visit www.SanDiegoHomes4u.com for more original content like
this. Reprint (or reprint with your modifications) permitted if this footer is included.
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