Dumbing down the price (negotiating, agent, mortgages, housing)

[ProLogic]

How much is too much when negotiating a home price? I've heard people say that offering 15% less is way too much.

[nitram]

Shoot I've sucessfully offered 50% less to see what really motivates the seller to sell and his readyness to negotiate the price. Sellers always have a tendency to think their precious domain is worth more than it is. A low negotiating offer brings out the reality of things.
An item is only worth what someone is willing to pay for. If someone overpaid previously, don't look for a sucker to take over your mistakes.

[garth]

It all depends on the comps. What if the seller has priced his home 15% above the comps just because of an emotional attachment? Their love for the four walls where they raised their children and burped their grandchildren in front of the fire may have value to them, but it's of no value in the marketplace or to anyone else.

There are other factors too, such as how long it's been on the market, how distressed the seller is, and the condition of the property to bring it up to the value of other properties. These are all factors that can/may affect an offer.

[ProLogic]

Scenario is: House is close to $1 million dollars.. its $799k The housing market over here hasn't affected the newer homes in the new neighborhoods as much but I know a lot of people don't have enough money to take on a house of this price. According to Zillow its worth between $740-$805. I would think that an offer $100k less than what they're asking would be sort of an insult. In reality the house has been on the market for god knows how long.. maybe 4 months? The current owner just purchased a million dollar home in another area. The owner has two mortgages now. thoughts?

[pghquest]

Originally Posted by ProLogic

Scenario is: House is close to $1 million dollars.. its $799k The housing market over here hasn't affected the newer homes in the new neighborhoods as much but I know a lot of people don't have enough money to take on a house of this price. According to Zillow its worth between $740-$805. I would think that an offer $100k less than what they're asking would be sort of an insult. In reality the house has been on the market for god knows how long.. maybe 4 months? The current owner just purchased a million dollar home in another area. The owner has two mortgages now. thoughts?

I've seen houses listed for $799K, sell for $182K.. It depends on the comps, and who's selling.. Owner, bank et.

btw, dont count of zillow for anything other then.. thats interesting.. its very un-reliable. I expect sometime in the future it will become a very reliable website, its just not close to being there.

Suggestions, pull up the recorder of deeds, get an estimate as to what they owe on the properties, then shoot pretty close to that amount.

[Bill Keegan]

Originally Posted by pghquest

Suggestions, pull up the recorder of deeds, get an estimate as to what they owe on the properties, then shoot pretty close to that amount.

I think that's bad advice. Make an offer based just upon what's owed? That doesn't take into account at all what the property is actually worth. Perhaps the asking price isn't a reflection of what it's worth either. Which is why I say do the research, find out what recent buyers have been willing to pay for similar houses in similar neighborhoods. Then, decide what it's worth to you. Offer that. If you honestly feel your offer is reasonable, then you can't worry that the seller will see it as insulting. (Now, if you are offering well below what you know is reasonable, then prepare yourself for the possibility that they don't bother to come back to you with a counter at all.) If the seller says no, then the two of you and/or your agents sit down & negotiate until a middle ground can be reached, or until you decide no such ground can be reached.

[surfingatwork]

hubby and i offered 21% less on a house, all parties ended up agreeing to 15% less than the list price. we based our original offer on the fact that other homes in the area that sold for more than our offer had a few additional (necessary) features that we will need to do to this house. we also knew we were coming in really, really low with our initial offer but we were prepared to negotiate and we ended up at the price we were hoping to get for the property.

[Gretchen B]

Originally Posted by ProLogic

Scenario is: House is close to $1 million dollars.. its $799k The housing market over here hasn't affected the newer homes in the new neighborhoods as much but I know a lot of people don't have enough money to take on a house of this price. According to Zillow its worth between $740-$805. I would think that an offer $100k less than what they're asking would be sort of an insult. In reality the house has been on the market for god knows how long.. maybe 4 months? The current owner just purchased a million dollar home in another area. The owner has two mortgages now. thoughts?

ProLogic - I think your name fits - you seem to be more logical than most when it comes to figuring out what you want to pay for this home. That is:

Step #1 - Ultimately, what is the fair market value for this home, and what is it worth to you? To come up with that answer you need GOOD sold comps. Zillow is all over the place. I'd suggest either researching county records (which aren't always up to date) or hiring an agent that will thoroughly research recent solds in the area.

Step #2 - Coming up with an offer/negotiation strategy that will get you a great house at a great price (hopefully for less than what you're prepared to pay for the house). Again, this involves research and it looks like you're getting that done. How much do they owe on the house? Have they bought something else? How long has it been on the market? Have they been dropping the price? Etc. (BTW, 4 months on the market for a home in an upper price range and in a slower market is typically NOT a long time on the market. As a rule of thumb, the higher the price point, the longer it will take to sell.)

Lowballing doesn't always result in the lowest contract price. From my experience offering 50% less like someone mentioned would either not get a response or else the seller would dig in his heals and hold to a price at the higher end. Unless this is some sort of a "fire sale" with a distressed seller I think you'll need to be prepared to pay market value (and by that I mean what other comparable homes have SOLD for in the past 3 or 4 months). I also think that with good negotiating you could get the home for less than market value. There's a number of ways of doing that, but just offering a standard % off the list price isn't the way to do it. You must know the market and know the seller's level of motivation. The first one is easy if you research it well, using accurate sources. The second is sometimes the unknown. The 3rd factor is knowing how to negotiate well. I see so many buyers thinking of number they want to pay - then making a low offer or an offer they think will result in "meeting in the middle" at the price they want to get the house for. You'll probably end up paying more by doing either of those tactics. Unless the seller and his agent are stupid, they know that game really well and they'll end up with the upper hand.

[DMenscha]

Zillow isn't too far off in the bay area compared to other places, it's a far more homogeneous area than many parts of the country.

Give it a shot PL, what's the worst that can happen?

[Boomerang]

Originally Posted by Bill Keegan

I think that's bad advice. Make an offer based just upon what's owed? That doesn't take into account at all what the property is actually worth. Perhaps the asking price isn't a reflection of what it's worth either. Which is why I say do the research, find out what recent buyers have been willing to pay for similar houses in similar neighborhoods. Then, decide what it's worth to you. Offer that. If you honestly feel your offer is reasonable, then you can't worry that the seller will see it as insulting. (Now, if you are offering well below what you know is reasonable, then prepare yourself for the possibility that they don't bother to come back to you with a counter at all.) If the seller says no, then the two of you and/or your agents sit down & negotiate until a middle ground can be reached, or until you decide no such ground can be reached.

I agree. There are so many posts advising people to find out "what is owed" on a house, as if that is the market value - not realistic. Extending that logic, you should just give away any car or house you own that's paid off because it now has no value. Also, that logic does not take into account that you may have paid $100,000 for a house with knob and tube wiring and an outhouse, and brought it up to modern standards, for which it is reasonable to expect the house to be worth more now than it was in its original state.

I think it is reasonable to offer what you think a house is worth to you. You've done the research, you have a basic idea what the house's current market value is, and you also know how much you would be willing to pay for it - or not. The seller will agree or negotiate with you - or not. If both sides are gracious or at least courteous, no harm done.