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Ok. If you are looking at million dollar homes, looking 100K up from your budgent isn't unreasonable. I wouldn't put too much into discount "averages" though, because that means that half were more and half were less. Real estate is probably one of the assets with the most variables that you can find. Especially, when you are looking at higher end homes like you are, it becomes hard to comp. Best of luck with your search and keep us posted!
ps. Don't ever fall for the other offers thing. Offer what you want to offer and don't get emotionally caught up. But, don't blame your buyer broker. She is just passing along what she is being told. It's all part of the negotiatiion game.
Thanks for above. I agree, many are hard to comp...so I/we use as many sources as I/we can - - and go to as many open houses as possible around the home I am interested in to "couch" my offer. The problem as I see it is this: as a buyer, I am coming in with an offer that is based on as you say, "rationality". My offer is based on solid comps, fair market values, property conditions, time on market, # of price drops, cost of renovations, etc. Im not out to "low ball" anybody just for the sake of doing that. However, Im up against two difficult forces: 1) a Seller who is always going on "Emotions", not rationality, and 2) Stupid buyers who never do a comp, think their sales realtor is working for them, and over-offer for houses that just dont warrant it.
. In the price range I am looking, a 10% discount-off-list is about -$100k off the List. So, that's how we factor in the level of list price we want to look at.... the List price minus -10-20% to reach our "walk away price".
The difficulty arises when buyers are comparing properly priced homes with overpriced homes. Not all homes priced at $1 million is worth anywhere near it. One might say that's why the price is called "asking price".
Example:
1. Let's say the market value (eventually as per lender's appraiser) is $800,000 but the seller and/or the listing agent decide to list the property at $950,000 (either because of lack of market knowledge or "greed", or "need"), then there is plenty of room to negotiate - or the property will sit till the seller takes the house of the market or the face reality.
1. Another, very similar house, is priced at $825,000 and will also appraise at $800,000. To offer $700,000 or thereabouts is unrealistic because that is not the "market".
The frequent media suggested rule "offer 10-15% less than asking price" is a generalization. Each home is unique; square peg/round hole
By and large (there are always exceptions!!), the general public is not knowledgeable enough to know the difference, although internet access provides a lot more information; that's one of the many areas where an experienced real estate agent still comes into play. We do this many times (or several times) a YEAR, whereas the average person does a few times in their LIFETIME :-)
JMHO
Oh, and BTW, not all real estate agents are Realtors...
Yes, there is a lot of misinformation and misunderstanding. Much of it is due to the complexity of NYS agency law, which sadly, even many agents do not understand.
In some states, real estate agents are legally considered "facilitators". In other words, their only responsibility is to try to bring the two parties (buyer and seller) together. However, in NYS, agents are required to have fiduciary duty to either the buyer or seller and act in that person's best interest. Much like a lawyer "represents" one party or the other. Misunderstanding of this by both agents and consumers is where the trouble usually begins.
It is not necessary to have a Buyer Agency Agreement to establish a buyer agency relationship and take on the attendant legal responsibilties that go with it. Courts have held that such a relationship can arise through the agents actions. In other words, if he leads the consumer to believe he is acting as a buyers agent then he is, even if the words are never said. However, if he is contractually (either through his own firm or as a subagent through the MLS) working for the Seller, then he has violated his responsibilty to both parties. This is called "undisclosed dual agency" and can land the agent in big trouble.
There really is too much to it to fully get into here. The big thing for consumers to remember is that the agent works for you or he works for the seller. One or the other. He is required to tell you up front have you sign an Agency Disclosure form to evidence that he told you. If he does not volunteer this information, make sure that you ask before having any discussions at all about a possible purchase.
Thanks so much for the clarification, which now makes it as clear as mud as they use to say!!! Just kidding I understand what you said.
The difficulty arises when buyers are comparing properly priced homes with overpriced homes. Not all homes priced at $1 million is worth anywhere near it. One might say that's why the price is called "asking price".
Example:
1. Let's say the market value (eventually as per lender's appraiser) is $800,000 but the seller and/or the listing agent decide to list the property at $950,000 (either because of lack of market knowledge or "greed", or "need"), then there is plenty of room to negotiate - or the property will sit till the seller takes the house of the market or the face reality.
1. Another, very similar house, is priced at $825,000 and will also appraise at $800,000. To offer $700,000 or thereabouts is unrealistic because that is not the "market".
The frequent media suggested rule "offer 10-15% less than asking price" is a generalization. Each home is unique; square peg/round hole
By and large (there are always exceptions!!), the general public is not knowledgeable enough to know the difference, although internet access provides a lot more information; that's one of the many areas where an experienced real estate agent still comes into play. We do this many times (or several times) a YEAR, whereas the average person does a few times in their LIFETIME :-)
JMHO
Oh, and BTW, not all real estate agents are Realtors...
The first step is to take the emotions out of it and if you find a home priced at 800,000.00 and it has a comp that accepted a 800K offer a year ago (although it may have closed 7 months ago), an offer of 700K might be accepted and it certainly does not hurt to try. And to be willing to walk away. Sellers have learned that they may only get one offer in this market.
This is not at all the advice I would have given 12 or even 10 years ago - the market has dramatically changed.
I am not a realtor - I am not sure if that adds or subtracts from my credibility on the topic.
Ok. If you are looking at million dollar homes, looking 100K up from your budgent isn't unreasonable. I wouldn't put too much into discount "averages" though, because that means that half were more and half were less. Real estate is probably one of the assets with the most variables that you can find. Especially, when you are looking at higher end homes like you are, it becomes hard to comp. Best of luck with your search and keep us posted!
ps. Don't ever fall for the other offers thing. Offer what you want to offer and don't get emotionally caught up. But, don't blame your buyer broker. She is just passing along what she is being told. It's all part of the negotiatiion game.
Tom: Re-read your post just now and thanks for advise. Two more things Im wondering what you think:
1) There are two ways to play the comp game - - a buyers way and a sellers way. As a buyer, I am using the low comps and all other rational and pertinant market information to couch my offer in. Thus if PruElliman or others are saying average 10% + listing discount, then that is the "baseline" I am going with...why should I think lower? Let the seller think on the low end (or use the high comps)
2) Buyers Broker: you say "he is just passing on what he is told"...but since he is a pro and contracted to me, shouldnt he be "filtering" the BS he hears from other brokers (either in his office or other offices)? Shouldnt that be part of his responsibility to me -- to guard me from the BS and not just inform me of the BS??? That's what ticked us off and we had to have a serious discussion to move forward with him after we signed his contract. I would think that a realtor pro would have their BS meter on a very sensitive level - - that's why I contracted to one - - for a filter. We now regard him sort of as a "double agent" - - in that we trust him only 50% of the time which is unfortunate until our contract ends......
1) Absolutely, buyers and sellers come at it from different angles. Sellers almost always think that their home is worth more then it really is, and buyers almost always think that it is worth less then it really is. The truth usually lies somewhere in the middle. Again, asking price has nothing to do with true value, but it does give you a read on seller motivation. Likewise, the buyer's offer price has nothing to do with true value. True value is only established when an agreement is reached.
2) You are correct. He should be filtering what he hears and advise you accordingly. He should also be a negotiating pro and advise you about the best strategies to get the home you want at the price you want. However, agents are humans, too, and he does not know for sure whether it's true or not. I, for one, am always leary when I'm dealing with an agent that I don't know. On the other hand, there are many who I know personally and trust to give me accurate information.
I give Tom and Elke a lot of credit. They have given wonderful advice to people about real estate on this forum despite the bad mouthing of their profession.
What does everyone else do for a living- I'd love to know.
Agreed. I have not posted much here but I have read many threads. They seem like two stand up people and agents.
1) Absolutely, buyers and sellers come at it from different angles. Sellers almost always think that their home is worth more then it really is, and buyers almost always think that it is worth less then it really is. The truth usually lies somewhere in the middle. Again, asking price has nothing to do with true value, but it does give you a read on seller motivation. Likewise, the buyer's offer price has nothing to do with true value. True value is only established when an agreement is reached.
2) You are correct. He should be filtering what he hears and advise you accordingly. He should also be a negotiating pro and advise you about the best strategies to get the home you want at the price you want. However, agents are humans, too, and he does not know for sure whether it's true or not. I, for one, am always leary when I'm dealing with an agent that I don't know. On the other hand, there are many who I know personally and trust to give me accurate information.
Thanks...very helpful. Per #1 above, the problem in the market generally is that the Sellers overprice, and the buyers are generally rationally-priced. Thus, there tends to be a big spread between List and Offer and THATS why those houses remain on the market. I tend to think they are priced-to-sit due not to the buyers offer - - but rather the Seller/Agent not researching the marketplace thoroughly. Its also actually amazing that so many listings have the taxes listed incorrectly - - priced too high! We always crunch the actual taxes first with our broker and its astounding to see that town/school and village taxes are listed wrong.....
I give Tom and Elke a lot of credit. They have given wonderful advice to people about real estate on this forum despite the bad mouthing of their profession.
What does everyone else do for a living- I'd love to know.
Eat risk for a living - that means calling a spade a spade, we don't sugarcoat anything. No using words like "cozy home" - say it as it is - rooms are small. Charming aka "old-fashioned". When asked is it worth the price or how much should I offer - the broker rarely says the truth, instead they are interested in earning the biggest commission they can so they say don't offer less tha 1-3% below ask or someone else will grab it? I wonder would they give the same advice or take it, if they were purchasing a car that had 3 wheels, sounded like a dump truck or hesitated on the first turn of the key?.
Thanks...very helpful. Per #1 above, the problem in the market generally is that the Sellers overprice, and the buyers are generally rationally-priced. Thus, there tends to be a big spread between List and Offer and THATS why those houses remain on the market. I tend to think they are priced-to-sit due not to the buyers offer - - but rather the Seller/Agent not researching the marketplace thoroughly. Its also actually amazing that so many listings have the taxes listed incorrectly - - priced too high! We always crunch the actual taxes first with our broker and its astounding to see that town/school and village taxes are listed wrong.....
Exactly - a home around the corner from me listed at 449K, sold for 439K in 5 weeks. Another home on the opposite block - listed at 699K 2.5 years ago, we told the owner they were not realistic, 2.5 years later, now down to 425K with nary an offer in sight. Had they listed it at 500K, they likely would have sold it quick, being on a main road without a garage does not help.
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or the face reality.
Charming aka "old-fashioned". 
