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What would you base it on, if not the value you perceive?
List price?
Quote:
Originally Posted by MikeJaquish
Make your offer on value and what you are willing to pay, not vs. list price. In any market.
Buying a house is - usually - a negotiation. You do not start off a negotiation with what you are willing to pay. Not if you are trying to get the best deal.
If you are in the market for a house, and set your budget at a max of $470 - that is what you are willing to pay. If you look at a house that you really like, and are prepared to make an offer, and that house is listed at $474 - is your first offer $470? Why wouldn't it be? That is what you are willing to pay!
You don't offer $470. It may be what you wind up negotiating to, but you don't start there.
You've got to do your due diligence relative to the market and comps. No matter what the current real estate climate is, doing this gives you the detail and background needed to make a fair and realistic offer. There is no prescribed "formula" that can be applied across the board. For example:
Made an offer on a piece of unimproved land in a development. Due diligence revealed that the land was part of a flood plain, but was buildable. A very hot market with parcels flying off the shelf with DOMs of maybe 3-5 days, if that. This one had a DOM of 200+ days. A tell for sure. Offer was below the list price based on the questionable nature of the property and DOM. Offer was accepted. Sale went down the drain due to a lack of disclosure and discovery of additional changes by the county that rendered the land unbuildable.
Made an offer on a SFH over the ask, about 5%. Most comps showed sales in that range (5% over listing price.) Offer accepted.
The point being that your offer has to be crafted based on a large set of variables, all of which play into the process and change on an almost daily basis. It's also directly related to due diligence on your part and that of your agent - there are so many resources for information out there that an aggressive buyer or agent can glean a great deal of information to guide said offer.
RM
Thank you. There is no prescribed "formula" that can be applied across the board - kinda wishing there was!
That is a cart before the horse. And a thank you to the person who posted it. It's a clever picture.
OP, there is no rule or formula. You have to know the market, what things sell for, how much the repairs are going to cost, and consider how long the property has been on the market.
I don't consider 10% below the asking price to be an insult, but some sellers will and they won't even counter.
The biggest discount from asking that I've gotten is 25% off asking, but I carefully considered the value and asking was way over value. Seller didn't even quibble about my offer because he know he was listed way over value and testing the market. On another house, I knew it was listed below value and I offered over asking price and got it even though there were half a dozen offers at or above full price within 24 hours of listing.
If you want to buy at bargain prices you can't be lazy about it. Put in the time to learn your market and then don't be picky about what you buy. Also be prepared to do repairs because it is the houses in rough condition that don't sell for full price.
Buying a house is - usually - a negotiation. You do not start off a negotiation with what you are willing to pay. Not if you are trying to get the best deal.
If you are in the market for a house, and set your budget at a max of $470 - that is what you are willing to pay. If you look at a house that you really like, and are prepared to make an offer, and that house is listed at $474 - is your first offer $470? Why wouldn't it be? That is what you are willing to pay!
You don't offer $470. It may be what you wind up negotiating to, but you don't start there.
The question is, where does one start?
So... Value doesn't matter. I get it. I have worked with plenty of people who have to win the card game, with value secondary. It is not a wise approach, but it is not uncommon.
So. To reset the example.
So, IF the market says a property is worth $440,000, but I list it at $525,000 and you wrangle a 10% discount off list price to fit your budget, would you be getting a great deal due to the discount?
No. There is NO formula. Sales are value-driven.
Ok, let's assume that in 2.95 years, we go back to a buyer's market.
There is a house listed for $479 in a nice area. The comps I do tell me that houses in that area that are similar in sq ftg, amenities, yr built and condition, have sold for anywhere from $445 - $470.
Nowadays, I might be lucky to get that house for $479. But remember - we are talking a buyer's market 2.95 years from today. What would be a good starting place for a first offer?
If not prepared to pay at the very least, list price, you shouldn't be looking at that property. Once you submit your property, the seller can accept, reject or counter. Counter is usually off the table in today's market. They reject and go on to the next offer. If you want the property, be prepared to pay for it. If that doesn't work for you, then you are not a buyer in today's market or any other market actually.
If not prepared to pay at the very least, list price, you shouldn't be looking at that property. Once you submit your property, the seller can accept, reject or counter. Counter is usually off the table in today's market. They reject and go on to the next offer. If you want the property, be prepared to pay for it. If that doesn't work for you, then you are not a buyer in today's market or any other market actually.
I hope that someone like you is around when I list my property for a sky-high price.
Ok, let's assume that in 2.95 years, we go back to a buyer's market.
There is a house listed for $479 in a nice area. The comps I do tell me that houses in that area that are similar in sq ftg, amenities, yr built and condition, have sold for anywhere from $445 - $470.
Nowadays, I might be lucky to get that house for $479. But remember - we are talking a buyer's market 2.95 years from today. What would be a good starting place for a first offer?
The area I've lived in has NEVER been a buyer's market. I've been here 16 years. You cannot assume it'll be a buyer's market in 2.95 years. Our house has almost doubled in value since we purchased it 16 years ago, despite much nicer, fancier, newer homes being built all around us. We sold our house - in a weakening NJ market - for our asking price. We then bought our new house in a different state over asking with competing bids. Even during the economic depression in 2008-2011, house prices in our area stood firm and increased at 1-2% each year versus the normal 3-5%.
So much like Rakin said, when you are ready to purchase a home, THAT'S when you evaluate your market and determine what a good offer would be on the home you want.
The lowest similar comp in the neighborhood. Probably no more than 10-12% below asking in a buyer's market. The lowball offers are often considered insulting and won't lead to negotiations. The house will sell for what the market thinks it's worth. It depends on whether you think the house is overpriced or not. If it's a bargain your bid should to be different than if you think it is overpriced. Also depends on whether they have already lowered the asking price. When we sold our house there were a few bidders who gave us lowball offers. I don't know what they were thinking. It wasn't worth countering so we just said no.
Quote:
Originally Posted by HendrixStyle
Ok, let's assume that in 2.95 years, we go back to a buyer's market.
There is a house listed for $479 in a nice area. The comps I do tell me that houses in that area that are similar in sq ftg, amenities, yr built and condition, have sold for anywhere from $445 - $470.
Nowadays, I might be lucky to get that house for $479. But remember - we are talking a buyer's market 2.95 years from today. What would be a good starting place for a first offer?
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