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New Homebuyer, Home Buyer in Madison, WI

If multiple houses/condos in the same neighborhood/complex aren't selling, how low below asking is a reasonable first offer?

Asked by New Homebuyer, Madison, WI Thu Apr 19, 2012

We're finding that a few of the areas we are considering have a high inventory of single family homes and/or condos we are interested in that are all pretty identical in style/layout/size/price. Many have been on the market many months, a few even closer to a year, and some we have even seen be put on the market, taken off briefly, and then relisted. (We have been looking for about the last year). Many don't appear to have had price deductions recently, if at all, so our question is what is a reasonable first offer that we can make for these types of properties? Is there a rule of thumb for what to offer for a property that has been on the market a few months vs. closer to a year? I feel like there is so much inventory in these neighborhoods with many options to consider, so we want to use that to our advantage, but not offend anyone in our asking price. Any suggestions?

Thank you.

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The typical answer to this question is you have to look at what has recently sold and compare those prices to the condition, size, etc... of the home you are considering offering on. However, in this market, you need to strongly consider the inventory available when making these decisions. Typically if a home sits on the market for 180 days or more it is over priced or there is something unique about it that buyers don't like, or it required repairs and cannot be financed.

The homes that are selling right now are in the top 1/3 of condition and bottom 1/3 of price. Therefor if you have 3 almost identical condo's, in almost the same condition your offer needs to be much closer to asking on the one listed the lowest, because that one is the most likely to have activity and/or sell. This rule increases exponentially when the condition of the lowest priced unit is superior.

It is not at all uncommon to have bidding wars in the current market when homes are priced correctly. Finally, I would leave you with a piece of advice, to buy the HOME that is right for you. Do not split pennies when it comes to buying a home. Unless you are buying an investment property, choose the home that makes you the most happy. You have to live there a while!

Oh, and make sure you have a good Realtor! (feel free to contact me for a recommendation if you don't have an agent)
1 vote Thank Flag Link Fri Apr 20, 2012
Madison Buyer Agency. I work with Buyers and Buyers ONLY. We can tour as many of these houses as it takes to see which one is the best match for your needs and budget. We can research comparable sales, last price sold,approximate mortgage payoff, pending divorce , etc.

When we have gathered all the available information, we can intelligently structure an Offer that will give you the best possible chance of owning a house at the best possible terms. Due diligence and a game plan will improve your position and help you make a good purchase decision.

Like a previous posting stated: Price is not the only thing to negotiate.

Google me: "Madison Buyer Agency" , see my reviews on Zillow.
0 votes Thank Flag Link Fri Apr 20, 2012
That is a great question. I think that is one that needs to be answered on a specific case by case situation with your own buyers agent. You can discuss a strategy and look at similar sales and competition around. Then make a decision on how to proceed. Please don't rely on advice from here however well meaning it is. Don't have a buyers agent? pick one or two from here and pick one you feel comfortable with and who you feel has your interest at heart.

Good luck in your home purchasing venture.
0 votes Thank Flag Link Fri Apr 20, 2012
Hello, First of all, are you looking to invest to sell right away. Do all of these homes have everything you are looking for? Do they all have great curb appeal? That always helps sell a home. Have you seen the interior? Do they need updates? Are they all in good condition? You should consider hiring a Buyer Agent to represent you and tell them what you really are looking for . They can give you advice. Check the assessed value, condition, etc. When you see a home that is appealing to you from exterior and everything is great interior wise, then you have them do a market analysis if you are skeptical. Are the sellers in dire need, etc. I used to say, "if you want it and can't find anything you like better, then buy it" I guess it depends on what your financial situation is also. I don't think there is a rule of thumb .It used to be sometimes 5% of asking price but now it is a different market. Good Luck!
0 votes Thank Flag Link Fri Apr 20, 2012
Does it seem likely or even possible, that all of the houses/condos in the few areas you are considering have all been just sitting there waiting months or an Offer? you suppose that maybe the Sellers are upside down and actual market-value offers would turn them into a Short Sale and they don't have the resources or lender consent to complete a short sale?

Maybe people have been making low-ball offers all along and these patient Sellers simply turn them down. Like they will with yours. Making a Low Offer doesn't turn patient/stubborn Sellers into closings. Low Offers often irritate Sellers, causing them to dig their heels in and make a high counter-offer. Start wherever you want. Keep in mind that the price negotiation might be the first item to negotiate but it is certainly not the last.

Sounds like the first thing you need to figure out is: Condo Or House. Like Fish or Bicycle, Take-n-Bake or Wood-Fired, troll or bobber.
0 votes Thank Flag Link Fri Apr 20, 2012
1. To get the best price and terms, hire a buyers agent. Their responsibility is to be your advocate. There is a state approved form to do this. Without this agreement, the agent who writes the offer for you is working for the seller and the agent's job is to get the seller the best price and terms. It should not cost you anything. The seller's broker splits their fee with the buyer's agent.

2. What to offer for a property is different in each situation and depends on the buyer, seller, market and home.

2. Know what comparable homes have sold for in the last six to twelve months. These are excellent benchmarks.

3. What is the seller's situation and how motivated are they? What are their goals? What is in it for them?

4. How badly do you want this particular home? Would you be OK if you didn't get it after making an offer?

5. How long has it been on the market. Generally, but not always, the longer it has been on the market, the more flexible the seller is.

6. There is some risk in making an offer that is significantly lower than the asking price. The seller will not counter.

7. Don't take anything personally. Just be aware of the risks of a low offer. As a buyer's agent my job is to help you understand your options and the consequences and deal with the seller.

8. Finally, if you don't ask the answer is always no.

I hope this is helpful. If you'd like to chat informally, give me a call or drop me an e-mail.
0 votes Thank Flag Link Fri Apr 20, 2012
Your approach seems reasonable. There is no rule of thumb regarding offering prices. One seller is going to be more motivated than another, so what one might decline, another might be happy to take. Since the properties are similar, you can start making offers to see who shows interest. Properties that have been on the market for a year apparently aren't sufficiently motivated to reduce the price significantly and properties that are just listed might already have plenty of motivation. A call to the listing agents might give you some insight.
Good luck!
0 votes Thank Flag Link Fri Apr 20, 2012
You should offer a price that makes sense for you based on the comparable properties that have sold. Ignore the asking price.

I will say the Madison market has really heated up this spring. March and April have been record months for putting properties under contract. In the past 3 weeks I've several multiple offer situations on properties our buyers have been interested in. So, you may not get as good of a deal as your hoping for.

That being said, there are still a lot of overpriced properties sitting on the market. If you aren't already working with an agent, feel free to privately send us the address of a specific property, we can look up the comps for you, and tell you what we think it should sell for.
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0 votes Thank Flag Link Fri Apr 20, 2012
Your best option is to only look at homes that have sold within the past 6 or 12 months. Active listing prices may not reflect the real market value regardless of how long they've been sitting on the market.

Also, think of this as a business decision - include the comps you use with your offer to show the seller you are not trying to lowball.

Best of luck,

Oggi Kashi
Broker Associate, Paragon Real Estate Group CA DRE 01844627
All data from sources deemed reliable but subject to errors and omissions, and not warranted. truonly
0 votes Thank Flag Link Thu Apr 19, 2012
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