Jason, Home Buyer in Baghdad

Currently, is 10-15% below asking price a good place to start a negotiation given the current downswing?

Asked by Jason, Baghdad Wed Nov 7, 2007

Does getting the lowest price cheat my real estate agent from extra money? Basically do they have an incentive to see a home sell to me for as high as possible? Need an honest answer here folks since I see the majority of respondents are agents. Thanks

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Jason, I agree with Sylvia (must be that enigmatic smile! Very Mona Lisa like) the true pro is in business for the long haul. I've been doing this for now 29 years and have seen many a real estate who listened to WITFM (What's in it for me) and tried to churn and burn and crank the big numbers for the big dollars. This still goes on and it is strictly a numbers game as they belive another consumer is just a sign or ad call away. PT Barnum had another name for them.
However, it's been my pleasure to work with consumate pros who understand how hard it is to attract a good buyer or seller and then HOLD onto that new client long after the esrow has closed. The true pro knows you'll be talking to the neighbors, friends at work, family members, all those folks we wish for you to refer to us, and the true pro wants you to say, "Mike got me the best deal in town!"
My reputation in Sonoma County is impeccable. I guard it zealously and contribute to my community in many constructive ways and one of those ways is an ambassador to my industry. .Eeverytime I goof up and have a client out there with a bad taste in his mouth, I'm damaging many other Realtors plus putting my industry in a bad light.
I've been working with young families lately on "Short-Sales" and I consider it my 'pro-bono' work as the chances of getting paid are very skinny and we as Realtors/Licensees sometimes have NO IDEA how much we will be compensated. But when you see a young couple with two small ones throw up their hands and say we can't keep these payments up and then breakdown at the kitchen table due to shame and guilt--I'm not thinking how I'm going to get paid out of this mess, I'm thinking how do I get these kids out of THIS MESS.
Many Realtor/Licensees go around thinking they deserve a better market, better clients, better homes to sell and better commissions. I remember that great line from the "Unforgiven" when Clint looks at Gene Hackman and replies to his lament that he doesn't deserve to get shot, "Deserves got nothin' to do with it!"
You get in life what your daily actions bear out.
3 votes Thank Flag Link Wed Nov 7, 2007
Everyone, thanks for your answers. Patti has a good point. I apologized for using the word honest when I should have said, "Need as unbiased an opinion as possible, folks." You have all exceeded my expectations.
2 votes Thank Flag Link Wed Nov 7, 2007
Your agent's fiduciary responsibility is to you and her goal is to help you achieve YOUR ultimate goal.

With that said, part of your agent's job is also to help you structure an offer that will ultimately get you the home you want. Part of that structuring entails studying your current market and various other factors to help you formulate the strongest offer while at the same time protecting your best interests.

There is no such thing as a standard percentage off ask price from which to start an offer. It is so specific to your market that a blanket percentage may actually harm your chances of meeting your goal. And when I say this, it could go either way: You may actually pay too much!

As an aside, I'm not sure what you mean by "Need an honest answer here folks since I see the majority of respondents are agents." I can't tell if you are insinuating that agents will not give you an honest answer because they are agents, or if you want an honest answer FROM the agents. There are many fine agents on this board who have shown time and again via their participation and advice that their intentions are to provide honest and helpful feedback to consumers, so I hope you will find the answers you receive to be the same. And so you understand, the reason why the majority of the answers are from agents is because, according to Trulia, the purpose for this particular forum is for consumers to "Get real estate advice from those in the know." Hence, you will see many real estate agents participating.
2 votes Thank Flag Link Wed Nov 7, 2007
Patti Pereyra, Real Estate Pro in Chicago, IL
MVP'08
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I am not an agent or a broker, I am a home owner who just put my house on the market. I have already priced it $12,000 less than what I paid. Why? 1.Because of the sales price of comperably sized homes in the area that have sold in the past 6 months. 2. If I list it for what it is worth (212K), that price is over the threshold of anyone looking for a house in the 150-200K range 3. I want to sell the house so I can move in June and hoping to catch the PCS timeframe. Yes, it is true the listing agent gets a certain percentage of the sales price, but if it doesn't sell, they get nothing. Agents have a fiduciary obligation to get you the best price for your house and the Listing Agent represents you.
1 vote Thank Flag Link Tue Mar 30, 2010
I got three today signed that were 17.4% below asking. It is easier to find sellers willing to do it before finding a place. So have your agent call evry seller he has a listing for and see if they'll consider an offer between 15% - 20% below asking. Out of the 100 or so I have, 1 person said yes, he made $100K profit on selling the three houses he sold as a package.

Other than that, expect to hear no. When that happens and you really want the house, now you're probably going to be in a position where the seller has a low opinion of you. To me, that's the wrong type of eergy in the deal.

No one every tells you how they get 20% off. It's not going to be buy insulting someone. Rather you find people who still make money but are willing to share thier profits with you. The bad side is the "asking first" model only produces a small # of deals. They aren't always luxury homes, if you know what I mean....
1 vote Thank Flag Link Thu Nov 8, 2007
Hi Jason

There are two parts to your question -

First one, is a 10% to 15% below asking price a good place to start?

Absolutely, you can start with 10 – 15% below asking price (or even more); however, like Fence Sitter (a home buyer) said, it depends on the price point of the house – actually how close to the market value the house is listed at, how many houses are on the market now for how long, as well as the condition of the house, etc.

The exact reduction of percentage from listing price will best be answer by your local Realtor who is familiar with the market. Your Realtor should also be saavy enough to be able to negotiate on your behalf and be able to hold the deal together if the seller considers your offer offensive (yes, they can be that way, but I don’t blame them); there is a lot of skill involved in successfully gauging the response from the listing agent, and in presenting an offer.

So, that’s the first part.

The second part of your question concerns whether your Realtor will want to make a lower offer for you because they might make less commission. Fence Sitter said that :’Your agent will not try to keep the price high as they want the transaction to close a soon as possible for pay day.” – BTW, Fence Sitter, I have respect you, but I am quite offended by this from you! I would think you know much better than this! Also, your logic is wrong. It would be much faster to close the deal if my buyer client pay full price on a house.


Here is my answer to the second part of your question - -

First, as a Realtor, my goal is to build long term relationship with my clients. A person may change their homes several times in their lifetime. My goal is to be their Realtor for all those homes, both buying and selling. The only way I can accomplish that is to provide the best service, to help them find the best house for the best price that they would love. They might even want to recommend me to all their friends and relatives

Second, I want my clients to eventually become my friends and I can't make that happen if I am only after money.

You'd say, sure, that's sounds good and noble, but are you being ‘Honest’ when you said that because after all, you are a Realtor. So,

Third, we can get down to the core of your question and do a little math:

For the sake of easy math, i am going to assume that you are buying a house for $700K (I am in Marin); and the seller is offering 5% commission. The norm is listing and selling agent split 50% / 50%, so, my brokerage will be getting $17,500. Now, let's say that you want to offer $650K and was accepted. The commission my brokerage gets will be $16,250. For $50K difference in offering price, we are talking about a difference of $1,250 in commission. This commission will be split between my brokerage and me.

Do you think I will let you bypass a $50,000 saving for a maximum of $1,250 on my companies commission ? (much less for me due to the split).

You would like the whole experience so much better if you can get a $50,000 discount on the house and I will have so many more opportunities to work with you in the future.. On top of that, you might like me well enough that you';d recommend your friends and families to me. '

So, now do you see why the majority of the Realtors will help you with making a lower offer, not because they want to close as fast as possible, but because they want to serve you better and at the same time, build a great, long term relationship with you.

Please let me know if you have more concerns.

Thanks,
Sylvia
1 vote Thank Flag Link Wed Nov 7, 2007
Sylvia Barry,…, Real Estate Pro in Novato, CA
MVP'08
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Jason,

You may not realize how many questions you are really asking here. Your realtor should be concerned with you purchasing a home that is not only right for you but is in your budget. Repeat customers come from satisfied customers. satisfied customers tell all their friends. As a realtor my reputation is everything! therefore, getting the lowest price does not cheat your realtor even though your realtor will be making less money on this 1 sale. As far as how low to offer. Different parts of the country have been hit at a different rate. Before you automatically decide that you will be offering a certain percentage below the asking price no matter where it is you may want to have you realtor pull up some recent sales in the area that you are interested in. Find out what has sold that is similar to the property that you are looking at within the last 6 months. Take into account how long that house was on the market and from that you should be able to come up with a fair offer. You never know that house that you are looking at may be priced right already!!!!!

Best of Luck
1 vote Thank Flag Link Wed Nov 7, 2007
Your agent should take more Pride in getting you the best deal instead of worrying about there commission. Because if they get you a good deal on a home, there is more of a chance that you will use them in the fututre.
1 vote Thank Flag Link Wed Nov 7, 2007
Hi Jason:

This question comes up a lot here, but there really is not "right" answer. In one case, offering the asking price as quickly as possible might be the best approach because the home is priced to sell. In such a case, the home is a bargain and it will be gone soon. In another case, you might just want to walk away until the buyer gets realistic and lowers the price significantly. The vast majority of cases fall between these two extremes.

The point is simple: there is no formula for negotiating price. You –– hopefully with the help of your real estate agent –– should get a good idea about what the house is really worth based on previous sales in the area, then craft your response from there.

I think this question comes up so often because many people see negotiations as a contest. People are afraid they will "leave money on the table" of "be taken advantage of." Unfortunately, the housing market is complex. Though you want the best deal you can negotiate, you also have to worry about someone else coming in and offering more than you are. If you frustrate the sellers with hardball tactics, they may just walk away and wait for someone else to come along, or they may harden their position and refuse to take a lower price even though they would accept that price from another buyer. When buying, the best negotiators focus on what they want and what they are willing to pay rather than spending many frustrating hours trying to second-guess the sellers. And generally, these buyers are more successful in reaching a mutually-agreeable conclusion.

Kind regards,
Ron Rovtar
Prudential Real Estate of the Rockies
Boulder, CO
303.473.1926
0 votes Thank Flag Link Tue Mar 30, 2010
It can be insulting to the sellers if they already have their home priced competitively. I would not even consider an offer and would take me home off the market if someone came to me offering 10-15% below my asking price. Not everyone has their home overpriced!
0 votes Thank Flag Link Tue Mar 30, 2010
>> "... is 10-15% below asking price a good place to start a negotiation..."
Negotiating for the best price doesn't always have a formula that's as cut and dry as starting an offer x% below asking. If the property is highly overpriced, then you may want to offer even less to start. If the property is underpriced, you may not want to offer that much less. Knowing what other similar homes have sold for, how long they've taken to sell, how much the seller may have paid towards the buyers closing costs, how long this property has been on the market, etc. are all factors that should be considered when making an offer.

>> "Does getting the lowest price cheat my real estate agent from extra money?"
Let's take out the word "cheat" because that implies depriving or deceiving. Your agent gets paid based on the final sales price so they get paid more the higher the price of the home.

>> "Basically do they have an incentive to see a home sell to me for as high as possible?"
Using the word "incentive" implies that there is something to be gained by your Realtor. Realtors are bound by a Code of Ethics which require them to put your interests ahead of their own and there is no "incentive" that should break their obligation to that code. Also, by putting your interests first most professionals know that means you'll end up a happy past client and will continue to use their services and refer them additional business, so there is another form of "incentive". Knowing that you meant would the increased/decreased compensation to your agent cause them to have more incentive to get you to pay a higher amount for a house, consider this, the average cost of a home in the Harker Heights / Fort Hood area is $126k, and with a price that was 10-15% less the total difference in pay to your agent could be as little as a couple hundred dollars. Do you consider that 'incentive"? Also, many of our area builders are currently offering much larger commissions to buyers agents than what regular sellers are offering in the MLS, but that doesn't mean they have the only homes that are selling.

Hope this helps, I tried to answer your questions as directly as possible. Good luck! The link I provided gives a variety of info on buying in Texas and has links to the Realtor Code of Ethics too.
0 votes Thank Flag Link Thu Feb 14, 2008
Offer price all depends on the market you are looking in. Austin for example has multiple market areas with varying demand and price ranges depending on what part of town you are looking. Best thing would be to first have your own Representation/Realtor(r) and ask them to run a comparative market analysis for the property and specific area.

Broker fees are usually based on the final sale price, a good agent will/should put the cleints interest and treating all parties fairly above all. The Broker fees is a basic concern for all Realtors(r) as this is how we make our living, but it should not be the primary or basis above the best interest of a client.
0 votes Thank Flag Link Sat Nov 10, 2007
Jason...good questions..... I just think there's no good general rule when bidding. It all depends on the property, the seller, the timing, and the pricing. Some people price the homes to sell. If that's the case and you bid 15% below the asking price, you'll watch someone else move in your home. Some overprice the home and if that is the case then you might be able to get a 15% discount. It will just depend on the individual situation. It might also depend on your offer. If you're putting down a significant amount of cash or high amount of earnest money your offer will be stronger and perhaps your negotiating leverage more. If you are trying to use 100% financing and minimal amounts of option and earnest money then you might not get far. One good starting point would be to have your agent prepare a CMA for the neighborhood of the home your bidding on. You can see the percentages of list to sold prices and then perhaps bid accordingly. Realistically in the neighborhoods where I sell and for homes people typically want to live in the bid to ask ratio is closer to 2.5-3% instead of 10-15%, but it all depends on the property. If you bid 15% below asking for most of the properties I list the seller normally won't even respond. That's not trying to be mean or disrepectful to you in any way, it's just that they don't want to waste time with someone who is not serious about buying their property. To them it's not even a starting point. I don't think it really cheats your agent out of any money. Of course the lower the pruchase price, the less commission they make, but I think most are motivated to get you the best deal. Now with that being said if the going ration is about 2.5% discount and you insist making offers continually at 15% below market and they continually don't work, at some point they may want to charge you a retainer fee, or a transaction fee to continue on that path due to the amount of work involved versus your success ratio of getting the property. Thanks for your service to our country and let us know if you need assistance finding an agent that will work for you.
Web Reference: http://www.teamlynn.com
0 votes Thank Flag Link Fri Nov 9, 2007
Bruce Lynn, Real Estate Pro in Coppell, TX
MVP'08
Contact
Follow the news! Just pick up a newspaper and look at price trends in your location. If you are in Detroit, you can go low, really low. If you are in Philly's Main Line looking at million dollar plus mansions, heck, take off $200,000 or more. But if you are looking at a 1000 square foot ranch house on a pin head lot expect to pay $300 per square foot. (yipes!) The market is nuts sometimes.

Ask your agent. If you are really serious about buying and not just throwing out 50 offers until maybe you get lucky - he'll help you get moving!
0 votes Thank Flag Link Wed Nov 7, 2007
First, noticed you are in Baghdad. Thanks for serving.

Next, do NOT place 'a hard and fast rule' to lowballing. Each deal is different and a good buyer broker will know the 'right' number to start at.

Lastly, I, more than anyone, understand why consumers doubt real estate agents but common sense dictates this, if you are using a reputable broker, and you are unhappy with the deal the agent negotiates for you, you won't refer business. Just like all other professionals, ie: doctors, insurance agents, attorneys, etc... we are in a client based business. Every deal we do is judge based on performance.

Yes, I have an incentive to promote your financial interest. Like most businesses, no one gets rich alone. You win the broker wins and together a successful partnership is formed.

Keep asking questions, this is a great forum.

God Bless,
Susan Walker
0 votes Thank Flag Link Wed Nov 7, 2007
I'd rather be paid less than not at all.
0 votes Thank Flag Link Wed Nov 7, 2007
Jason:

"Fence Sitter" said start at 30% off the asking price. Wow.

What you really need to do once you find a home you're interested in is let your REALTOR do the work. Have them research the sales for the past 3-6 months. Then see how long they stayed on the market, what their original asking price was, etc. When you give a lower offer, you are more likely to get an acceptance if you have something to back it up with. Does the home need repairs and/or updates? If so, figure how much they would cost and structure your offer based on all these facts. Offering 10%-15% off their asking price may be too much or too little.

Getting the lowest price is not a REALTORS goal. Have a REALTOR represent YOU. Basically, I would rather make less on a transaction and be assured that you had a great transaction, felt that you got a great price on the home. I want to earn future referrals. Receiving your sincere recommendation to your friends and family is worth more than a few hundred/thousands at closing....
Web Reference: http://www.RotarTeam.com
0 votes Thank Flag Link Wed Nov 7, 2007
Jason, I wouild start at 30% below asking but it depends on price point and competition (# of homes for sale). Your agent will not try to keep the price high as they want the transaction to close a soon as possible for pay day. The listing agent has a fiduciary responsibilty to the seller to try to maximize price. In most markets and most price ranges; buyers are calling the shots and will be through mid2008.
0 votes Thank Flag Link Wed Nov 7, 2007
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