Home Buying in Saint Johns>Question Details

Alicia, Home Buyer in Portland, OR

How low is too low to offer?

Asked by Alicia, Portland, OR Sat May 31, 2008

My husband and I are looking at a townhouse in N. Portland listed at 139K there are not many comps in the area for the 2B/1bath. We just started working w/ a new real estate agent and not from here we do know know what to offer. Back in NY 85-90% is a typical starting point. Is offering 125K too low? I hear that RE agents are not the ones' to tell you what to offer (then who is???)

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A few quick comments: Who told you real estate agents aren't the ones to recommend what to offer? True, it's ultimately your decision, but agents are likely to be able to provide the best advice. Listen to other people for advice!

The first piece of traditional advice is to look at the comps. Apparently you've done so; you say there "are not many." You may have to make the best of what you have. And bracket, too. That is, if there are some 2/2 townhouses listed, they're not great comps but yours (being just a 2/1) is probably worth less. Your agent can give you some other tips. And the advice below is good, regarding condition, location, and so on. And one other thing your agent can do: Ask the listing agent for the comps on which he/she based the $139,000 price.

The other factor I always inject is what you can afford. Not what you're prequalified or preapproved for. But what you can comfortably afford. That number may be less than your prequalification number. That should be your maximum price; your offer should be at or lower than that.

Let's say, though, that you're prequalified to $140,000, and that there are no decent comps. At this point, gather any information you can about seller motivation. Are they selling because they've already bought a new home. (High motivation.) Or are they just testing the waters and have said, "Well, if it doesn't sell for our price, we'll just hold off for a year or two." (Low motivation.) The higher the motivation, the more likely they are to take a lower price.

Then gather information about what they bought the property for and (if possible) what they owe. Understand: That has no relation to its value. However, as a practical matter, if they bought the property for $120,000 a couple of years ago and are trying to sell for $139,000, then they don't have a lot of "wiggle room" to negotiate. On the other hand, if they bought 10 or 12 years ago for $45,000, then there's plenty of room for negotiation.

Ignore any statistics you may see about properties generally selling for, say 95% of their list price. First, that's a generalization, and many don't.

Second, you don't know what price reductions had occurred, nor what seller concessions were offered. For example, a property is listed at $200,000 and it sells for $190,000--5% lower. But is it really 95% of the list price. Not necessarily. Suppose the house originally was listed 9 months ago for $249,000. It's been reduced over that period to $200,000 and sells for $190,000. That's just 76% of the original list price. And let's suppose there were 3% seller concessions. So, while the house "sold" for $190,000, the seller actually received (before having to pay commissions, etc.) 74% of his/her original list price. Yet the number that would show up and be quoted is that the house sold for 95% of its listed price.

Finally, one of the other comments below suggests that a modest reduction from the list price won't "insult" the sellers. Look: Don't worry about insulting the sellers. Some sellers get insulted if your offer is a penny below the asking price. They think their home is the best one in the city, and they're already unhappy that their Realtor has suggested a lower list price. On the other hand, some sellers are highly motivated, and would be overjoyed at any offer. You're not a psychiatrist; you don't know the seller's innermost psyche. Don't worry about insulting a seller. Worry about making an offer that represents a good value to you and that you can comfortably afford.

I know: You're probably still hoping for the "magic" number: What's the right number? There really isn't one. But do those first two steps--gather whatever comps you can and then figure out what you'd be comfortable paying. That's your ceiling number. Offer less. And if offering 85%-90% is what you'd like to try, and that number meets the two criteria above, then give it a try.

Good luck.
2 votes Thank Flag Link Sat May 31, 2008
Don Tepper, Real Estate Pro in Burke, VA
Hi Alicia-

Real estate agents are not the ones to tell you what to offer. BUT... they are the ones to provide you with the information. help you understand and prioritize that information. And they are the ones to help you put together an offer that has a chance of being accepted by the seller.

An offer is a many-legged stool and price is just one of those legs. An important one, but not the only one. Your agent can help you put together an offer that stands strong on all those legs.

You are wise in not relying on your experience in another maket to decide what to offer. Even within the Portland area, there are wide variations in the difference between list price, final list price and closing price from one area to the next. Your agent can look at the transaction history on the RMLS of sold homes in the area to get that information.

Best of luck with your offer!

1 vote Thank Flag Link Tue Jun 10, 2008
The best thing to do is go with your instinct. All the seller can do is say "no." You will probably receive a counter offer. This is the procedure. Eventually you both will arrive at a mutually desireable price. I can help by researching the surrounding homes to see what prices they sold for in the past 6 months, and go from there. I will share all the information I have so that you will be totally informed.
Web Reference: http://www.LexiClark.com
0 votes Thank Flag Link Tue Jun 17, 2008
Great Question. Ask your agent to show you a CMA, for townhomes in the area, that are active, gone pending, and sold in the last 3 months. You will want to look at the numbers, as well as the condition of this home compared to others that have sold in the area.

Also, look at the property, is it on a busy street? Is it next to a commercial building, gas station, etc? Are there any drawbacks that can may make it hard to sell in the future? Is it a fixer?

Additionally, do you want the seller to pay for a home warranty? Closing costs? HOA dues?
These are things to also consider when trying to decide how much you are willing to pay for a property.

Additionally, have your agent pull a Trio, this will show, who owns the property,( is it bank owned?) and how much is owned on the 1st, (typically).
0 votes Thank Flag Link Mon Jun 9, 2008
You wrote in part: I hear that RE agents are not the ones' to tell you what to offer (then who is???).

I'd like to address that, and shed a little light on why that is.

I'm the Broker/Owner of EBA Portland, LLC an Exclusive Buyer Agency here in Portland. My clients rely on me emphatically for their real estate purchase. But in entire length of my career, I have never told my clients what to offer.

The question you asked in good. Buyers / Sellers turn to professionals exactly for the purpose of representation, direction and guidance. BUT . . . the truth is; you DO NOT WANT an agent "telling" you what to pay for a house. Just as you DO NOT WANT an agent "telling" you what price to place on your home for sale (as a seller).

Here's why: it's to protect you! Believe it or not.

Agents can provide price ranges, suggestions of pricing, etc. and this is entirely ethical. But if a listing, for example says, "You can get $XXX,000 for your house. List at $XXX,000" and the sellers does this, what if . . . this was a low-ball price to begin with just to get the place sold quickly . . . not for you, but so the agent can get a commission?

A truthful agent will provide you with RECENT comps of the area, and "discuss" pricing strategies with you. Both in the home purchase, and the listing sides.

A truthful agent will provide you with information that you -- they one paying for the home -- can make an intelligent, informed consentual decision.

You should NOT rely on an agent to tell you what to pay for your house. You should rely on your agent to discuss pricing strategies, negotiation strategies, explaining the recent comps, etc.

I always educate customers and clients alike on the very subtle difference between of "telling" a client vs. counseling a client.

Can you imagine a buyer who is angry at their agent if they lost the house they loved: "YOU told me to offer that price. I trusted in you, I relied on you and YOU told me to write up the offer with that price!"

But the house was sold to another buyer who might have had a different pricing strategy.

The point is that the home might have been sold to the other buyer ANYWAY . . . but, if the buyer's agent TOLD them what to offer, is very difficult to repair that trust once it's gone.

I recently had an out-of-state buyer who wanted to pay $XXX,000 for the property. They liked it SO much, they were willing to pay full price. While I did NOT tell them what to offer, I spent a lot of time preparing comps for them to look at, and spend time with them explaining the market. Buyer said, "Okay, let's drop the price, and offer $10,000 less."

I could have done that too. But, I actually do have a good finger on the pulse and suggested that the buyers might want to start off with an offer $20,000 less, and explained and counseled them as to why!

But I never TOLD them what to write up in their offer. It's unethical on so many levels to do this.

Our deal was accepted as written with the $20,000 OFF list price!

Here's a good example of how an agent, while not "telling" their clients what to offer, got them to understand and feel comfortable with their offer and saved them money.

I hope this helps!
Web Reference: http://www.ebaportland.com
0 votes Thank Flag Link Sat Jun 7, 2008
Hi - I've been selling real estate here in the Portland metro area for almost 10 years. I just wrote offers on 3 different properties and all 3 net the seller much less than the asking price. So far one offer has been accepted and the other 2 are still being negotiated. It is definitely the job of your Realtor to do some detailed research about the home you are buying to help determine a starting price.....including being able to determine approximately how much the seller owes on the property. In many instances right now - sellers owe more than they can sell for and don't have the luxury of doing alot of negotiating as the final decision will be up to their bank. On one of the offers I just wrote I was able to determine fairly quickly that the seller had bought another home and moved into it about 6 months ago and has been making double payments while the home for sale sat vacant. I also easily learned almost exactly what he owes and that he has $200,000+ equity to play with. He's a desperate seller with no offers on the table and he's a little overpriced. Our offer was $39,000 less than list price. That may sound like we were just trying to low ball him - but realistically this is a fair price in today's market. And when presenting an offer to the listing agent that's less than they are asking - it's always very helpful to have your Realtor provide as many comps as possible to justify why they landed at the price they did. Another offer I presented yesterday - we wrote for about $35,000 under list price - I had 102 active listing comps to justify our price and show that we had actually offered about $10,000 more than the average price per square foot for this home. The more you can back up your offer to show that you aren't trying to insult or take advantage of the seller - the more likely he will be to give you serious considertion. It's when we present low offers with no reasoning that sellers emotions come more into play and make them less than willing to see reason. There are always going to be buyers who just want to write low ball offers to see if a seller will play. But the well informed buyer with the most educated and informative offer will have a better success rate. Best of luck in buying your home!
0 votes Thank Flag Link Thu Jun 5, 2008
Offering $125,00 is not too low, in my opinion. Find out how many "Days on Market" it has been. The more DOM, the better &125,000 will seem. There are also many other factors to consider when making an offer. Caution. They may need more than $125,00 to cover their expenses, or it becomes a short sale. It sounds like your new agent has not earned your confidence. Good Luck.
0 votes Thank Flag Link Mon Jun 2, 2008
First to answer the original question above, My advice is to ask your 'new' realtor to get someone to work with him/her so you can have good representation if you meant that realtor is new in the industry.

I agree, Realtors can and should offer opinion; but not so much an opinion of what to offer- rather opinion on whether the sale price on the home is really in the ball park of similar homes recently sold or listed for sale. Your realtor may have to pull data from a larger bulls eye search. Look at what is for sale in the neighborhood, even if they aren't good comps. You'll be able to see price ranges...Just so you know, that price, unless the home is a dump will be competitive according to my recent searches in that area. Be on top of it and get your data quickly.
Web Reference: http://www.junelizotte.com
0 votes Thank Flag Link Sat May 31, 2008
Let's add that it depends on whether you want lowest price or lowest cost to close, and sometimes you can have both. You should first have a good idea of the market value, something that only a buyer's representative can or will provide for you.

The actual lowest offer will come out at the end of the negotiations, when you and the seller agree or decide to end the negotiations.
0 votes Thank Flag Link Sat May 31, 2008
I usually advise my clients to make an offer at a price that makes them comfortable. As the other realtors said, it often depends on the home's condition, the market time, and how motivated the seller is. Although we are not seeing as many "multiple offer" situations as we had in the past, they can still happen and in that case, you risk not getting your offer accepted. Sometimes, with a lower offer, a seller may want to "counter" your offer with a price that is higher... just be prepared for that.
Now is a great time to buy unlike a few years ago, because more sellers are motivated to sell their home and move on in fear that their house will sit on the market too long. Best wishes to you.
0 votes Thank Flag Link Sat May 31, 2008
How high is the sky?

I would say that is totally base don sales comps and that has to come from your agent. So look at that. Being 5-8% below that is not an insult. You want to get the home at or below the last sale to insulate yourself against further reductions in value.

Be a buyer and get what you want. The rates are going up so I would strike now.

Best wishes to you;


Dirk Knudsen
Re\Max Hall of Fame
#1 rated Re\Max Team in Oregon
Web Reference: http://www.nwhomecenter.com
0 votes Thank Flag Link Sat May 31, 2008
Hi Alicia:

Yes, Realtors should be the one who can give you the advise on how much to offer. Interview a few Realtors, find the one you like and ask them to produce a comp for you on the property.

We always say that there is no 'typical' percentage lower you should offer on a property - there are a lot of factors involved - is the house priced reasonably to start with? How motivated is the seller? How does the house compare to others? How long has the house been on the market? What's the location, condition of the house? What's the trend in that particular area? etc.

Get professional advise for a reasonable offering price for the house.

0 votes Thank Flag Link Sat May 31, 2008
Sylvia Barry,…, Real Estate Pro in Marin, CA
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