Home Buying in 01754>Question Details

Irena, Home Buyer in Maynard, MA

Is 10% below list too low to ask?

Asked by Irena, Maynard, MA Thu Oct 23, 2008

Considering the state of the real estate and financial market, for the Boston area (particularly around Maynard/Marlboro/Hudson/Stow/Littleton) is it offensive to sellers to offer a standard 10% below asking for a home? How should I establish an appropriate offer price for a home? I've made two offers in the last week that were rejected because the seller refused to accept anything but 1-2% less than they were asking. Am I doing something wrong?

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As a general rule, after I have run comps and done a CMA for my buyers, I do not recommend that they go beyond 10% if the home is reasonably priced. This will normally get a counter where I live. However, if the home is unrealistically priced, I help my buyers to see where it should be priced, and then I write their offer.

I would suggest that you find a buyer agent in your area who can help you to establish a reasonable price on a home that you would like to buy and go from there. Ultimately, the price that you offer is your decision. Normally, you should get a counter if you are within 10%, but one can never predict what the seller will do-especially when offended.

If a seller is rejecting offers that are within 10%, they may just not be financially able to take anything under what they are asking. There are a lot of people who jumped on the second mortgage or interest -only bandwagon who are stuck. They cannot accept less, so they are going to have to stay in their home, rent their home to someone, or face short-sale or foreclosure if they are unable to sell.

If they are not in financial hardship, they probably have not been on the market very long and they will be wishing that they had countered you after they have sat on the market for a while.

Don't give up, and I hope that you find what you are looking for. A helpful buyer agent should come in handy, but make sure that he or she is willing to do some work to help you. A good buyer agent should be ready with comps and some type of a CMA to determine how the property is priced.

Good Luck,
Dawn Isenhower
1 vote Thank Flag Link Thu Oct 23, 2008
No. Prices are only BEGINNING to drop. Offer what it is worth to you. IMO 20% off is not unreasonable; this is business, there is nothing insulting about offering whatever you decide, and a low ball offer will still likely be a huge increase from 2000 prices.

If they are insulted, there will be ten more homes just like that one up for sale over the next year. Best of luck.
1 vote Thank Flag Link Wed Oct 29, 2008

I would recommend keep making offers until you find sellers who really want to sell. 10% is about the average starting point of most of my offers. Best
0 votes Thank Flag Link Mon Jan 18, 2010
Be prepared to accept or reject when the seller comes back with a counter. I'm optimistic.. ..You may have hit the nail on the head!!!
0 votes Thank Flag Link Mon Aug 24, 2009
I won't comment as to whom should be offended or not, but every home is different - an arbitrary 10% might be too much if the home is priced right and it might be too little if it's very overpriced. You're relying on every seller having overpriced the home by 10%; do you really think that's the case?

If you're financing the home, the real question would be what is the home worth and that's answered with either an appraisal or comparable market analysis from a seller's or buyer's realtor. Lenders, including me, all follow the same basic guidelines. With respect to the home's value, your down payment will be calculated from the LESSER of the sale price or appraised value, hence it's important to get the value right and bid appropriately. It's great if you can get a bargain, but the sellers almost always have done a comparable market analysis so don't expect a "yes" to your bid in every case. You can always make a counteroffer for less than 10% under asking price if you feel the home is worth it. Otherwise it'll take patience and persistance but your plan may eventually work.
0 votes Thank Flag Link Fri Oct 31, 2008
Hi Irena - Right now in South Carolina, just about anything goes with an offer. When we make low offers, we try to have some sort of numbers to justify it in some way. Many times we show that there is 5 years of inventory on the market and if the owners want to sell, we may be the only buyer in town. Hope that helps, email me if I can be of further assistance. Randall Sandin
0 votes Thank Flag Link Wed Oct 29, 2008
Well, that depends on the seller and their agent, assuming the house is listed. Some sellers understand that an offer is "just an offer "; it's not personal; it's not even a reflection of what a buyer thinks he house is worth - it's really just the beginning of a discussion. Others take it personally, get stubborn and insulted. In this market some sellers are happy to have an offer from a qualified buyer and will try to negotiate - it depends on how long the house has been on the market, whether or not they've had a recent price reduction, why they are selling.

How an offer is presented makes a huge difference. Do you have a Buyer Agent who knows the market, how to negotiate with other agents, and is making sure that the seller's agent knows you are a serious, qualified buyer? Or, are you going directly to the seller's agent who doen't know or care about what you want? Buyers have no idea what goes on behind the scenes - it is so important to have the right agent representing you. If you're going directly to listing agents, don't expect much help - they're job is to help the seller, not you!
0 votes Thank Flag Link Tue Oct 28, 2008
The short answer is it all depends on the exact house, how it is priced, the condition and the specific local market. My first piece of advice to every buyer is don't generalize all real estate and assume there are deals on every house in every town. Real Estate is hyper local, and the markets in each are very different for various reasons. Every now and then even in a town experiencing a terrible market a great home priced right will sell quickly.
You are not doing anything wrong by offering 10% discount. It is "low" but certainly not unheard of. Just because your offer got rejected - or you were given a counter offer - doesn't mean your buyer agent can't get you that deal. You just need to be patient and your buyers agent has to be a great negotiator. Often sellers will reject a "low" offer outright because they are sensitive to discount but if your buyers agent strategizes properly and keeps on top of it, the seller will likely reconsider a week later. The risk in low balling is always that there might be another buyer willing to pay more than you. As long as you understand that risk and can be patient usually you can get closer to the deal you want. We recently negotiated $90,000+ off a sellers original asking and at first they weren't even willing to negotiate. My client was patient and we were very diligent.

Unfortunately A LOT of people over paid in 2003/2004 so even though your offer might be the current value of the property if the seller sells at that price they might be losing quite a bit of money or at risk of short sale/foreclosure. Your buyers agent can find that info out for you, though, which should all be part of your offer strategy.

Hope that helps! Good luck.
0 votes Thank Flag Link Sun Oct 26, 2008
There is no certain percentag you should bid below asking price, it all depends if the seller is in a financial position to take less, your best bet is to determine what the property is worth and base your offer on that. you never know what they willo take unless you try. a buyer broker can assist you with making the best offer.
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Sat Oct 25, 2008
Hi Irena- I think you're right in line with your offers. In general, why not offer 10% below list price? A good listing agent / seller will then start a dialogue and negotiation process- not just shoot you down and ignore you. The 2 offers you made maybe were with people that were already at their break-even point and really could not lower the price even a couple thousand dollars... Keep going.
You are in the driver's seat- especially if you already have a preapproval letter and can really get a mortgage. That's worth a lot in this marketplace. If you need any help or other advice, please let me know. Thanks, and good luck,
Ken L.
0 votes Thank Flag Link Sat Oct 25, 2008
Just ask your agent to run the comps for that particular neighborhood; I'm surprised s/he hasn't done this for you already.
Then figure the percentage of list to sold price.
For instance, in much of Kansas City, homes are selling for 94-97% of list price. In some areas, homes are selling for more; some less. It is very particular and can vary from block to block.
If the buyer offers 10% below list, some sellers will indeed feel offended and refuse to do business with that buyer at any price. Usually, the listing agent and the buyer's agent can soothe feelings, put together a counter offer that is more reasonable for that property and get everybody to closing. Sometimes it takes several counters and a lot of skillful negotiating to get both parties to come to terms. This is one of the areas many FSBO sales fall apart.
0 votes Thank Flag Link Thu Oct 23, 2008
It can be offensive to some sellers who are new to the market and who are already “priced right”. Sellers have already lost equity in there home, and if they are priced accordingly and a buyer comes in with a low-ball offer, it can tick them off. As much of a business deal the sales process can be, sellers can be very emotional. If you have a Buyer Agent, they should be providing you with a “CMA” which would be used as a baseline for negotiations. If you can’t provide comparable active listings or sales data to support a low offer, the chances of getting it accepted, weakens.
Web Reference: http://MelissaBMancini.com
0 votes Thank Flag Link Thu Oct 23, 2008
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