Home Buying in Loop>Question Details

Elizabeth, Home Buyer in Washington, DC

Looking to buy something listed a bit over my budget...

Asked by Elizabeth, Washington, DC Mon Nov 5, 2007

After a couple of weeks of searching, I have just found a stunning condo right in downtown Chicago. It seems to be priced correctly, but has been on the market since mid-July, and the seller has yet to lower the original list price. How agressive can my offer be if I hope to stay within reason?

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Patti Pereyra’s answer
Hi Elizabeth:

The Chicago condo market is saturated, indeed; however, don't assume that market time will automatically get you a rockbottom price. Assumptions can be dangerous. Instead, use strategy to make your offer.

Have your Realtor study the most recently sold comps, and the background of this particular property. While I hesitate to base an offer solely on the tax records of a property, some insight into the possible motivation of a seller can be gleaned from these records. For example, if the seller owes close to what they paid 2 years ago, they may be less likely to accept less than what they are asking. While we Realtors always advise our sellers that 'what they need' is irrelevant to 'what the market bears', it takes some longer than others to accept this. In some cases, sellers simply decide not to sell.

With that said, there could be a million other factors impacting this particular seller's motivation - some you may never know about, and some that may end up in your favor!

Therefore, it is best to base your offer on the current market combined with what you can afford. If your offer is lower than you feel they may accept (and you will never know until you try), structure your offer to balance the negatives (lower price) with positives (quick close, few contingencies, solid down payment, higher earnest money - things that will show you are not a high-risk buyer and that you intend to close), and be prepared to negotiate.

Don't bully the seller or patronize them by making them feel "they should be lucky" they are getting an offer, or you may be met with resistance and even disdain. A win-win is always the best solution.

Best of luck to you!
2 votes Thank Flag Link Mon Nov 5, 2007
BEST ANSWER
Hi Elizabeth,

Right now, you're in the driver's seat. A seller should be extremely grateful if you were to formulate a reasonable offer on their property. A reasonable offer is one that takes into consideration comparable sales information as well as a thoughtful presentation of your idea other market considerations.

For example, in my in-box this morning was an update from Bank of America with the results of its monthly survey of real estate agents in major markets. Here in Chicago, buyer traffic remained very weak for the month of October. Agents say that sellers have become a bit more realistic, but prices have not dropped far enough to entice buyers.

You could frame your argument around the fact that it has become obvious that buyers are clearly aware that prices are continuing to fall and are postponing decisions accordingly. Striking a deal with you now could be a positive alternative to waiting for several more months and some severe price reductions.

Other statistics from today's report: Nationally, the supply of inventory is just about to pass 10.5 months worth of supply. Here in Chicago, the numbers are nearly identical as more and more inventory comes on the market with very few contracts being written.

If you are at all hesitant about negotiating so aggressively for your new home, you definitely should employ the services of an experienced agent. An agent will be able to present your case in a factual and non-threatening fashion while getting the point across that selling to you today will be far better than selling at a discount six months from now.

Good luck!
Web Reference: http://www.darrowwest.com
2 votes Thank Flag Link Mon Nov 5, 2007
Dont let anything dictate your offer other than what you are comfortable with. They may not have received an offer at all yet and you maybe surprised at what happens. This is a strange market and no one can predict what will be accepted. Funny things are going on out there everyday. Offer what you are comfortable with and sit back to see what happens. You may be surprised and if it doesn't work out there are many deals out there to be had. Keep us updated I am curious to see what will happen.

Best of Luck,
Linda J Sears
1 vote Thank Flag Link Mon Nov 5, 2007
It's hard to say what the seller will take as each situation is different. Some sellers will take really low offers if the house has been listed for awhile, others are more stubborn and feel that their house is worth whatever they have it priced at and no less. In my market, we are seeing what would have been ridiculous offers last year or the year before, but sellers are looking at them and countering. Worst case if you make an offer too low, most sellers will at least counter it. Your best bet would be to work with an experienced Realtor in your area who does these negotiations on a regular basis. Realtors in other areas will have a hard time giving advice about pricing and offers in your area as real estate is a very local business. Discuss negotiating with the Realtor and have them help you with an aggressive offer. Good luck!
Web Reference: http://www.webberteam.com
1 vote Thank Flag Link Mon Nov 5, 2007
Hi Elizabeth,

I am wondering if you are working with a Realtor or if you have been searching on your own. The reason is because you mention that the condo seems to be priced correctly. If you are working with a Realtor, they will definitely find that information out for you. That being said, if the condo has been on the market since mid-July, it may not be priced correctly. Most people would offer 5-7% below asking price on a correctly priced home, usually landing between 3-5% below asking price. If the home is over priced, they've missed the mark by at least 7%, so offering 8-10% may be a good place to start. If the seller hasn't lowered the price, they may not want to negotiate lower, but it's worth a shot if this is the place you really want to call home.

Cathi
Web Reference: http://www.cathiweaver.com
0 votes Thank Flag Link Mon Nov 5, 2007
Hi Elizabeth,

Only offer what you can afford. There is a ton of inventory out there, so depending on this seller's situation you could get a fantastic deal on the place.

One thing you should look into is a temperary buydown. This will get you into the condo at a lower interest rate for the first couple of years. (This is not a ARM product) Example
3-2-1 buydown
Year 1 4.875%
Year 2 5.875%
Year 3 6.875%

Let me know if you would like a free consultation or check out the site below for additional info.

Best of Luck!

Chris
0 votes Thank Flag Link Mon Nov 5, 2007
Offer what you can afford and nothing more. Make sure it will appraise, or the comps justify the numbers.

The worst they can say is no.

There are so many condo deals in the marketplace, even within the loop right now, so the seller may take your offer.
Web Reference: http://www.iansellsnola.com
0 votes Thank Flag Link Mon Nov 5, 2007
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