The only way to know for sure is to make an offer, and whether you are making an offer on this particular property or any other, you don't have to offer your maximum price to open up a dialog and get the ball rolling.
Focus on what your monthly payment will be for the mortgage financing, including taxes and insurance. If that payment is within your means, then your Mortgage Banker will determine the maximum loan/purchase price for you based on all the factors of the monthly payment, your down payment and your mortgage qualifications.
Begin making an offer with the following standards:
1. WISH LIST. Does the home meet MOST of the requirements from your Dream-Home-Wish-List? The Dream Home exists only in our minds; it's NOT out there waiting for you to stumble across it one Saturday afternoon. But you can find the right home using your Wish List. When you find the home that meets most of your requirements from the wish list, then it's time to make an offer.
2. FORGET LIST PRICE. Based on your own research, shopping in your chosen area, select the price you're most comfortable with, regardless of list price/asking price. In other words, you'll find a home listed at $268,000, but you've seen at least a dozen other similarly constructed homes in the immediate area priced or sold at $235,000. What makes this home so special that it's priced $33,000 more than the average price? Remember, your Lender will appraise the home based on similar homes and those prices.
3. MAXIMUM OFFER. Never exceed the price based on your mortgage qualifications, no matter how much you LOVE the home. You have to be able to afford the payment for the next thirty years. That in-ground swimming pool you love isn't going to pay the mortgage for you!
4. OFFERS ARE NOT PERSONAL. An offering price can NEVER be misconstrued as an insult to the homeowner. This is business; you're not going to hurt anyone's feelings! Make the offer based on a price you're most comfortable with!
5. OPENING OFFER. NEVER open with your maximum offering price. Test the waters with your opening bid: you want to see if this Seller is a SERIOUS Seller who understands this is a BUYER'S MARKET. If there's no reaction to your offer---assuming the price you offered is within the reasonable range of current market prices---you may be wasting your time with this home/Seller. It might be time to move on to another home.
See my "Five Steps To Making An Offer" for the best way to negotiate on your home purchase.
#1) Asking price has no basis as to the true price the home will sell for. The fact it's been on for 4 months bodes well but maybe it sells for $930K, or $900K etc. But since you can only afford $860K ... your hands are tied. I would suggest putting that in as your highest / best offer that you can make and see what happens. Normally an unfairly low offer certainly can hurt in putting a deal together, but since you're at your ceiling it doesn't matter to you... put it in and good luck
The important question is "how much is this home worth?" If it is worth what the homeowner is asking then he will most likely get a bunch of offers and be able to sell it quickly. The fact that the property has been on the market for four months means nothing. The owner may have several offers on the table and he is waiting for someone to give the full price, who knows? Beauty is in the eyes of the beholder. Without viewing a home it is impossible to formulate an opinion as to it's value. Hence without knowing the specific property you are referring to, there is no way anyone can give you sound advice. If you feel as though the house is worth $860,00 or more you should put your best foot forward and submit your offer and see what happens.
When the disparity between an asking price and an offer is to large, usually it will not happen. However, you have nothing to lose by submitting your offer. If I can be of further assistance, please let me know. Good luck!
Mitchell S. Feldman
Associate Broker/ Director of Sales
Madison Estates & Properties, Inc.
Office: (718) 645-1665/ Cell: (917) 805-0783
Licensed Real Estate Salesperson
The Listing agent works for the Seller and whether they feel the property is properly priced or not they are obligated to defend the price. Buyer brokers work for the buyer and could care less about the Seller.
Sellers may ask anything they like, but only a ready, willing, able ( and hopefully sane) Buyer determines market value. I have no doubt there are similar properties that have sold within the past 6-12 months and a good buyer broker will know about them and be able to analyze the property you're interested in against those that have sold. They can then offer yo a report clearly indicating the real market value of the property you're interested in based on the ones that have sold. This is the same information they will use when presenting your offer to the Sellers agent.
Having a buyer broker will not cost you anything , their paid out of the Sellers total commission that the Seller has already agreed to pay their agent, If you have a buyer broker then there's no need to be posting your questions on Trulia, if you don't and aren't sure how to find a good one, read the attached blog post I put up on Trulia not that long ago.
Best of luck to you and I hope you're able to make your deal.
Your offer sounds low to me, but the house has been on the market for 4 months. You agent should be your best guide.
Licensed Associate Broker
Prudential Douglas Elliman
You are assuming that the LISTING PRICE is set in stone, or at least fairly rigid.
Do you know what the reasoning and logic there is behind assigning that LISTING PRICE?
In fact, there very well may be NO logic nor reasoning behind that number.
That number probably is what the Seller wants: So What!
Have you had a good Realtor, do a good CMA to determine what the Market Value of the house is?
You could have an Appraisal done, but I wouldn't recommend spending $500 on a house that isn't yours, yet.
What are you going to do, if you did offer $970,000 and the Appraisal came in at $860,000? You will have spent the $500, only to find out that you cannot have the house.
If you have a Realtor do the CMA, you will have a good idea what it is worth and be able to make your offer accordingly; you can even include a copy of the CMA with your offer.
It may be that $860,000 is a good offer, but you don't know!
Good luck and may God bless
Whether your offer is reasonable or fair depends on a number of factors such the amounts at which comparable properties in the area were sold. Your agent, if you are working with one, should be able to advise you on what is fair for that home. Regardless, just make sure that you present as many positive aspects about your offer as possibly applicable (for example, all cash deal or have a prequalification letter from the bank you will actually get the loan from).
Atlas Sales Realty