The Lamorinda market has not cooled off that significantly. Year to date, as compared to last year, the average sales price in Lafayette is down 6%, Orinda down 7%, and Moraga is up 2%. Even if a particular property was appraised at $300k less than 3 months ago, that doesn't neccesarily reflect a drop of $300k in market value on that house, and it certainly doesn't mean that any/all other properties have dropped that much. I have never met a seller who would consider an offer that is 20-30% below asking, and here is one reason why: rather than take an offer that much under list, the seller is better off reducing the list price 10%-15% and possibly getting multiple offers. Yes, multiple offers are still happening here in Lamorinda!
You never know until you try. Some sellers will just hold out, others may have the motivation to accept a lower offer.
I recently had a buyer who was "shopping." Made crazy offers on multiple homes. In two out of 3 of the offers, the sellers eventually came back (within 2 weeks) and accepted the offer.
On the other hand, I have a seller who refuses to reduce although his house is overpriced. His perspective "We haven't had any offers, not even low balls." This isn't the way it works, but hey, I'm just the realtor, what do I know.
It really depends on each particular seller, individually. Some sellers, particularly ones who have no necessary NEED to sell, will be firm on price because they can simply wait until the market corrects. Others however, who are relocating, need to sell as soon as possible. I always advise my buyers to bring in very low offers in markets like this. With properties sitting on the market as long as they are these days, an offer 20-30% below asking price isn't a stretch. I'd have a local Real Estate Professional run recent comparable sales to any particular property you're interested in, and use those as leverege when deciding on purchase price, as well as negotiating with the seller. I'd be more than happy to help if you need assistance. Good luck!
When I see a flood coming in at such reduced numbers then you know a "trend" is developing! But if we're talking price points of $1,000,000 then we can get into all sorts of funny business with purchases and sales. Make sure your Realtor does an exhaustive CMA (comparative market analysis) for you neighborhood by neighborhood. They can be dramatically different. But by all means, 'tis the season for lowballing
In other words, real estate value appreciation and depreciation begin with transactions that consistently close above or below the last closed sale. Stability in a real estate market can only occur when Buyers finally agree to pay a price at the last sold price or higher if there is a limited supply of available homes for sale.
Not all sellers have the same motivations. Those who really need to sell might welcome getting raked over the coals. Those who are downsizing but don't really need to sell to survive probably won't even respond to a hard ball negotiation. Determining who wants to play is key these days, so as not to waste your time or anyone else's. , and there are a number of sure fire ways to do the research in order to get the best deal possible. Feel free to call me at 415.999.2205 if you would like to discuss further. Although I have a San Fran # and office I have lived in Lafayette for the past five years and do quite a good deal of business on both sides of the Bay. Have a great evening and I look forward to discussing this more with you.
Dr. Cheng, although you have good points, do you think it is good psychologic threshold for the buyer if a seller who has bought a 1700 sq ft home in late 2006 for $750K to redo a kitchen and put in Pergo floors, and tries to sell the house today for $1.4 M? I doubt the house has doubled in value in a year. These people will be lucky if they even get 70% of their asking price.
You NEVER want to make an offer lower than 83% that's phycalogical threshold, buying house or car, that is the price you won't get and hurt EVERYONE.
If you ask any downside expert like myself, or go back to 90's to find out all the sold price and listing price ratio, there is hardly any ratio lower than that. Why?
Because, even good borrow pay down only about 20%, and mortgage pay 80%, so once YOU wipe out the downpayment of the seller, the bank would NOT let you to wipe out their money, so you got huge barrier right there.
If you were trick by listing agent telling you that the house was listing something like $2.4 million and now dropped to $1.789 millions and you can get it at $1.3 million like I am buying a house at Warren NJ, you may or may not be lucky like myself to uncover the township appraised the house worth only $1.1. million. So, you can slash the price, but that may be just or old man trick...
In San Francisco, many Chinese paid CASH to buy their property, so they are holding a house like holding a land, they could let it sit there forever, like I got a land at Atlantic City that already went up 1700% and I still let it sit, and so many realtors send me letter, threatening me real estate will collapsed, but I also read the news that there will be 4 big new casino built in Atlantic City, so I really do NOT mind to hold on to it.
If I happened be a owner of property in San Francisco, I would just go to place ads in Beijing or Shanghai to sell to them at the price I want, NOT sell it to local people. This is the same thing I advise Manhattan condo owners, and went to European to bring investors over.
But, if I were buyer like you, trying to get a great deal, I would go out to make 80% offer on all the properties I like, and soon or later, you will hit one or two willing to sell you at about 83%. Otherwise, they may just lower the listing price, so your buying price eventually still above 83%. I mean sold and list price ratio...
It is a great time to make low offers and you may get lucky. Make sure to push for those seller credits also as the dollars given there are worth so much more than a lower price. The other area to probe is to find out if the seller will do some seller financing-- that can make some homes affordable to you that otherwise would not be. Last comment-- watch rates as they decline because that is also more critical than the price of the house- 25-50 basis points on a 30 year mortgage is huge.
so, go make an offer-- good luck.