Home Buying in 46060>Question Details

Legene Quese…, Other/Just Looking in 15825

What percent of list price is a reasonable offer for a house priced at $599,000 in Indianapolis? The house

Asked by Legene Quesenberry, 15825 Sun Dec 30, 2007

has been on the market two years.

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Answers

13
Don Tepper’s answer
You really need to know what the comps are. If it's been on the market for two years, then it's safe to assume that it's overpriced at $599,000. How much overpriced? Hard to say. Probably at least 10%. Maybe more. But you really need the comps. Elvis, as usual, has given an excellent answer.

As for the other advice below...ummm...ahhh....well....no.

95%-97% if priced at market value? Well, in this case we know it's NOT priced at market value. Otherwise, it would have sold. But in today's soft market, I wouldn't advise starting out at 97% of the list price. Frankly, it's impossible to determine to the penny what market value is. And many sellers leave a bit of wiggle room anyway. If you're absolutely in love with the house and it's one of a kind, maybe 97%. Otherwise, no.

Someone else advises finding out the previous sales price, then adding 3%-4% per year in appreciation to that. No way. Not in today's market. Many markets have declined, some radically. I know lots of properties that sold for $500,000 two years ago that wouldn't bring $400,000 today. Many wouldn't bring $350,000. You want to take one of those and add 6%-8% to that? That makes the $500,000 house now "worth" $540,000...when identical houses today are selling for $350,000. Bad, bad idea.

Someone else suggests staying within 10% of the list price so as to "not insult a seller" (though he does acknowledge that the offer should be based on comps, and that 10% after two years might be too high). Do not--I repeat, do not--worry about insulting a seller. It's your money. If successful, it'll be your house. It's your mortgage. It's your offer. Let the seller be insulted by all the people who didn't make an offer. After two years, the seller should be delighted by your offer, even if it's far greater than a 10% discount.

Look, Legene: You take the comps. Make sure they're recent, and if the market's declining, as it is in many areas, discount the comps accordingly. That's your initial "maximum allowable price." Then you check with a mortgage broker, and evaluate your own finances. How much can you reasonable afford to spend? That's your second "maximum allowable price." Now, you take the lower of those two--the comps, or what you can afford--and that's your new "maximum allowable price."

Now you have the maximum you will spend on the property. At this point, you consider which negotiating techniques you want to use. Maybe you make an offer at that figure, marking it as "best and final." Or maybe you choose a figure lower than the list price, so that the average or mid-point between your initial offer and the list price is your "maximum allowable price." Or maybe you negotiate terms as well as price. This is where a good Realtor can help.

But that's how you determine what a reasonable offer is.

Hope that helps.
3 votes Thank Flag Link Wed Mar 12, 2008
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
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I hear this question from buyers almost daily. The asking price has nothing to do with what to offer. If you are working with a Realtor have your agent help you determine the value of that home based on recent sales in the area. Some sellers are actually pricing their homes where they should sell while others are pricing their homes way over market value. So to say there is a general rule of thumb would be giving you very bad advice.
For example: What if a home was really worth only $40,000 but the seller found an agent that would list the home for $1,000,000.00? Would you offer them say 93% of the asking price or rely on market data? Then on the other hand if a home were priced at say $450,000.00 but other homes just like it were selling for $460,000.00 you might want to offer a little more than the asking price if you want a chance to buy it. This is a stratigy we are seeing in this market. Sellers and agents from time to time will price a home low in order to cause several buyers to bid on the home and drive the price up to market value vs listing high and then resist low offers.
Have you had your Realtor pull recent sales in the area for you?
Good luck finding your new home!
2 votes Thank Flag Link Sat May 10, 2008
Legene, there is no magic percentage of a listing price to offer, in Indianapolis or any other community.

Knowing what to offer comes from many places.
* Understanding the true-value of the home based on comps and CMAs
* Knowledge of what your desired target price is
* Understanding the climate of the current market
* An awareness of the list/sale ratio of recent comparable sales
* Negotiating skill (not to put too fine a point on it, but it's much easier to know what to offer, when you'd negotiated for homes before... the more successful times, the better, and you can get a "feel" for the seller, and figure out how they might respond by "profiling" and getting into their mind)
* ... and other intangibles.

As you can see, coming up with that starting point, is a compilation of lots of different things, all coming together to build that price.
2 votes Thank Flag Link Wed Mar 12, 2008
Alan May, Real Estate Pro in Evanston, IL
MVP'08
Contact
Always start with a lowball offer on a house. Start with what you would really like to pay for the house and what you feel it is worth then work from there. It never hurts to make an offer. Who knows, they may accept it. Start with 15% if you feel that's what it's worth and if they want to sell the place they may counter 9-10% or just deny it and you can try another higher offer.
1 vote Thank Flag Link Wed Apr 22, 2009
To Don Tepper from Fairfax,
In defense of my example, Adding appreciation into the sales price is a valid method of ballparking values. To dismiss it off hand as a "Bad" idea deserves further discussion. Appreciation should not be the sole determining factor in estimating value, just as you would not just use one home for a comp, or use just 1 neighborhoods comps without refleting on the whole market. It would be a "bad" idea to use one valuation method only. Valuation is not an exact science and is subjective, thus I suggested looking at it from a few different perspectives. There are way to many variables in the market place to arrive at an exact figure. Different markets also appreciate, or depreciate, at varying rates. Sounds like your market is really taking a hit if your wacking off $150-$200k in price in two years. The reverse has been true in other markets where appreciation had run up every year and sellers were doubling the price of their home. Thats the nature of real estate markets and supply and demand. I'm sure you have methods that help define pricing in such markets with huge swings. The question specifically asked about Indianapolis. We have not had huge run ups in price and also have not taken huge hits in our equity, in general. As another poster comented, "Indy's housing market is 'Steady Eddy" compared to most". A majority of the property selling here recieves around 97% of asking price. If not, price reductions take place and 97% is reflected in the new lp/sp metric. A lot of homes sell for full price or more. There will always be overpriced homes in any market and peoples motivation to sell changes daily. Days on market would be a good marker on overpricing. 90-120 days locally to sell is fair. Longer than that, price is usually the issue. The appreciation rate here, in general, has been at pace with inflation. So adding 3-4% a year is a valid method of estimating value in our market, but should not be the sole consideration. Lots of good ideas here, lets not dismiss them off hand. Legene, arm yourself with these ideas and form your own opinion and offer what you believe is fair. As a buyers agent, I try to guide my clients as best possible with the information at hand, but need to remind them, whatever thoughts I have, I can't spend their money for them. They are the ones who must feel comfortable with the price.
1 vote Thank Flag Link Wed Mar 12, 2008
$599,000 & the house has been on the market for 2 years?? Those are some pretty hefty payments if the seller has two homes! So, my guess is that the seller would like to stop the bleeding of the extra $5K monthly they are spending.

I just negotiated $100K off the price of a home for my buyer -- the list price was $699K. So, you really just never know. Every seller is different & motivated by different things.

If it's an estate sale & 4 kids are splitting the net profit (and the house is paid for), they might sit on it to get the BEST price. If it's a corporate relo w/ a buyout, then they might shed a bunch of money in order to unload it from corporate ownership.

Just make sure you hire a negotiating expert as your buyer's agent so you are sure that you get the BEST price no matter what!!

Let me know if I can help you in any way.

Kristie Smith
Relocation Director
Real Estate Links
Web Reference: http://www.IndyHomes.com
1 vote Thank Flag Link Wed Mar 12, 2008
List price to sales price ratios are available from local multiple listing services for "comps" in the area. They can be tailored to specific communities to really define your target property. Another metric you can use is the cost to sq/ft ratio of comps to determine if your target property is in the ballpark of what your considering. If you can find out what a property has previously sold for and then add 3-4% appreciation to that sales price, per year since it sold, , you come up with another metric to help determine fair value. More times than not, these methods will all be about the same. Pretty good chance that is what the seller is going to take for the property. I would say a reasonable offer will fall in the range of any of these methods. Value is always subjective though. It's what a buyer is willing to offer, and what a seller is willing to take. At the risk of offending sellers, I have presented, by unpopular opinion, "lowball" offers, only to reach agreement and complete a sale. I always caution, as a buyer you can start low and work up, but not vice versa. With my sellers, I am always thrilled when I am able to present offers. Low or High, they indicate "someones" willingness to negotiate on your home. In todays slow market, I caution to review all offers carefully. That Merry Go Round only comes by once in a while, no matter how much marketing is being done. In any offer you have price, then "terms". Examples; cash vs. loan, inspection vs. as is, quick close vs. extended close. There are value items in an offer aside from price that deserve consideration. Some so called "low" offers, can in reality be worth more than just focusing on price alone.
At the end of the day, price solves everything. So if it's been on the market 2 years, price is an issue. Going back to my original thought; value is what a buyer offers and a seller accepts, not what the property cost new, or what your appraisel says it's worth, or what sold down the street. It's only worth what someone will offer, today. After 2 years on the market, peoples motivation and personal circumstances change, a lower than list offer just may be what is needed to get movement on price.
1 vote Thank Flag Link Wed Mar 5, 2008
I would suggest you get some factual market data regarding the area in which you are looking. Is the house over priced? I don't know, maybe they just reduced the home and it is priced correctly now. Typically Indy area homes are selling for about 96% of list price. Are there other factors that may affect the home? Dated, high traffic area, deffered maintenance? They would all play a role in an offer price. Good Luck! Jon
0 votes Thank Flag Link Thu Sep 17, 2009
WOW!
Some great answers and information on this one.
Getting down to the basics:

1. Do you like the house?
2. It the hous in your price range?
3. Are you buying a home or a house? (will you live and hold for a while or are you looking to sell quick for a profit
4. A little different than #3. Are you buying for % off or because you like it?
5. Have you looked at comparable sales (within two miles and 6-months)? Lender is going to want to see three of them for the apprasial unless your doing a cash sale. When you find how the bank looks at the value it should put everything in line. Now the seller may not accept but at least you can be comfortable that you put a good offer that has third party conformation rather than just picking a number.


Now I am a mortgage loan officer vs. REALTOR. I focus on purchase money and the last three closings (all within a couple of weeks) have sold for asking or near asking price.

So answer the questions to yourself and the offer should be easy.

If you have any mortgage questions let me know. Yesterday a few lenders have just made enhancements to Jumbo Loans that might make sense.

Tony Grego - The Place with Great Rates
0 votes Thank Flag Link Thu Jul 24, 2008
I'll keep it simple.

A house is only worth what a buyer will pay. If that buyer is getting a mortgage, their willingness to pay a price must be backed by an appraisal to verify the value.

That being said, your offering price should reflect your opinion of value based on a variety of criteria:

Comparable prices: what have similar homes sold for in the recent past in the same neighborhood
Subjective data: Does it have a pool, finished basement, etc. and do the comparable sold homes?
Location: If it's on - or backs up to - a busy street, subtract 10%-20% from the comparable value.
Available inventory: If there are 3 identical homes for sale in a neighborhood, you may be in a position to aggressively negotiate.

As has been eloquently said, the list price has no real bearing on value. We hope that the Listing Agent hasn't told the seller that the property is worth more than it actually is simply to secure the listing. (In the business, we call that "buying" a listing.) That it's been on the market for 2 years indicates that this might be the case. There may be other circumstances contributing to the extended market time, though.

Your REALTOR® is your best advocate in this situation.

Kind Regards,

Joe Shoemaker \ REALTOR®

MacDuff Realty Group
2243 Glebe St. \ Carmel \ IN \ 46032
317 413 8501 direct \ 317 663 0722 fax
0 votes Thank Flag Link Wed Jul 23, 2008
The Indianapolis market has definitely been steady as compared to other markets. Some areas of the country, homes are selling for 80% of what there purchase price was just a few years ago. Thankfully the Indianapolis market hasn't seen that type of decline but the market is high on sellers and it is definitely still a buyers market. If the home you are talking about is the one I am thinking of it has a very modern, one-of-a kind, architectural design by architect Michel Mounayarand, is on 7.5 acres. If this sounds like the home you are looking at then I think the architectural design and size limit the buyers that would have interest along with the price. I think the home has a really nice design but to many buyers the "traditional" 5000-6000 sq ft home for the same value is more appealing. Or competing homes on morse lake. If this is the home you're looking at it has actually been on the market since 7/26/04 and started at 699k. You can always offer what you think it is worth... The worst they can say is no. It could be the only offer they've had so they could be happy for any interest at this point. Best of luck!
0 votes Thank Flag Link Thu Mar 13, 2008
To answer your question.... 95 to 97% of list price PROVIDED it is priced at market value.

There are many layers to your question. Here's the scoop. Even though Indy's housing market is 'Steady Eddy" compared to most, and we've been named as one of the first markets poised to rebound early, the buyers are having a field day. Houses are selling well when they are priced at market range. (Sellers set the price, the buyer says its value by what they pay, and the market is the price range of homes sold in the last six months.) So, location and condition are large factors. If a home has been on the market for 2 years I would certainly study it's MLS history. If you are not presently working with a realtor, I'd be happy to give you information to determine how well the property is priced. Also, I just attended the Housing Summit regarding the taxes issue. If the home is in Marion County, the tax issue may have slowed down interest in the home in the last 6 months. Tax assessments for the property may be delayed again this year.
Web Reference: http://LolaMcIntyre.com
0 votes Thank Flag Link Fri Mar 7, 2008
I usually suggest staying within 10% of list price not to insult a seller, however, the offer should be based on comparable properties and if the home has been on the market 2 years it could be really overpriced. 10% less could still be too much. Without more information on the home it would be hard to give you a proper answer. Is in in Indianapolis or surrounding city? Last time I checked the list price to sales price was about 96%. I would be happy to research and provide comparable properties if you have an address or MLS #.

Regards,

Jeff Thomasson
Tiger Realty LLC
0 votes Thank Flag Link Mon Jan 28, 2008
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