I only wish it was so simple to wait! Unfortunately, as a renter, it is hard to time it perfectly, because you have to deal with leases expring (as mine will be soon), and you also get sick of moving around when your current place doesn't work out for various reasons. So for me, it may be best to look for the best deal I can find and live with the fact that I may still see a decrease for the first year or two.

Thu Mar 27 2008, 13:53

Greg, there is no magic "percentage" that you can apply to Bucktown, Wicker Park or any area in the U.S. for that matter. Each seller is an individual with their own story, motivation and needs.

That being said, the likelihood of a seller being ready to accept a 30% below list offer is slim to none, and slim has left the room. Sellers price their properties (hopefully with the help of a Realtor) based on very recent comps, trying to fit into the current marketplace. Sometimes sellers get greedy and overprice, sometimes they're anxious and underprice.

But if a seller has priced their home at $200,000 (to use Sierra's number), they are nowhere near ready to "hear" a $140,000 offer, even if that $140,000 is the correct number! If they were willing to hear that number, they'd be priced a whole lot closer to it than $200,000.

More likely, than not, they'd reduce their price several times, before they'd even consider a $140,000 offer... ($175,000, 165,000 150,000)... in the hopes that they'd attract an offer somewhere between 140,000 and 200,000.

and contrary to Pt's riveting entry, I'm not saying this because I'm fighting against a perception of declining prices. You're entitled to make an offer of whatever you want, and if I were your Realtor, I'd certainly write the offer... but you'd get the advice I noted above... because that's part of my job... to help you understand the reality of the market, and the potential reaction to your offer.

Thu Mar 27 2008, 10:47

Please note that all the responses above came from realtors (who work on commission and are fighting as hard as they can against the perception that prices are declining which will, in turn, make people even more reluctant to purchase until prices hit the bottom). The comparative market analysis will help you determine what other properties are selling for but make sure that it is as current as possible since prices are dropping and will continue to do so for some time. A CMA showing sales from 3-6 months ago is utterly useless so it may be very difficult to judge. Try looking at as many listings as possible in your search area to see how long they have been on the market and what the prices are, you will probably see a few homes that are (despite the listing agent's diligence) laughably overpriced in comparison.

Also, keep in mind that a good price today may not be such a great price if housing prices continue to decline over the summer and beyond (there are so many articles and economists that support this a google search will probably turn up a dozen WSJ or Chicago Trib stories - oh, I just looked and there was an article in the trib from earlier this week talking about the staggering decline in home prices).

Nobody expexts to get 100% (probably hoping for 90-95% if they are lucky) of their asking price so they list it above what they really want to get and you should, conversely, initially offer under what you are willing to pay. Lastly, once you have decided on your offer don't let your agent talk you out of that number. Your money, your investment. If the seller doesn't like that number or thinks it is too low they will counter offer. Despite what your agent may tell you, absolutely no seller in his right mind will dismiss bids because they are offended at the low offer. They might not drop the price too much on their counter, but nobody is in a position these days to refuse to negotiate, especially if they are not living there and lose thousands every month in carrying costs.

Just a thought...

Thu Mar 27 2008, 10:37

Greg, there is little chance your offer would be accepted for 30% below asking price. Exceptions of course might be a foreclosure or other distressed home and there are more and more of these hitting the market each day. As pointed out already, the listing agent does a lot of the heavy lifting when they meet with a seller to discuss a listing. That is to say, they pressure a seller to lower their pie in the sky expectations and price to home to sell. So listing prices are way down and there is more rooom for negotiation just not 30%.

Thu Mar 27 2008, 07:06

Greg,

There are a number of variables to consider before putting in an offer on a particular property. I have found that in the current market, even though it is a buyer"s market, the buyer should have factual information/rationale for a real low offer. i.e. The unit you are considering has a "sliver" of a city view while the same exact unit is on a much higher floor with a panoramic view. With the help of a realtor, you can establish how much of a discount can be attributed to the lack of view.

Please note, just as you want a deal, the seller's realtor has an obligation to get the best price for his client. The seller's realtor did a comparative market analysis to domonstrate the value of the property. 30% is just way out of line in my opinion unless you can demonstrate a rationale for the offering price. Perhaps the seller is over priced. If that is in fact true, have your realtor provide cost per square foot data for the building or a like building to show this is the case.

Perhaps the unit needs alot of work. i.e. a new kitchen and bathrooms. Obtain estimates before you put in the offer so that you have back up factual information when presenting the offer. With this information in hand and stated upfront you may have a chance that the seller will be willing to counter your 30% below asking price.

Yes, it is a buyer's market, but please keep in mind even though there is a glut of properties on the market, many areas of the city continue to have some price appreciation. In summation, do your homework and check out the history of the property. How long it has been on the market, check to see if there has been price reductions and finally look at the property from a cost per square foot perspective as this approach will provide the most appropriate way of determining the true value of the property.

Wed Mar 26 2008, 15:34

Greg,
I love your thought process, because yes, it's a buyers market, but you have to be educated when making your offer and also manage your expectations. My suggestion is to first find the property you are interested in. You should be working with an agent who will assist you in finding what meets your criteria and add some perspective to what you are looking at that I guarantee you weren't thinking about beforehand.
Once you find the property, then, it's the agents responsibility to look at comparable properties that have recently sold in either the building, or in a few block radius. This is not as simple as one might think and requires time, education about the properties, and expertise. If your agent is able to come up with reasons that the property is worth 30% below what they are asking, then yes, it's reasonabile to offer that much. But, I will say that unless it's a foreclosure situation, 30% is a HUGE number. On a $200,000 property, that is an offer of $140,000!! If you were a seller, would you accept an offer of $60,000 less than what you are asking? Keeping in mind that 9.9 out of 10 sellers have already priced their property lower than what they originally thought their property was worth to begin with.

Hopefully that answers your question. There just isn't an easy way to "average" what is a typical accepting price. I've seen offers recently that were only a few percentages below asking, and I've seen some that were about 10% below. It completely depends on the property, the neighborhood, the sellers motivation level, etc.
Let me know if you need any assistance in finding a home in the West Town area this summer.
Sierra Bloom - sbloom@PruPref.com

Wed Mar 26 2008, 08:49