Your target should not be x% of listing price. Instead, your target should be either a price dictated by comparable properties, or some percentage of that.

Why?

Some properties may be overpriced, so even purchasing at 90% of list price could be overpaying. On the other hand, some properties may be bargains at 100% of their list price. There are even some properties--not many, but some--getting multiple offers.

So, first step is determining the true value of the property. And the best way is to use a Realtor to get the comps for the property. Then, if you want to buy at some discount from what the comps suggest the property is worth, that's fine. But you really need to know what it's worth before you begin negotiating.

Now, as to negotiating: In the United States, the customary method often is to "split the difference." It's not a good way to negotiate, but it is frequently done. So, if you want something at 90% of its listed price, you offer approximately 80%. If the seller is interested, he/she may counter at about 95%. You in turn counter at about 85%. And you meet in the middle around 90%.

You reflect this concern in your own question: You're worried about offering 90% and ending up paying 95%. There you go...splitting the difference. Using this strategy, offer 80% and end up paying 90%.

Some posters on Trulia suggest an alternative: You put in an offer at 90%, along with whatever justification you can provide to support your offer. You make your offer as strong as possible--such as not being contingent on the sale of another property. And you mark your offer "best and final." That technique can work, too. It's your choice.

Final comment: Don't worry about making an "insultingly" low offer. Do not worry about insulting, offending, or otherwise irritating the seller. It's your purchase. It's your money. It's your future home, if you're successful. The owner, if he/she is going to be insulted, might better be insulted by people who view his/her home, and don't even put in an offer.

Hope that helps.

Don had a good response.

I just showed a house yesterday priced at 425000. It's been on the market over 600 days, having started at 555,000. After going through, my buyers felt there was no way they would offer more than 325,000.

Sometimes you just need to sit back and wait a little, especially if the comps don't justify a higher price.
Although it is a buyer's market, well-priced homes in good condition will sell before those that aren't. My neighbors just sold their house in THREE days, for more than $6000 over list price. It was in great shape and showed well.

If you're interested in how a phone call can earn you $$, PM me.

I agree with Don's response below. I do not think that it is a bad place to start at 90%. Many homes in good markets are selling in the 93%-96% range.

But there are many factors involved when deciding on putting an offer in a home.

- #1 Location, Location, Location
- What homes are selling for in that particular market
- What does the home have to offer?
- How long the home has been on the market, etc.

Your Realtor should be knowledgeable in this area and advise you.

In any case the Seller has right to counter; see where it goes from there.

Hi Louie....great question.

My advice would be to not get too caught up with percentages. I'm not saying don't use them but don't make them your only tool.

What it comes down to is how is the property priced? If I was working with a buyer and we paid $465,000 for a place that was priced at $475,000 it looks like we didn't get a great deal at first glance. However....when we looked up comparable properties we both (agent and buyer) agreed that the asking price was very appropriate. Same property across the street was asking $499,000. Now.....let's say both properties sell for $465,000. The one listed at $475,000 sold for 97.8% of asking and sold in 3 weeks. The one listd at $499,000 sold for 93% of asking price but it took an extra 6 months because the higher asking scared people away.

Now.....which one did you get a better deal on? They both were identical and sold for the same price....one at 98% the other at 93%. See what I mean? Again...use the % as a tool but do your due diligence and compare the properties against one another. If you get too hung up on % you could actually wind up not getting a better deal just because you got a lower % on an listing that was overpriced to begin with.

Good Luck! Hope I wasn't too confusing. This example wasn't just pulled out of my backside.....it's a true story.....names of properties and participants were changed to protect the innocent. Except for me....this is my real name.

Have your agent complete a CMA of sold comps in the area in which you are looking to purchase. See what the comps have sold for within the last 3 months, no farther out as it will not show true value. And the comps must be exactly what you are thinking about buying. Compare Apples to Apples. From the CMA, you will be able to tell if the home is appropriately priced or has been adjusted for the market. At that time you can discuss what is an appropriate offer with your agent. But, I would guard against getting caught up with a % of a number. I would advise you to pay fair market value. No matter what the % is.

Hope that helps!

Hi Louie - I am not sure if evaluating an offer price based on a percentage of asking price is necessarily a good strategy. As an example - some sellers who purchased new construction units in downtown high rises are actually pricing their units for less than what they purchased the units for from the developers - some are in negative equity situations. This is an opportunity for some buyers to buy units that are relatively good values. The key is to evaluate a purchase price based on recent sales prices of similar properties. If values are in decline, it may be fair to assume you could purchase a property for less. If a property is price 5 to 10% below recent sales data, you may not be able to purchase the property for much less than asking price. Seller's motivation plays heavily into the mix as well.

Good luck in your search!

Louie,

I agree with many of the other responses that it depends on the property. But, I did just submit offers for two clients in Lincoln Park in the last week, so I compiled the attached data for them. It has some broad / general data on the Old Town / Lincoln Park markets. Also, this data is based on properties east of Racine in Lincoln Park and parts of Old Town, so it is not for all of Lincoln Park, but I think the same trends would still apply to the rest of the neighborhood.

http://spreadsheets.google.com/ccc?key=0AlPcNE63T47ndGQtZGV4…

Hope that helps.

Vik

Hey, I posted a response to this question. I actually did a short video to answer it and I hope it is helpful. Good luck with your home!

David

PS, the video is the link here. It is not a spam or anything...I really made a video for you!

I agree with the responses below about getting caught up in a percentage of list price. Pay what it is worth to you, and remember, you do your own negotiating, your agent presents your price to the seller. Know yourself how high you'll go, and submit an offer that gives you some room to get to that number via increments. Stay firm, this is a buyer's market. Hope this helps.

I looked over some recent data for places under 200k in the Lincoln Park, Lincoln Square, Andersonville areas. The general final sale price was around 95%. I am unsure what initial offers were.

The best suggestion I can give you is to be represented by a Realtor in the transaction. We are trained in negotiations, analyzing the market and property valuations. It completely depends on the property, the seller's level of motivation, market time, etc. In this market, I'll be honest, insulting a seller is sortof part of the deal. People are making low ball offers just to see what sellers will take. While I'm not in the business of telling people to low ball, I am in the business of being open and honest with each and every buyer and seller I work for. In this market, I tell my seller's to expect lower offers and to price their property based on their motivation levels. I tell my buyer's, based on my CMA of the property, to offer the seller what they think it's worth and what they are willing to pay, and we'll go from there. If you aren't working with a Realtor, I can offer you many resources on negotiating skills etc.
Email me.

It really depends on how badly you want the place. Some sellers find that even offering 90 percent is insulting but depending on their situation, time frame, and other variables, 90% could be just the right offer. You will only know once the offer is submitted. Even in this market people aren't interested in giving their homes/condos away so it would be wise to prepared for them to counter. If they don't, then you are already 10% ahead of the game!