Yes, we get paid a percentage of the deal. But the difference in what we get paid, if you purchase for $10,000 more amounts to about $150.00 in our pocket. $150.00 is not enough to cause us to abandon our client's best interests. And most agents I know, take a fierce pride in their ability to negotiate.
The better a deal our clients feel that we got for them, the more they'll tell people, and the more they tell, their friends, the more likely we'll have a referral deal, and much more potential for payment than the lousy $150.00.
So it's in our best interest to negotiate a tight deal.
I'm going to toss out another important factor to "low ball" offers. They don't get accepted. For the most part, a low ball is a low ball. If you like the house, and want to alienate the sellers, low ball the heck out of it. They'll write REJECT in all probablity and not take your offer seriously. More to the point, they won't take you seriously.
If the house is price well, in a good location, in good condition, fits your wants/needs, and you can comfortably afford it . . . then why risk losing the house you want to call home?
If you don't care about the property being your home . . . toss away.
I am an Exclusive Buyers Agent in the Metro Portland area. I only work with buyers. I look at prices all day long, and I look at the SOLDS. Very interesting what I'm seeing. The houses start out, let's say for example at $379,000. It sits and sits. Has a few price reductions, but still doesn't move. One more price reduction to, say $349,000 and BAM -- it sells. And it sells for $349,000! The price brought out buyers, and the sellers says "I reduced it $30,000 . . . I'm not reducing it anymore" (as in "you can kiss you low ball offer good-bye!")
It's the oddest "buyers' market" I've experienced in my tenure as a Realtor. It's as if the listing price is set once it hits the right price. Then there is no wiggle room.
The problem with the new listings is that the property hasn't been on the market long enough. So if a low ball offer comes in, the sellers will REJECT it, and say "NO WAY! We only had the place up for a month."
So to answer your question -- No. Houses are not selling for much lower then list . . . if the list is where it should be to begin with!
This is a market driven industry. And when the list "Price is Right" it sells, and not too far off list, based upon my study and research of the current market.
There is always a difference between what you ask and what you get, especially in the real estate market right now as a preponderance of buyers may think they smell a good deal &/or seller desperation. Buyers may feel that they are few and sellers are many.
In all my offers for buyer clients, I always research deeds of trust or lines of credit, even notices of default just to get even a splinter of strategy on seller motivation.
Dirk sold a house for a 10% spread at an asking price of $769,000..but his offer was all cash and he agreed too a lower commission (as did the listing broker likely) such that the NET to seller may have been closer to 7-8% off of asking price. Not bad for all cash at that price range, especially to close in 2 weeks (real money offers are rare and I consider a blessing at any price range), as well still a healthy commission to get the deal done. I'd do the same, it's not about the money for us brokers..it's about the deal. Good job Dirk!
However, apply the same % to a $300,000 price tag and it may effect the seller to a larger degree than the higher priced home (larger exponent). Notice Dirk's sale at $372,000 for an asking price of $379,000 is not much of a margin of difference. I think the mentality above $500,000 is much different right now....especially when being offered cash and a short close, but it must exceed the seller's pay off + commissions (duh), hence the strategy to research deeds of trust and other evidence thay may conclude a seller pay off, or debt position. If the subject property is vacant, this is very worthwhile. If occupied, still worthwhile.
Example is I just concluded research on a $400,000 listing for a client that is now price $50,000 less than real market value (per assessor) and started at $520,000. I am very well certain the sellers are anxious to unload given that the property is vacant, and recorded deeds of trust for another purchase they chose last year that coincided with a $150,000 line of credit on the property that is for sale. My conclusion is them painfully servicing about $650,000 in mortgage, half of which is weighted with a vacant house (the one listed) and the other half with their new home. Ouch.
Short story is to swing low. After comparing sold properties to your subject which will determine what your subject may eventually appraise at (if you have a loan), start at 10% from that number, maybe 15% if you are $500,000 and beyond. Anything beyond that may be supported if you are able to prove a heavy dose of seller desperation (deeds of trust, lines of credit, notice of default...etc).
State Certified Residential Appraiser - 15 years
(541) 284-2511 office
(541) 912-1405 cell
Is this an "arms-length" transaction?
Did the eventual sales price reflect any added costs that were included in the sales price? Perhaps things such as the seller paying points, closing costs, lender required repairs or buyer desired repairs, or a host of other possible items may add to a closing sales price.
The reason for the home being listed for sale may also influence the eventual sold price. Perhaps the seller(s) are facing foreclosure and are hoping to salvage their initial investment.
Perhaps a job change and transfer to another area of town or out of town requires a quick sale, therefore the willingness of the seller to accept low ball bids could be another factor.
Divorce, loss of a spouse or partner, or any other factors that might influence a sellers willingness or necessity to make a quick sale may influence a seller to accept a low ball bid. So, its always nice to know the motive behind the sale and to understand a bit about the seller(s).
Then again, the seller may view their property as being worth far more than it actually is in today's market. Ask your real estate professional to prepare a Comparative Market Analysis and make sure the comparable properties used in this report are actually comparable to the subject property and is not just a clumsy neighborhood survey of all properties that are listed, have a pending offer, have expired and never sold, and sold properties. Facts can serve as strength, and vice-versa depending upon how the seller views reality.
Strong negotiation skills used by your real estate professional may also influence the final sales price. If the offer is rejected with no counter, resubmit a new offer if you desire. But then again, you may run the risk of offending the seller and therefore prejudice their view of you as a buyer. It all depends upon your investment criteria and willingness to accept rejection - or worse, acceptance!
Best of luck,
As you can see from the responses below, your Realtor isn't the only one who discourages "low balls"--though what really is a low ball?
Even Carla, who discourages low balls, gives an example of a house that might initially have been listed at $379,000, then reduced to a final price of $349,000, where it sells for $349,000. She says: "The price brought out buyers, and the sellers says "I reduced it $30,000 . . . I'm not reducing it anymore" (as in "you can kiss you low ball offer good-bye!")" Fair enough. But suppose it's been on the market for just a week at $379,000, and you come in and offer $349,000. Uh oh. Is that a low ball? Or is it the fair price of the house?
There's an interesting difference in perspective between many Realtors and real estate investors, who have a reputation for making lowball offers. Most Realtors want every transaction to succeed. If a buyer makes an offer and it's flatly rejected, many Realtors see it as a defeat. (It's also not financially profitable.) On the other hand, depending on the investor's strategy, an investor might be pleased if 1 in 20 or 1 in 50 offers are accepted. An investor would be quite concerned (and quickly check his numbers) if he or she was getting even a 50% acceptance ratio.
As a retail buyer, your perspective is certainly going to be different from the investor's. But it will probably be different from the Realtor's, too.
The comments below are correct that most (not all) sellers will quick reject offers they consider lowballs. But it's very difficult to read a seller's mind. (However, sometimes, as in Chris' scenario, you can determine some motivation.) One seller might consider an offer even a penny lower than the list price "insulting" because they already feel they're "giving it away." Others might consider an offer 10% below list as a blessing. So, try to determine motivation. But don't agonize over whether a seller might consider your offer an "insult."
As you can see, your Realtor's advice and behavior are very much in line with most of the comments here, and probably reflective of most Realtors nationwide. Nothing at all wrong with that. However, if you feel that your Realtor and and you aren't "on the same page," you should have a good heart-to-heart talk, and then decide where you want to go from there.
Hope that helps.
The statistic you cite is just one of many statistics out there. In my opinion, a more useful statistic is the list price vs. sold price average. This statistic tells you how close to the list price a home actually sold for, on average, for specific areas. Unsold homesâ€”sometimes over-price unsold homesâ€”are not included in this statistic.
Your agent can provide you this and can also give the same information for individual homes that sold in the area where youâ€™re considering buying a home.
I have a page on my website that gives offers a few sample statistics for some different areas, Zip codes and price ranges. Youâ€™re welcome to check out this page: http://edburnham.mywindermere.com/index.cfm?fuseAction=conte
Statistics and averages are useful information for the larger picture, but real estate values are really very local. The difficulty with statistics is that as you zoom in, the sample size gets smaller and the margin of error increases. While you should keep the big picture in mind, what is most important to you is whether the home youâ€™re considering is fairly priced for where it is and what a good offering price might be.
Your agent is the best source for the kind of focused, local and very specific information you need to decide this.
Your agent can provide a market analysis for a home youâ€™re considering. Just as important, your agent provides you with an experienced and often intuitive view of the very local market where the home is located. Thatâ€™s what you really need to write an offer that has a chance of getting serious consideration by the seller.
And, once a seller is willing to consider your offer, you have a chance of moving from offer-writer to home owner, which is really the point of writing offers, isnâ€™t it?
Best of luck in your home search!
Tom Inglesby, Broker
RE/MAX Equity Group Inc
Back in August, 2008, my wife and I put in a bid on a house. It was beautifully renovated, a truly one-of-a-kind house in a great area. The seller was asking 995K. However, the square footage was low, and high-end homes in the same area were priced around 800K. So, we put in an offer at $800K, along with a 6 page-analysis of why we thought that was a fair price given the economy, market, comparable sales, etc. We also offered cash with a short close. Our offer was rejected out-of-hand (fair enough, it was a nice house).
Cut to June, 2009. In the meantime, the seller has had three separate offers on the house fall through, and has lowered the price on the house several times. The house finally sells last month... For $820K. My wife and I would have gone higher if the seller had been willing to negotiate back in August, and he could have closed 10 months earlier, but he was mentally unprepared to deal with what his house could actually fetch in today's market. This is not uncommon. Sometimes, it takes a while for people to wrap their head around what is really going on right now in the housing market.
(For what it's worth, my wife and I ended up buying a great home in NW instead, which we're currently renovating, so the story has a happy ending [for us, at least]).
Consider it acknowledged. I like to think, however, that the bulk of Realtors think 'big picture', rather than 'today's profit'.
Give a dollar today, make a hundred tomorrow.
It is important as a buyer to assess this and determine if the person you're dealing with is one or the other. Good response Elvis...I like this conversation.
In many cases it can be a good idea to start a dialogue with the other Realtor who may be able to tell you if they've already rejected an offer higher than yours. In all honesty, I don't mind writing low offers if the seller hasn't seen any offers yet, because an offer is just that, 'an offer' and is potentially the beginning of a negotiation process that could ultimately culminate in a deal that works for all parties.
Oregon First, Realtors
Many agents feel "low balling" is a waste of time and insulting to the seller and their agent. Offers should be based on what is happening in the current market, desirablity of the property, and what the buyer is willing to pay for the priviledge of ownership.
Most agents will be happy to present a reasonable low offer that stands a chance of being accepted and is not a waste of everyones time.
Most are 1-3% off. Some are a lot more off.
I just negotiated a $379K home to sale for $372 K in 3 days and the other day I sold a $769 new custom in your area for $695K all cash buyer with 2 week close but I split the fee in 1/2 and we got the deal done.
Business is happening every day with buyers and sellers that are engaging the process and the market. Odds are you are too high on price or are being mis marketed. If you need more specific help please contact me directly at firstname.lastname@example.org.
Best wishes to you!
Dirk T Knudsen
#1 Rated Re\Max team in Oregon