Seller expectations are slowly re-aligning, and what may seem a low offer now might seem pretty reasonable in 6 months. For example:
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]).... more