Home Buying in 20895>Question Details

K Shaffer, Home Buyer in Silver Spring, MD

They countered full price. What to do?

Asked by K Shaffer, Silver Spring, MD Wed Jun 25, 2008

Concern is that the house is not actually worth the list price. Our agent says it is fairly priced. How do we really know?

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Hi K,

When a seller receives your offer, he can do one of three things: 1. Accept your offer as written, 2. Reject your offer, or 3. Submit a counter offer. (I guess #4 would be to ignore your offer all together which happens).

In most cases, a counter at full price happens when a seller responds to a very low offer (is this you?). A seller's typical emotional reaction to a very low offer is to simply reject it "since the buyer obviously isn't serious". Even though the most sellers are willing to reduce their asking price, they don't want to make early concessions for initial low ball offers.

In this situation, an experienced listing agent will often advise the seller to counter the offer at full price -- this is a good thing for the buyer. This tells the buyer that they seller is willing to work with the buyer, but they'll only start serious negotiations once the buyer starts with a more realistic purchase price.

The challenge in this market is to have both parties feel like they have arrived at a 'fair price' for the home. Your agent should provide recent comparable sales that support your offer. If you've simply thrown over a low offer with no supporting data, then your position is pretty week. Of course, the seller that is really desperate and motivated may respond to anything. In this case, your seller is likely telling you that they are not desperate and will only engage you once *you* become more realistic.

Of course, your seller could be the nutty, unrealistic one -- that happens too! Good luck with your purchase.
2 votes Thank Flag Link Wed Jun 25, 2008
One other note. There are no other offers registered with the seller's agent but he told our agent that he has three other people "writing offers" and that they are confident they will be able to get full list price with someone.
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That's a pretty important missing piece of information. If they, truly, have three other offers coming (and personally, I think it's foolish to wait for an upcoming offer, and ignore the bird-in-hand) that changes the whole dynamic.

Think through the scenario, if one of the other offers actually materializes and buys the house from under you for $595,000. If you're okay with that, and you're happy with your bid, then just sit and wait.

If it would bother you to lose the house for $10,000 - $15,000 ($60.00 - $75.00 / month on a mortgage), then you need to reconsider your offer. Only you can determine if you want to get into an auction type situation, if those other offers materialize.

If they don't... then you'll be in a stronger position.
3 votes Thank Flag Link Wed Jun 25, 2008
Alan May, Real Estate Pro in 60201
MVP'08
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Get a full report of all the comparables in the area. Tell your agent that you want to see all the sales for the neighborhood in 2008. Get complete reports including the sales price, days on market, seller assistance, number of bedrooms... Look over this information yourself. It will take about 45 minutes to get acquianted with the format and familiarize yourself with the information. Ask your agent to run a CMA availalable to them in Matrix. This is a software program that Realtors in this area have access to. You can read side by side comparisons and it will give you a better understanding of what is going on.

Decide for yourself. The agent gets paid on the sale of the property. Many agents want to make the higher commission and some agents don't like to negotiate. Most are honest, but not all are aggressive.
2 votes Thank Flag Link Fri Aug 22, 2008
If the property is fairly priced, your agent should be able to back that statement up with more than just words. He should give you a market analysis, with very recent comparable sales... very recent. Have your agent show you convincing evidence of the homes true value, and then base your response on that.
2 votes Thank Flag Link Wed Jun 25, 2008
Alan May, Real Estate Pro in 60201
MVP'08
Contact
You aren't paying full price, the owners have come down from 629, and depending on WHEN they came down (two days before your offer?) they may not be as negotiable as you'd like. Let me ask you a question: if they were asking 629 and you offered 600 and they accepted, would you feel as if you got a dea?

At this point, if you truly love the house and it meets your needs and the comps (as you say) show it's FAIRLY PRICED, either offer to split the difference with the owner or come up to 599. Otherwise, walk. But the problem is in some cases like this, buyers tend to remember the one they didn't get and try to find another one just like it, which sometimes never happens.
1 vote Thank Flag Link Thu Jun 26, 2008
Hi ... it's Kensington-Parkwood ... I'm having trouble figuring out the stats you gave me, but thanks for the formula! I appreciate all of the replies. ~KS
1 vote Thank Flag Link Wed Jun 25, 2008
Hi K,

I agree that a $580,000 offer on a $599,500 asking price is definitely not a low-ball offer. With 50% down, you sound like grade-A rock solid buyers.

Have your agent take a look at the available inventory for similar homes (see below). Right now, this varies wildly depending on where you are in MoCo. If your home is an area with 12+ months inventory, then it's a strong buyer's market. The odds of another offer coming in at list price is greatly reduced in this scenario. However, if you see 3-4 months inventory (or less), then you may need to come up in price. The listing agent may be right to wait.

I just helped a buyer negotiate a great deal on a home that has 2 years' worth of available inventory. When the listing agent told me that another buyer was really interested, we said "fine -- let them buy it". Even if another offer came in (it didn't), we had others to consider. For another buyer looking in Potomac under $800K, it's been a strong seller's market since May. Multiple offers are being made and sales prices are often over asking price. It's strange to see, but it's happening. We're prepared to write a full price offer in this case.

For your situation, you may stick to your guns and wait out the seller, but be prepared to loose the home if it's in a newly hot area. Good luck.

** To calculate available inventory, first count the number of active comparable homes; second - divide this by by the number of comparable homes that have gone under contract in 2008; third - multiply by 6. Example - 20 comparable homes are currently on the market. 5 have gone under contract in 2008. The inventory would be 20 divided by 5 times 6 (since this covers 6 months) = 24 months inventory. In other words, it would take 24 months to sell available homes at the current rate of buying activity.
1 vote Thank Flag Link Wed Jun 25, 2008
Hi,

Thank you everyone for your replies. Here is some more background.

The current list price is $599,500 (dropped from a very unrealistic $629,500 to $612,500 to here over the course of 70 or so days) and we offered $580,000. I don't think it was low ball by any means.

We are very "good" buyers - over 50% down payment, high earnest money deposit, few contingencies. If the house is fairly priced at $599,500, we're struggling with the pre-conceived (and I realize it doesn't always apply) notion that one won't pay full asking price in a buyer's market.

Our agent have provided us with some comps with more on the way. It makes it look like it is fairly priced. But, see the above pre-concieved notion that is hanging us up. We're also put off by the buyers not giving. Well, they countered at full current list price, they'll replace 5 windows with broken seals (we don't want this done b/c we want to handle how it is done and pick the windows), and they want to close earlier than we do (they're currently paying a double mortgage but we're going to be out of town when they want to close and are worried about owning a house that will sit empty and un-watched for 2 weeks).

Thanks again for all the input!
~KS
1 vote Thank Flag Link Wed Jun 25, 2008
K- That is a great question and one that all homebuyers are asking these days. I would recommend that you ask your agent to prepare a comparative market analysis and competitive market analysis. The comparative report should compare active listings and under contract homes to the home that you are buying. The competitve report will compare the home to comparable homes recently sold. Any feature differences should be reflected in both reports. Also, you should request an appraisal contingency in your contract. This states upfront that you are requiring the home to appraise for at least the sales price. If the appraised value is less than the sales price, then you can choose to add more money to the downpayment, ask the seller to reduce the price or not buy the home. But in the end, only you can determine if the home is worth the price to you considering your future plans. I wish you the best.
1 vote Thank Flag Link Wed Jun 25, 2008
In my experience sellers countering at full price happens when the house has just hit the market and there is a lot of activity, if the price is below market or if the offer is super low ball. Not every seller is pressed to sell and if the price is reasonable in a good market, the gamble to stick to his or her price may pay off. You would know by examining comparable sales or if other buyers are willing to pay.
0 votes Thank Flag Link Sat Dec 28, 2013
The market dictates the price. Not the agent, and certainly not the sellers. You need to view all the recent comps in that neighborhood. And after all that review.
The last thing is this...the bottom line decision is made by buyer...one must decide these criteria. Likeability, desireability, neighborhood, schools, ammenities....once you decide on these...then if the price is good then buy if not go find other one.
Web Reference: http://www.jordanmossa.com
0 votes Thank Flag Link Thu Jun 26, 2008
Hi K,

Sorry about the confusing math on calculating inventory. Measuring available inventory in an area is the best way to gauge the health of the real estate market. It's simply a measure of the homes available compared to the number of recent sales. Your agent can calculate this for you. Bottom-line: If homes in your area of interest area are selling quickly, then may be in a rising market (very possible) and you will likely have to come up in price to acquire the home. If homes are sitting -- e.g., inventory is very high -- then you are in a better position to wait the seller out and negotiate a lower price.

Last question -- Are there other homes in the area that would easily meet your needs? If you have very specific, hard-to-find needs that are met by this home, then you may be best served to come up closer to the seller's price. You're only off by 3%. $20K isn't much to spend if the home really, really works for you.

Good luck!
0 votes Thank Flag Link Thu Jun 26, 2008
It's likely that the way the seller sees it, your offer came in ~$50K below value. Whether the agent originally prepared the seller to expect the original price, or the seller demanded that it be listed at that price is not relevant at this point. The seller likely feels that the property can sell for the current list price.

The property has not been on the market all that long (though most sellers would think it has), and true desperation may not yet have set in.

Ask your agent to evaluate the highest value for the property, and decide whether or not to come in at the current offering price based on that value.
0 votes Thank Flag Link Thu Jun 26, 2008
You should also remember that the original list price was 630k so the sellers aren't really getting what they wanted for the house, they're already 'losing' 30k on a now full-priced offer. Maybe thinking this way will help you get over the idea of buying at full list price. Heck, I would offer 595k (without the window repairs) just to 'win' if it matters that much to you and you LOVE the house.
0 votes Thank Flag Link Thu Jun 26, 2008
One other note. There are no other offers registered with the seller's agent but he told our agent that he has three other people "writing offers" and that they are confident they will be able to get full list price with someone.
0 votes Thank Flag Link Wed Jun 25, 2008
Have your Agent pull as many Comps as possible and review with your Agent to make the best analysis possible of what's "fair". Make an offer you are comfortable with and hope your appraisal comes back justifying the value. If it doesn't either the Seller has to come down or you have to pay the difference in cash, OR, maybe you can meet somewhere in the middle.
0 votes Thank Flag Link Wed Jun 25, 2008
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