Question Details

Frank, Home Seller in Michigan

Priced too high?

Asked by Frank, Michigan Mon Jan 14, 2008

I've read that if a house doesn't sell, it's usually priced too high. I was wondering why potential buyers are reluctant to make low ball offers in such cases. Is there a psychological impediment? For example, if a house is priced at $165k, but a buyer thinks it's only worth $150k, why do they wait for a price drop instead of making an offer of $150k?

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As a buyer's agent, I have had buyers decline to make an offer when a property was substantially worth less than asking. I have always encouraged buyers to make offers, because you never know until you open that dialogue what might happen. Still, the cited reasons from buyer for decling to make offers include:

1) It's a waste of time. The seller wants way more than I am willing to pay, and it doesn't make sense. We are simply too far apart and why waste my time or anyone else's? The buyer is not upset, simply views it as a waste of time.

2) "Why should I waste my time? They obviously are stupid!" This buyer sees the seller as out of touch with reality, lacking an understanding of the market conditions. There is a wall of resistance already built between the buyer and seller.

3) This buyer says, "They obviously want "x", otherwise, they wouldn't ask for "x"." "Let me know when they come down in price, and maybe I wil make an offer.

Buyers in category 3 often have an interest in the property, and will even monitor price changes.....but decline to make an offer.....until the seller comes down nearer to a price range the buyer finds of interest.

The overpriced seller combats all of the above, plus the overpriced seller also misses many showings where the buyer doesn't even know that the property is there. i.e. The buyers are only looking at properties with asking prices from 145K-155K, so the properties with higher ask prices are eliminated from consideration.

There are some buyers who are 'low ballers" who will offer substantially under market in the hopes that if your throw enough offers out there, one will stick. The strategy does work. Some Realtors find this very time consuming with a very low success ratio, and prefer not to work with these buyers. In this case, the buyer is better off with a different Realtor, and the Realtor is better off with different clients. Working relationships should be a win-win situation. In reality, this type of strategy of offering substantially under market value is employed by few.
5 votes Thank Flag Link Thu Jan 17, 2008
Deborah Madey, Real Estate Pro in Red Bank, NJ
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Tman makes a lot of good points, albeit perhaps a bit bluntly.

There seems to be an assumption on the part of both buyers and agents for buyers that the "list price" of a house pretty much reflects the house's value...that maybe it's 3% overpriced, so you make an offer at 3%-5% under list and everyone's happy. Now, good agents will run the comps and advise the buyer on what other houses have sold for. And good agents will also suggest a strategy for bidding. And there are some good agents out there. When I bought my first couple of houses, I had some very good agents. But, frankly, many aren't that good at negotiating and many don't run the comps.

Let me let you in on a few more secrets and reasons why buyers are reluctant to make low offers:

Some are intimidated by the whole process. They figure that if a house is priced at $165,000, then that's its price, minus a bit of wiggle room. There's already a seller who's bought into that price. There's the seller's agent, who's bought into that price. There's the buyer's agent, who probably has done a search on the MLS for properties in the $160,000-$170,000 price range, and so figures this one is probably worth about that. And here comes the innocent buyer, who only buys a house every 5-7 years. Does he/she want to buck the system? No. Especially if he/she has been preapproved for a $165,000 mortgage.

Second, there's the American fear of negotiating. And if Americans (and I'm a 3rd generation American, so I'm all too familiar with the mindset) do attempt to negotiate, they feel the need to "split the difference." Why? Because that's what we've always been taught. So, to use your example, if a house is priced at $165,000, but a buyer thinks it's only worth $150,000, the buyer figures, probably correctly, that his offer of $150,000 will be countered at $157,500. That's still overpriced, and there's no way to get the price down. Best the buyer can do now is counter again at $154,000 (again splitting the difference), with his agent wispering in his ear that the seller probably won't accept it. And if you go with the old "split the difference" strategy, the buyer has to make an initial offer not at $150,000, but at $135,000, so that the difference can be split at $150,000. And now all the agents are likely to scream "low ball," even if $150,000 is a fair price.

Plus, some agents don't like getting the reputation of submitting low offers. In the same way some agents will only accept pristine or upscale houses. Anything less would damage their reputation, they feel. Also, a low offer can make the listing agent look bad if the listing agent recommended the listing price. Imagine Sally Seller yelling at her agent, "You told me that my house was worth $165,000. But here's an offer for $130,000. What are you, stupid or something?"

Here's another secret, though. If the agent had recommended listing it at $150,000, but the seller responded, "Well, let's see if we can get more. Let's try at $165,000, and if it doesn't sell in a few weeks, I'll drop the price," then the listing agent may actually welcome your low offer. It's a reality check for the seller.

Hope that helps.
5 votes Thank Flag Link Tue Jan 15, 2008
Don Tepper, Real Estate Pro in Fairfax, VA
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Good question.!

You have to remember consumers for the last 30/40 years have been "propagated" into believing that the price is based on the "asking price" - minus the realtors commission .. and don't mess with the commission.

Lets use your figures as an example: we have an "asking price" of $165,000 .... most realtors will say, you might "maybe" get a 3 to 6% discount if they bargain real hard for you (I always loved that part) ... but they also make sure you are very aware of their commission, and how it's going to effect the sellers net figures which usually runs around 6 or 8% ....

So in the buyers mind, they're thinking "gheez, I don't think the seller will ever take $141,900 for it" ..... plus, the whole time you have "your realtor" that you're paying a stiff commission to, is in your ear saying: "You'll make the seller mad, so don't bid low.."

Don't you just love it.? ..... try this someday, grab a plane and go to 20 different cities and you'll hear it from 20 different realtors in 20 different area's of the country, it's like when they get their license, they get a DVD that says the same thing .l.o.l......


So what usually happens.? ... they get 3% off the "asking" price and somebody still gets 7% for all of their great and wonderful negotiating skills that you probably could have done after your last Root Canal.... ..

Of course the seller is happy because he's sitting at $148,500 and his target price was $150,000 -- but properly negotiated by somebody that knew what they were doing, the deal would have went down at $145,000 or less and had the realtors out the door at 3 or 4% ..... when it comes down the the final seeds and stems of the deal, I always negotiate the realtors commission.

See, the vast majority of current buyers are only thinking what's been told to them before they purchased by others - their brother who bought a house 4 years ago, and their aunt 10 years ago, and then their Mom and Dad 20 years ago and their grand parents 40 years ago.

The advantage that buyers have today is ( that doesn't count paying $550,000 for a home thats only worth $380,000) ...... you have Trulia, Zillow and more will open .... and you're also "just starting'" to see smarter and more savvy realtors that finally "Get It", and aren't trying to drain the blood off Dracula himself, and the days of the 5 showings closer are over because of the internet and bundles of good information .... also buyers arent afraid to shop, challenge and fire a realtor in flat second ... plus they're also opening up the MLS -- face it, what good does it do anyone when it closed, thats like winning the lottery and throwing the money overboard during your first cruise (yawn).


Good luck and happy hunting.!
4 votes Thank Flag Link Mon Jan 14, 2008
Hi Frank,

My advice and response is to you as a seller. Buyers will overlook your listing if you overprice, and you are hurting yourself. When I speak to a seller, I discuss with the seller what is best for the seller. What is best for you is to price right, attract the most buyers, and hire a Realtor who will market your property well. If you engage a full service Realtor as a lisitng agent, you have the right to expect regular feedback, market updates, status reports, and feedback. From your listing agent, if you have a full service lisitng, you have the right to expect over the top marketing and dedicated time and commitment to marketing and representing you. However, as indicated, on literally 100's of posts on Trulia.......if you overprice, you will reduce your potential buyer pool. My advice was written to you, as a seller, not to a buyer. If you overprice, you will loose potential buyers to competing properties. When representing a seller, or speaking to a seller, my responses are predicated upon what is in the best interest of the seller. In your case, price right......wherever that is. I can't speak to what is your right price, since I do not serive your market.

When I give advice to a buyer, I literally "push" a buyer into making any offer they deem appropriate when they sincerely like a property. I do not "push" buyers into writing offers on properties if the properties do not meet the buyer's criteria. When a buyer likes a property, but simply does not want to make an offer because of the "listing price", I take out a paper and write out all the reasons that support why they should write an offer (right size, location, they like the closet space, etc.) and all the reasons why they should not. (their offering price is too far from the list.) The list of why they should is usually long, and the list of why not is usually 1 or 2 drawbacks on the house and "price." While some buyers will come around and agree to write an offer, some still will not.

When I work for a buyer, I will ask them to direct their focus on comps, market value and achieving their goals. Going back to the heart of the matter is the fact that you are a seller. For you, the best input I can provide is that information that will assist you in making in the best decision for you. The fact is many buyers will back away, as a result of overpricing, and that is counterproductive to your goals. My explanation of why buyers back away is relevant to you as a seller, since you are tyring to capture the attention of a buyer. You want to increase your potential pool of buyers, not limit it. If you are not aware of how buyers will respond to overpricing, it can hurt you.

Best of luck to you in achieving a contract at the highest and best the market can produce for you.
3 votes Thank Flag Link Thu Jan 17, 2008
Deborah Madey, Real Estate Pro in Red Bank, NJ
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Theres no list of secrets here .... it's reality 101.


"IF" ~ .. the buyer has studied the market for the last 4/5 months, understands the comps correctly and isn't throwing darts into the wind, then he is a real buyer ... especially if he is locked and loaded at the lenders end.

When properly schooled by a "quality agent" buyers won't become timid or reluctant ... but that scenario all changes for most consumers because most (not all) agents might be cute and maybe humorous but they lack communication skills and their negotiation skills are weaker than pond water ..... again, most not all.

All this fear thats discussed about "insulting the seller" is absurd, if a realtor isn't communicating with a buyer or a seller, they're unemployed ... it's really based on agents getting a "no no" for calling in a lower bid ...

Whats usually the scenario, and how does it play out..? .... the buyers makes the offer to their agent with all of their hopes and dreams for their future ... but, the sellers agent doesn't like it and turns into Little Lord Fauntleroy with a bad attitude ... he then goes back to the seller and the seller can smell the bad attitude a mile away and the seller stops - and the buyer and the seller loses, again.

If he had 1 single once of any negotiation skills whats so ever, he'd have a counter in his briefcase from the seller - not a Sara Lee crum cake.

Do you think Little Lord Fauntleroy cares..? .. heck no, he's still hoping one of the other 2,185 agents in the area will sell it someday, but he won the battle .... but what about the war.?

Worse yet, lets have a 68 second conversation and fax the figures over to the seller .... faxing is just like a drive-by shootings - it's hit or miss ..... or better yet, why doesn't he just call the IRS and "leave a message" that he won't be paying his taxes this year, thats always great form of communication.
3 votes Thank Flag Link Wed Jan 16, 2008
From the buyer's side, we have been to see many homes in our price range. Many are priced too high. When our agent tries to assess how motivated the sellers are, we often get the answer that the seller is not planning to reduce the price anytime soon, or that list price is the minimum price that they plan to accept, or that they anticipate multiple offers to come in the next few days, or that the seller is in no hurry to sell, or... THIS IS THE BEST RESPONSE we received: 1 told us that he could send us pictures by email and then would only agree to show us the home if we put in a offer.

I've done my research and know these homes are overpriced. Why should I waste time putting down an offer if it does not appear the seller gets it and is motivated or ready to sell their home? Also, we don't want to offend the seller too much with an offer 10-20% below listing. Afterall, when they realize they are overpriced and drop their asking price, we want to still be in the game to make a strong offer.

The point is... if you are willing to entertain lower offers, lower your asking price. More people will be interested in your house, and people will get the message that you are serious about selling and up for negotiating.
3 votes Thank Flag Link Tue Jan 15, 2008
The first answer by Thomas was the best.
Tman is clueless about the home selling buying process.
The primary issue is that in most markets the leverage has shifted to buyers. In many markets no one, including Realtors, buyers, and sellers, know quite what to do.
There is a rule of thumb that if a home is price within 5% of the market value, you will see offers and showing acitivity. This depends on the market.
I tell my sellers that based on the marketing I do, during the first 2-3 weeks on the market, if we do not see showings or offers, we will adjust the price.

The residential market is emotion-driven. Will I pay too much? Will someone beat me to this 'Great Deal: I've found? The truth is somewhere in the middle. 90% of the time, the person that purchases a home is represented by a Realtor. So, at least two people need to believe that your property is a good deal: The Realtor, and the buyer.

So an overpriced home, on average, for every 5% of over pricing, cuts out 15% of the potential buyers. Remember, the buyer sets the price, not the Realtor, nor the seller. In a buyer's market, their are more buyers than sellers. So who in the right mind would REDUCE the number of buyers?

Most buyers are qualfied to make purchases in a certain price range, usually in $25,000 increments (depends on the market). So a home price at $176,000 will never be shown to a buyer qualified for $165,000.
So the short answer to Frank's question, is the reason they don't make an offer is that they never see your property.

The other major missing component is called 'terms". Price is only a part of the equation. Any seasoned Realtor will tell you that price and terms are equal. I saw a deliberately underpriced home sell AT market price with NO contingencies (appraisal, inspection, etc.) in a SLOW market.

Do not undervalue the importance of pricing to sell, as opposed to pricing to please.
3 votes Thank Flag Link Tue Jan 15, 2008
Keith Sorem, Real Estate Pro in Glendale, CA
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I agree that the only way you're assured that the seller won't accept your offer is if you don't MAKE the offer. It's always worth making the offer, and never a waste of my time, assuming the client wants to write an offer.

There are more of us out there, writing and fighting for our offers, than you think. Most of us don't take a lowball offer, and simply fax it over to the listing agent, without any preamble, or contact. We recognize that the offer is going to require massaging, and we start that process from the initial point of contact. We often accompany the offer with the comps we're using, and ask the seller's agent to provide the comps they've used to come up with their listing price, so that we can understand where they're coming from (read that as "refute their stale old price").

We then prepare to put the gloves on, and go several rounds with an unmovable force... sometimes successfully, sometimes not. It's not about the commission, it's about the game and a certain sense of price in being able to do what we do well. Yes, there are some "order takers" out there... but there are fewer than you think, [cue patriotic music] and as you would expect, they're not the ones doing any real business out there today. The agents who have survived, continue to survive and will continue to survive are the agents who work hard for their clients every single day of the week. [ fade to black ]
2 votes Thank Flag Link Thu Jan 17, 2008
Alan May, Real Estate Pro in Evanston, IL
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I think if the potential buyers have a good agent who knows how to negotiate, how to work with the listing agent to walk the fine line of hard bargain but not insulting, and communicates the fact with the buyers, then the buyers will be willing to make a lower offer.

However, you will also need to have a seasoned listing agent on the other end to soften the blow for the sellers in order to make a successful sale for both sides.

My theory is that if you don't try, you will never get it. If my clients will not buy a certain property unless it's X amount of money, then the X is what I will be shooting for for them - under the premises that there no multiple offers within a short period of time (even if there are multiple offers, I'd still do it if that's their wishes).

In today's market, and to protect my clients, I want them to buy the house at the lowest possible price, If the housing price goes up next week, my clients make money, if not, they did not lose that much. I would be losing sleep if I don't get them a good deal on the house. I actually get into the habit of telling my clients that I am not shy about making lower offer for them. The truth is, if the seller is interested, they can always counter back.

The fact that I am both a listing agent and a buyers agent, I get to learn and know about the mentality from both sides - how to negotiate as a buyer's agent and how to negotiate as a sellers agent. I anticipate the response and make it work.

The other thing about seller's mentality - actually, they are afraid to price the house right on the dot - they know most of the buyers will come in and want to offer low. If their bottom line is $150K and list at $150K, they worry (and rightly so) that the buyers will come in and make an offer of $140K. So, that's another reason why sellers are keeping their price up.

Funny how if neither side plays games, they might both come up with that $150K number and save all that headache.

(BTW, midnight always makes my answer kind of strange, but I am too tired to re-read it. Hope it makes sense)

Sylvia
2 votes Thank Flag Link Wed Jan 16, 2008
Sylvia Barry,…, Real Estate Pro in Novato, CA
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Today your question became my reality Frank - while not exactly the same situation. My client made an offer on a large multi-unit building in Chicago - it has a market time close to 3 years. The price was ridiculous when it was listed and remains ridiculous today. The issue however is market time. My client is a well qualified buyer, has purchased other large multi-units and understands what needs to be done to a building in order to improve it over the long haul.

Our offer is $1.6 million LESS than asking - not quite half the asking price. We evaluated the building based on cashflow and other key metrics and determined what my client's needs were and then wrote an offer based on facts. Again, the seller may not agree, but it was an offer my client determined was fair in light of the fundamental metrics, current market conditions as well as what will be required to improve the property over time to increase his investment.

Prior to writing the offer, I had a lengthy conversation with the seller's agent to determine the feasibility of our offer - we wanted to test the waters. Needless to say, it was NOT well received - in fact I was told not to waste my time. Perhaps to Tman's point, sometimes the agents get in the way of making a deal happen. Regardless of what the agent told me, the ultimate decision lies with both buyer and seller. I will do my best in positioning the offer and defending our position. The seller's agent may encourage their client to accept, reject or counter - however, it is ultimately the seller's decision. Honestly, we may catch him on the right day at the right time - he may counter. Who knows? Bottomline, my client wanted to write the offer - we did our homework and we wrote the offer. It's now my job to sell it.
2 votes Thank Flag Link Wed Jan 16, 2008
I bring up the lowball offer possibility during the listing conversation, and when I present it, I preface it with a recap of that conversation. In a nutshell, we may get some low offers, we welcome ANY offers, any offer is an opportunity to negotiate---and once again Tman shows us how much he doesn't know. It's generally the seller who turns in to Little Lord Fauntleroy, as he puts it, at that point.
2 votes Thank Flag Link Wed Jan 16, 2008
Almost every agent I know, when wearing the shoes of a buyer agent, encourages their buyer to write an offer based upon what he/she thinks it is worth. On Trulia, there have been several posted questions that asked, "how much lower than the list should I offer?" If you read those threads, you will find consistent answers from Realtors across the country that advised the buyer to look at comps and make an offer based upon the value of the property and not base it on the list price.

Listing agents often face the discussion with sellers as you mention above. Lisitng agents encourage sellers to lower a price, but sellers believe that a buyer will make an offer for lower if and when they are interested. But, the fact is, they don't. The majority of buyers pass. Listing agents, with the agreement of the sellers, will often advertise properties as "motivated sellers" in an attempt to convey a level of flexibility in the price.
2 votes Thank Flag Link Wed Jan 16, 2008
Deborah Madey, Real Estate Pro in Red Bank, NJ
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bonbon,


Your absolutely right, good post ...
2 votes Thank Flag Link Wed Jan 16, 2008
Hi Frank - I like your question. I'm sure buyers have a number of reasons why they won't write an offer on a property that is perceived to be priced above market. In reading a number of the threads from other questions, I've come to understand that many buyers are reluctant to write an offer because they may lack the facts - they simply may not have the necessary information to determine the correct value of a property AND they are afraid that they may offend the seller.

While it sometimes may be the case, an over priced listing may be due to an unrealistic seller. A difficult task for many listing agents is to properly set seller's expectations - while in theory that may work, in practice it can prove difficult.

Regardless, I encourage buyers to write offers on property they really want to purchase, regardless of the price. Armed with the facts, an offer can be communicated in a manner that supports your case - I believe as a buyer, your offer has credibility when supported by recent sales data. Once communicated, it is now up to the seller to defend their price - maybe there are other reasons why the property is worth more money that is not apparent in the recent sales data - the seller needs to sell their price.

If the seller is lucky, they will get an offer from a buyer that is well researched and clearly delivered. In these circumstances, you want an experienced negotiator to communicate and defend your position. Sometimes sellers aren't ready to hear the market speaking - if so, you hope they are represented by an experienced agent who can bring the seller back to reality.

Just some food for thought.
2 votes Thank Flag Link Mon Jan 14, 2008
There is one thing we need to keep in mind with all of this. Yes if my buyer want's a property that is priced high i encourage them to make an offer and then I present to the seller myself in the company of the listing agent. BUT we can't encourage sellers and agents to continue to list properties at unreasonable prices. This is a VERY bad tactic to use because there are just to many properties to choose from that are priced properly. When an agent takes a listing that they know is way over priced for the market they are NOT working in the best interest of their client. A REALTOR working in the best interest of their client is trying to get them the best value for the type property they are looking for. A buyers agent has no obligation to try and force a seller into reality when there are other properties that are priced to sell.
This whole problem of over priced homes is not the buyers agents fault or problem.

Tman almost got it except what he says needs to be directed to the seller and the listing agent not the buyer and the buyers agent. The buyers agent works for the buyer NOT the seller. The listing agent need to have the conversation with their seller.
1 vote Thank Flag Link Thu Jan 17, 2008
See, here's the difference between order takers and closers .. and it's always "attitude".

- Sylvia says: "My theory is that if you don't try, you will never get it. I"

- Thomas says: "I will do my best in positioning the offer and defending our position - It's now my job to sell it."

I admire that attitude, it's positive and these two are going forward ..


- Then you have Deborah: "reasons from buyer for declining to make offers include: 1.) 2.) 3.) ...."

There's reasons and excuses .. and those are excuses.

The buyer is the mirrored image of you and you've categorized them in 3 lump sums ... if you look negative, dress negative and think negative - then you're flat dead negative ... and any or all negotiations are going sideways in a hurry ..

Remember, this just isn't about driving around and looking at the pretty houses and how the tulips are doing on the south side of the 8 car garage ..

It's about going "nose to nose" and "toe to toe" for the that silly person sitting next to you - the buyer, the consumer, the person that has put all of their faith and trust in you ..... (ya know, the one you'll get that fat commission from.?) - "if" you've done your job correctly ....

I understand that you'll always run into that blockhead buyer or that seller that still has his first communion money .... but the vast majority of buyers go by the agents lead, so either lead or follow, but get out of their way - or turn them over to an agent that can.

Last night I was watching the Golf Channel and they've been doing a wonderful piece on George Lopez & Lee Trevino ... and Lee makes a great statement: "when you can't get in through the front door, then go around back and kick-in a window.."

Thats what consumers need, agents that are savvy enough to kick-in a window and nobody gets their feelings hurt ..... thats the difference between an order taker and a realtor that can really negotiate for their client.




;^)
1 vote Thank Flag Link Thu Jan 17, 2008
When buyers are on the market to buy a house in the price range of $150,000-165,000, they will look at number of houses, not just one house. When they compare overpriced $165,000 home with other coparable houses that are priced at $150,000, they figure, why should they make a low offer on $165,000 home when they can easily buy other 10 or 15 homes for much less.
Web Reference: http://www.VeraSoldMine.com
1 vote Thank Flag Link Wed Jan 16, 2008
In this market? Who care`s about offending a seller.

Frank,
Your in Michigan? The psychological impediment is the Michigan real estate market is the poster child for disaster.

Last week some advocate group asked the Governor to declare a state of emergency, regarding the 10% ((( TEN PERCENT ))) FORCLOSED PROPERTIES.

This 3% or 6% Psychological B.S. is last year, A.K.A 30% ago.

Today and Now...
If your house hasn`t sold it is because of the price, or buyers can`t get a loan.

You need to drop the price 5K every 2 to 3 weeks.
Actually you should begin pricing your house very aggressively. You want to create a " Fear of Loss"

If there are any buyers roaming the streets, looking to buy. You want them to see your home and say.
" That is such a great deal, that if I don`t buy it someone else will. "

Maybe I haven`t answered your question.....It is not that I don't think you have a good question, In my opinion your question is outdated. I don`t think buyers are thinking that way anymore. Today's Buyers are dreaming of that incredible deals on a Foreclosure, or at an Auction. Maybe that is why they are waiting for a price drop....Remember we live in a Wal Mart World.
Good Luck
1 vote Thank Flag Link Wed Jan 16, 2008
Mr.P, Other/Just Looking in Arizona
MVP'08
Quite a loaded question.

I have to agree with many of my colleagues here. I don't know many agents, who when negotiating simply say "let's knock 3-6% off the list price" as Tman suggests. All of the professionals I know, strongly suggest looking at the market, and determining the homes true value, before writing an offer.
... Sometimes that offer will be 6% off list, and sometimes it'll be 15% off list. And yes, when the offer is 15-20% off the list price, I do "whisper in my clients ear" the feasibility of our offer working. It's part of my job description to make sure that my buyer understands the likelihood of his offer working. Just because 20% off list is a reasonable value, doesn't mean that the seller will agree with us, and I want my buyer to understand our odds going in. That doesn't mean I discourage him from making the offer, I just want to inject a dose of reality into the negotiations.
... Tman's list of "Secrets" is merely a valid plea, for buyers to become more educated, and with the advent of Zillow, Trulia and others, we're seeing that every day, and I for one, welcome an educated consumer.
... Mr. Tepper's less acerbic "secrets" simply states Americans are afraid to negotiate... they somehow find it rude and/or inappropriate, well that's where we earn our bread and butter, isn't it?

Buyer's tend to be reluctant to bring in offers that are 20%, 30% 40% below list price, not because they're concerned about insulting the seller, but because they're realistic in knowing that even though they might be correct about their pricing, the seller is in no way ready to hear that number, from the position they're at right now. And they're just not willing to waste their time and effort.
1 vote Thank Flag Link Wed Jan 16, 2008
Alan May, Real Estate Pro in Evanston, IL
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Hello everyone..

Robert.....The trend in the local market should be a factor in the CMA. I don't expect that you would have read my mulitple posts on Trulia and other places, but when I discuss how to arrive at a price, I definitely include the trend of the local market, if the rate of properties going under contract is increasing/decreasing, if the volume of competition is increasing, etc. Yes, Robert, your point is valid. A complete market analysis is just that, a look at the entire market and analyzing all components.

Barry, Thanks for your comments. Again, on Trulia, you will find post after post where RE Pros discuss that an overpriced property will not sell. A Realtor does not get paid (in most circumstances) until the property closes. So, of course we want offers. Any offer opens the conversation for future dialogue, so I welcome any offer. I present offers with comps, and I much appreciate when comps are submitted with offers I recieve for sellers. If I believe the buyer should consider other comps, and my seller agrees, we will reply with a counter that also includes comps, along with any cycle/trend data. I welcome the well prepared and knowledgeable Realtor!
1 vote Thank Flag Link Wed Jan 16, 2008
Deborah Madey, Real Estate Pro in Red Bank, NJ
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Deborah has hit the nail on the head. Everyone I know encourages their buyers to make an offer based on what the home is worth. When I represent sellers I hope the buyers agent thinks the same way. We want offers. We have nothing till we get an offer. I spend considerable time with my sellers at the time of listing converting their home to a house in their minds. When we get an offer on the HOUSE we leave emotion out on the driveway and deal with the offer. Last of all I welcome offers with comps attached.
1 vote Thank Flag Link Wed Jan 16, 2008
Ally wrote: From the buyer's side, we have been to see many homes in our price range. Many are priced too high. When our agent tries to assess how motivated the sellers are, we often get the answer that the seller is not planning to reduce the price anytime soon, or that list price is the minimum price that they plan to accept,
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Absolutely. Another reason why buyers don't get to see a particular home: Home has been listed quite some time, agents (not only listing agent, but th 15 other agents that talked to the owner when the listing expired, or when they showed the house) know what the owner's bottom line is, how motivated the homeowner is ("I'm not in a hurry I don't retire for 5 years") and know their customer is not going to spend that much for a home in that condition/that size/whatever based on their feedback from other homes they've shown them.
1 vote Thank Flag Link Wed Jan 16, 2008
Finally .. an honest answer in the business.!

Well written and well said Mr. Don Tepper.
1 vote Thank Flag Link Wed Jan 16, 2008
Buyers have many properties from which to choose. Are you competing with nearby foreclosure listings? Is there a short-sale listing down the street? If so, you may want to hurry up and decide on your bottom line, or take it off the market. I recently submitted a low-ball offer to a bank, on behalf of my client, and the bank countered three different times before we came to an agreement four weeks later. As our price increased, so did our demands-- seller to provide pest clearance, seller to credit buyer 3% credit toward closing costs to buy down the interest rate, seller to provide home-warranty included and more. It's a buyer's world now. The sooner you sell, the sooner you can position yourself to buy a larger, nicer home for the same price you sold. Use your equity and purchasing power to move-up or buy income property. If a low offer arrives on your table, hold firm at your bottom-line. Instead of splitting the difference, lower your price $2000 per counter offer until they come close to your $150k target price. Maybe drop your price from $165k to $154k, and stop the negotiation at $150k. Price indicates motivation. Keith Sorem was right. Buyers are pre-qualified in $25,000 increments. At $165k, you are $15k away from an offer. That's much further than $4k. Good luck!
1 vote Thank Flag Link Wed Jan 16, 2008
I would not hesitate if you included a phrase like "all reasonable offers considered" or "motivated seller" in your description. Otherwise, I'd assume the offer was likely not to get accepted and would move on to the next house.

I should clarify that this scenario is for truly discounted offers (15% or more). Where I live, it is assumed that 10% is taken off the top of any asking price, motivated seller or not. Once in a great while there is something priced to sell. In that case it sells in a day with multiple offers at 97% or so. But most properties are overpriced for the current market and no one hesitates to ask 10-10% off asking price.
1 vote Thank Flag Link Tue Jan 15, 2008
Because the agents on Trulia tell us that we'll be cursed down to the 7th generation if we do so. But, seriously, there is such a strong vested interest for the agents in keeping the prices artificially up that the buyers are often advised against even making an offer 10-15% lower than the asking price. Home prices were artificially inflated in the past several years through the collusion between the lenders, appraisal officials, and realtors. Now, that the bubble is bursting they are trying to convince that we will insult somebody if we, God forbid, ask 15% off the asking price.
1 vote Thank Flag Link Tue Jan 15, 2008
The majority of buyers want a property that is move in ready and will not require alot of updating or addressing of deferred maintanence/repairs. Price is key, but not everything in the buying equation.
1 vote Thank Flag Link Tue Jan 15, 2008
Oh, my. A TD for apologizing for something. How interesting. I wonder where THAT came from? :)
0 votes Thank Flag Link Thu Jan 17, 2008
My apologies Barry. Sorry for putting your name on the wrong post. I think Deborah said that.
0 votes Thank Flag Link Wed Jan 16, 2008
J R That was not me. That was Robert i believe
0 votes Thank Flag Link Wed Jan 16, 2008
Barry wrote:
"most every agent I know, when wearing the shoes of a buyer agent, encourages their buyer to write an offer based upon what he/she thinks it is worth. On Trulia, there have been several posted questions that asked, "how much lower than the list should I offer?" If you read those threads, you will find consistent answers from Realtors across the country that advised the buyer to look at comps and make an offer based upon the value of the property and not base it on the list price."
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Rober asked:
Doesn't this ignore the fact that the market might be declining based on reduced demand? For example, if the last (arguably) comparable home sold for say 500K four months ago, does that mean that the new home placed on the market now is also really worth 500K based on comps? Maybe it really is worth 450 now, or even 400. I noticed when demand was strong sellers added 3-10% from last month's comps based on speculation of increased demand (which is how the prices got where they are so quickly). Nobody considered that inappropriate or "high-balling". I think buyers should always be encouraged to state what they would be willing to pay for a property. The seller can reject, but at least then they can distinguish between no interest and possibly a shift in the market.
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Robert, a good agent takes into accout the declining market and how long ago a comp sold. Comps are historic data. They reflect the past. When the market was going up, yes, the house down the street got X, so lets add X%. When the market is declining we do the same thing, which is why it is important to be represented by a good agent on either side. We do know how this game works.
0 votes Thank Flag Link Wed Jan 16, 2008
Elv!s wrote:
Buyer's tend to be reluctant to bring in offers that are 20%, 30% 40% below list price, not because they're concerned about insulting the seller, but because they're realistic in knowing that even though they might be correct about their pricing,
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Elvis is correct. Note the word "buyers". There are people who throw out offers that low, but they are not usually buyers. I've had customers who consistently lowballed: If the price was 599,000 they offered 520,000. If the price was 499,000 they offered 410,000... these are not buyers. It was almost as if deep down inside they didn't really want the house. What ended up happening? They saw a house at 575,000 and ended up paying 570,000. Guess what? That was the house they wanted.
0 votes Thank Flag Link Wed Jan 16, 2008
Robert also brings up a good point and I need to stop saying CMA when I need to say PTA which takes into account rising or declining markets but any good realtor which covers most will do that regardless of what they call it.
0 votes Thank Flag Link Wed Jan 16, 2008
"most every agent I know, when wearing the shoes of a buyer agent, encourages their buyer to write an offer based upon what he/she thinks it is worth. On Trulia, there have been several posted questions that asked, "how much lower than the list should I offer?" If you read those threads, you will find consistent answers from Realtors across the country that advised the buyer to look at comps and make an offer based upon the value of the property and not base it on the list price."
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Doesn't this ignore the fact that the market might be declining based on reduced demand? For example, if the last (arguably) comparable home sold for say 500K four months ago, does that mean that the new home placed on the market now is also really worth 500K based on comps? Maybe it really is worth 450 now, or even 400. I noticed when demand was strong sellers added 3-10% from last month's comps based on speculation of increased demand (which is how the prices got where they are so quickly). Nobody considered that inappropriate or "high-balling". I think buyers should always be encouraged to state what they would be willing to pay for a property. The seller can reject, but at least then they can distinguish between no interest and possibly a shift in the market.
0 votes Thank Flag Link Wed Jan 16, 2008
Price is not based on asking price, as another poster said. If I list, the price is based on what we think will result in a sale at market value. In answer to your question, though, the reason people don't just make lowball offers is because generally prospective buyers never see that house, as it is not in their price range.
0 votes Thank Flag Link Tue Jan 15, 2008
I agree with Thomas about the reasons. I also would encourage a buyer to write an offer supported by comps. To low ball without reason is , in my opinion, rude. Many times a real offer is just what a seller needs as a wake up call. I have seen sellers turn down an offer and then the next month ask me, "What about that one...".

I think we will see more assertive offers from buyers in the coming months. Selling and buying personal homes can be extremely emotional and that is what keeps most from pushing forward an offer or accepting an offer in a changing market.

CJ
0 votes Thank Flag Link Mon Jan 14, 2008
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