Home Buying in Washington>Question Details

Nico, Home Buyer in Washington, DC

In this buyer's market how low of a bid is an insult?

Asked by Nico, Washington, DC Sun Jan 27, 2008

In this buyer's market how low of a bid is an insult? Is 10 to 20% off the listing price too much? Even if a home has been listed for four to six months?

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As a buyer, in today's market, I wouldn't be the least bit interested in whether or not the seller felt my offer was insulting. If I've built my offer based on the value that I see in the property, then I can feel comfortable bringing the offer. They have the option of accepting, declining or countering.

tman, the snotty little "poke" at the end (someday you'll make an average employee...) really takes the air out of your otherwise excellent response... Totally unnecessary.
4 votes Thank Flag Link Mon Jan 28, 2008
Alan May, Real Estate Pro in Evanston, IL
At the risk of repeating other advice below--though I've offered this advice in other postings, too--it really isn't your concern whether a seller finds your bid "insulting." What you should be concerned about is what the value of the home is and what you feel comfortable paying for it. So--get the comps, get input from your agent, and determine what the house is worth in today's market. Then look at your own finances and figure out how much you can afford to spend on the house. And check with a lender to see what you can get qualified for.

Take the lowest number--value of the house, what you can afford, what you can qualify for--and this becomes your MAO (maximum allowable offer). You should spend no more than that. Your actual offer depends on multiple factors--what the house is priced at, what your MAO is, what the spread is, your desire for the property, etc.

One tip: In America, people who negotiate tend to "want to be fair." And that often means "splitting the difference." It's a lousy way of negotiating, but it's frequently done. So, let's say your desired property is priced at $500,000. Your MAO is $475,000. If you bid $450,000, and the seller chooses to counter, there's some likelihood that the final price will end up around $475,000. So you might decide to make an offer at slightly under $450,000. Or more under $450,000. That's up to you. And if the seller is insulted, so what?

Hope that helps.
3 votes Thank Flag Link Mon Jan 28, 2008
Don Tepper, Real Estate Pro in Burke, VA
Hi Nico,

I encourage my sellers to respond to all offers. Having represented both buyers and sellers i truly believe that it is better to start a negotiating process than none, even if it is from a lower price point. Hope this help you and good luck!
3 votes Thank Flag Link Mon Jan 28, 2008

Don't you just love it..? .l.o.l..

" If there are other reasons to why you NEED the price discounted "

Translation: I'm really a poor negotiator and I'm not accustomed to buyers even haggling over the price - I'm an order taker.

Other than Nico saving thousands of dollars in interest and lowering his payments by a few hundred dollars a month -- no NEED.

First off .. "buyers market" is a general term, what goes on in Washington versus Detroit is a huge spread .. also once you've narrowed it down into your preferred area there can be a huge spread between this house and houses 1.2 miles away.

That said ... if you've really done your homework, studied the market for the last 4/5 months and not firing blanks, then 20% is a good starting figure .... the issue is, getting the sellers agent to present the offer correctly without the Little Lord Fauntleroy attitude - and in person.

Keep in mind ..... buying and selling real estate is structured in one of the worst forms of communication on the planet, thats because it's all done 3rd party - no face to face ... ... you tell your agent, agent writes offer, agent calls/fax offer to sellers agent, sellers agent calls/fax to buyer -- and then you have to rely on an agent that you don't know and probably a worse negotiator than the one who's been driving you around .. (not all) but most are very weak.

A good negotiator will always come back with a counter, even if it's five dollars, keeping the ball in play is what it's all about ... see, it's much easier to convince "you" of a price.

If you feel a little insecure about the early negotiations, have the agents make an appointment with the seller, everyone is there - and do them yourself ... you would be truly amazed on how much backwater can be removed when you don't have a translator speaking for you ..

Good luck and happy hunting.!
3 votes Thank Flag Link Mon Jan 28, 2008
It is also important to note that in a declining market (of which there are many credible sources to prove this point to a seller) offering 15-25% under listing (if the listing is priced high or market value for last year) is completely reasonable especially if you are putting 20% down. You are protecting your hard earned down payment from evaporating in a down market, and there is nothing wrong with that.

I live in the worst part of "bubble country", the SF Bay area, where average homes went from 300k in 1999 to 1.2-4MM in 2007. Does this make sense? No.

So what is happening now? I see average homes(built in 1960's, 2300 sqft with minor updating, but still a dump to the rest of the country) in nice neighborhoods priced at 1.3MM sitting around without a price reduction, slowly being reduced 50-100k every month or being taken off the market. Well...if you put 20% down on that house at full asking price you will have lost your downpayment and be upside down on your mortgage. And to add insult to injury, chances are you will have financed this house with an I/O jumbo ARM.

This will leave you feeling poor and desperate for the next 10 or so years while the seller walked away with a 500k-1MM profit, depending on when he bought the house, thanks to your politeness and not wanting to insult the seller.

Do you really think the seller cares if you he insulted you??? Doubtful.
2 votes Thank Flag Link Mon Jan 28, 2008
There's nothing cheap about it, this explains it perfectly: "there are other reasons to why you NEED the price discounted"

Offers are the residual of interest ... no offers, no interest ... no interest and they'll sit there for 4/6/15 months.

Like Sean just mentioned "I don't think any seller who is receiving an offer in a buyer's market should be insulted" .....

Not to worry, you'll make somebody an average employee someday ...
2 votes Thank Flag Link Mon Jan 28, 2008
Nico - I get asked this question all the time and you know what I tell them? You don't know unless you ask. What's the worst thing that will happen, the seller says "no." A property is only worth what someone is willing to pay for it. So if a home has been sitting on the market for six months with no offers, you bet I'd submit a low-ball offer and see what comes of it. Good luck!
2 votes Thank Flag Link Mon Jan 28, 2008

" even the slightest deviation from the asking price may be an insult " ..

.... If so, then the seller wasn't properly schooled by the agent .. or the agent just wanted another listing, not a sale .... either way, buyer and seller LOSE LOSE.

2 votes Thank Flag Link Mon Jan 28, 2008
Offering 20% less than any listing price is not unreasonable. Property is worth only what someone is willing to pay. Yes, some sellers will be insulted, but the fact that a home has been sitting on the market for months is a sure sign that the property is priced too high or has some problems that require a deep adjustment in the price. One home in our subdivision was listed for $500K, and in one week was reduced to $330K ... and it hasn't sold yet. Those are the types of reductions that are hard for sellers to swallow, and some sellers refuse to admit the horrid condition of the economy. The market has not yet hit bottom across the country, so prices will be dropping dramatically for the next several years. And then recovery will be long and slow. That's not what sellers want to hear, but it's just reality. Sellers almost always think property is worth more than Buyers.
1 vote Thank Flag Link Tue Feb 19, 2008
If you are using a buyers agent to present the offer, no amount is "too low". Whether a seller is insulted or not isn't the concern. What you do want to make certain of, if this is a house that you want, is that your agent puts a very short time frame on the response, so that you have the opportunity to re-bid in the event of a flat out rejection. While offering a lowball subjects you to the possibility of another offer coming in and being accepted, if it's been on the market for 4-6 months, and you're a gambler, getting the best possible price is the goal of your agent (if they represent you). Good luck- it's an interesting game in a market that is taking a dip in many areas!
Web Reference: http://optionsrealty.com
1 vote Thank Flag Link Mon Jan 28, 2008
I am going to have to disagree that 4-6 months is a normal amount of time for a house to sell. I dont care what season it is. If a house is priced correctly and there isnt anything wrong with it, it should sell within 30 days-45 days for a regular house up to 90 maximum for a luxury home. Otherwise there is a problem. From what I am seeing as a buyer, usually those homes sitting around forever are completely overpriced or dumps or both.
1 vote Thank Flag Link Mon Jan 28, 2008
Every market and neighborhood is different. We have some neighborhoods in Dallas where homes only stay on the market for a week and they are selling closely to full price, some other areas with more inventory and homes are 4-6 months on the market and they sell abut 4-8% below asking...

The price range also plays a role... Your best bet is for your Realtor to do a market analysis on the home you like and that will tell you how much other similar homes in the neighborhood have recently sold for so you can decide on how much to offer.
Web Reference: http://www.sumnerrealty.com
1 vote Thank Flag Link Mon Jan 28, 2008
There's no standard formula--You really have to research each property individually to come up with your offer. The asking price often has nothing to do with the market value of the property.
0 votes Thank Flag Link Mon Sep 22, 2008
Check your comps with your Realtor first. Maybe this home has had a few price reductions and are currently priced where it should be or below market for a quick sale. The Seller may not be able to negotiate much more, and your offer will be ignored or declined.
0 votes Thank Flag Link Sat Mar 15, 2008
With out a doubt; in this market it is to 'Bring it on'.... Sellers want to see an offer on the table, the truth is it gives them a 'starting place'. Lately in my experience sellers aren't offended by what we call 'low ball' offers, they are just pleased that one came in and they can deal with it as they wish.
0 votes Thank Flag Link Tue Mar 4, 2008
"Bring All Offers" is the name of the game.
No offers, no sale.
In our area, once a home has found it's 'sweet spot' in terms of price (after, typically, many reductions) we are seeing an average of 95%-97% list to sale price difference at closing. (Bellingham/98229 sales since 11/07)
Is this remarkable? I don't think so. There is simply so much information available to buyers these days, that they can spot a deal a mile away, and in our area, they are willing to pay for those deals without trying to go deeper with the seller.

This could be unique to our area. We are not encumbered by over-built subdivisions, and our city and community value the natural qualities of our area over growth. (very anti-sprawl) Because of this, many of our communities have been more insulated than many other markets around the nation. (Although, we have pockets in the market that are experiencing a much different reality.)

Hope this helps!

Mimi Osterdahl / The Muljat Group Realtors / Bellingham, Washington / http://www.LiveGoodBeHappy.com
2008 President, Northwest Washington Women's Council of Realtors
0 votes Thank Flag Link Sun Feb 10, 2008
I don't think any seller who is receiving an offer in a buyer's market should be insulted. Sellers should be insulted by people NOT making an offer. However, selling a home is emotional and they may repond accordingly. A good seller's agent has already prepared their customer to be ready for lower offers. Therefore, do your research of what comparable homes are selling for in the immediate area in the last 30 days and what homes are selling for currently and make an offer accordingly. There is no wrong or right in making an offer. Put it out there and the worst they can say is no. Now is a great time to buy! Good luck!
0 votes Thank Flag Link Mon Jan 28, 2008
Impossible to tell....different people are effected differently. If an individual seller has all ready discounted their property to try to keep up with an evaporating market even the slightest deviation from the asking price may be an insult.

To be fair look at the recent comps for the area and base your offer on that without worrying about insulting any one. If you really, really want the home, make an offer that is fair to both the seller and you........WIN, WIN!

The "Eckler Team"
Century 21 Almar & Associates
Venice, Fl 34285
0 votes Thank Flag Link Mon Jan 28, 2008
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