There is no rule saying you HAVE to offer higher than list, especially in this economy. Some agents will tell you anything to get the price (and their commission) up. There are many excellent agents out there that do a terrific job, but this industry certainly has its share of people looking out for their own financial interests. Keep your eyes open during every phase of your deal, and read up on what is considered "normal" rather than blindly accepting everything your agent tells you. There is a lot of valuable data here on Trulia that, when combined with answers from your agent, will give you a good idea of what offer might be needed to be taken seriously.
- What is the CURRENT median SALES price in the zip you are looking to buy in? I would ignore median list price (way inflated) and median sales price data older than 6 months (outdated).
- How does median sales price compare to their asking price?
- What is the trend in that zip - are prices way down, only slightly down, or perhaps even moving up?
- How long has the unit been in foreclosure? Was it a failed short-sale?
- How many similarly sized/appointed units are on the market?
- Probably the most important question, how many offers do they currently have on the property?
Your agent should be able to answer all of these questions for you, but you would be wise to take a "trust but verify" attitude on any data from any source, including Trulia, just to ensure it is accurate and up to date.
Think of the answers to the above questions as a power balance, or negotiation balance. If their asking price is well below median SALES price for your zip, it's a point in their favor. If it's been in foreclosure for a long time, point to you. If the market in that zip is moving downward quickly, point to you. If there are a lot of similar units on the market (especially if they have been on the market a long time) point to you. And most importantly of all, if there are no current offers on the property, double bonus points to you.
Either way, an offer at asking price or even below will be taken seriously unless they have other offers that are higher than yours. They will just counter-offer, which they will probably do no matter how good the offer. If your agent tries to tell you that they can't reveal the number or value of other offers, don't believe it. They probably just want you to panic and overshoot your offer, making the sale more likely and making them a tasty commission.