How to negotiate a fair price?

Asked by Matthew Jacobs, Chicago, IL Tue Nov 13, 2012

There is a house I'm interested in Beverly that is being listed at about $300K, however this is more than $100K above the house's current market value. How do I go about negotiating a fair price for the house?

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21
Don Tepper, Agent, Burke, VA
Thu Nov 15, 2012
Some of the responses here seem to miss the point of your question: How to negotiate a fair price.

For sake of argument, I'll assume that you're correct that the listing price is $100,000 above the house's current market value. You say the house is worth $200,000; the seller has it listed at $300,000. Those are the facts.

I'll assume that your definition of a "fair price" is one no greater than $200,000. Otherwise, you'd be overpaying and that wouldn't be "fair" to you.

What you have to do is convince the seller that $200,000 is his/her most desirable option. Other options are worse.

That may be difficult to do, because of the large gap in prices. But that's what you have to do.

First, you have to demonstrate to the seller that the real market value is $200,000. You do that with facts and figures. An appraisal. Comps. A CMA from a Realtor. Understand, though, that most sellers think their houses are somehow different. "Oh, my house is 5 years newer than that example you're showing me." "My house is on a 12,000 square foot lot; that one is only 11,500 square feet." "OK, that house has a new kitchen. But mine has better landscaping." Be prepared for that.

Second, demonstrate by showing what the market's like. Perhaps the house in Beverly has been on the market for 180 days, while the average days on market is 65. That sort of discrepancy is the market talking: It's saying the house is overpriced.

Third, make the seller "feel the pain." The seller wants to sell for some reason. Emphasize and underline that reason. "Until you sell this home, you can't move closer to your children." "Until you sell this home, you can't retire to Florida." "Until you sell this home, you can't take a new job in Texas." "Winter's coming. I'm sure you're not looking forward to another winter of shoveling snow and huge utility bills." Find out what the seller's motivation is (that's really not too difficult to do), and work that angle.

Fourth, present a solid offer. You've set the stage: The house is only worth $200,000. And it's hanging like an albatross around the owner's neck. Now you can come along and solve those problems. You can relieve that pain. You present an offer that's consistent with your previous statements and actions. (Odds are that if the property has been overpriced by $100,000, the sellers haven't received any serious offers. Show that yours--while lower than they'd like--is dead serious.)

That's how you negotiate a fair price for the house.

Oh, and one other thing: While your agent can sound the listing agent out about motivation, seller's situation, etc., do NOT--repeat do NOT--quit just because the listing agent reports to your agent that the sellers aren't likely to accept your offer. In fact, a competent listing agent will simply say, "Have your client submit an offer and we'll consider it." And a competent buyer's agent will tell you, "The odds are probably fairly slim of the seller accepting your offer, but we won't know until the offer's made." Point is: You make an offer and see what happens. Worse case scenario: The answer is "no." And you're no worse off than you are today.

Hope that helps.
2 votes
John Meyers, Agent, Park Ridge, IL
Thu Nov 28, 2013
Hello Matthew,

Unfortunately, sellers are not always realistic with price and their realtor isn't able to convince them otherwise.

The best way is to make an offer. Your realtor should be able to provide comps which support your price and hopefully get the seller to negotiate with you.

Just let me know if you need help.

Thanks,
John Meyers, Meyers Realty
e: JohnMeyers@MeyersRealty1.com
c: 847-533-7115
0 votes
Manuel Brown, Agent, Chicago, IL
Tue Nov 26, 2013
Dear Mathew,

In order to negotiate fair price you will need to know what similar properties have closed for in the last three to six months. Hopefully you are working with a great broker.
0 votes
Mike, Agent, Chicago, IL
Sat Nov 23, 2013
Meet with an agent, and discuss the specific situation. They should be able to educate you , as this is part of their duties.
0 votes
Pamela St. A…, Agent, Muskegon, MI
Thu Nov 15, 2012
As a buyer's agent I would start by looking at the history of the listing..when and where did the price start
0 votes
opondomusa, , 10020
Thu Nov 15, 2012
Before make an offer, you need to do your research

For example, what was the listing price of other houses of similar size in the same neighborhood? Did the seller get that amount, or did the house sit on the market for some time?

Once you've know the facts, be specific and aggressive in your purchase offer. Make a deadline for the seller to counteroffer, and stick to it. If the seller knows he only has a certain amount of time to decide yes or no on your offer, he'll be more willing to take you seriously. After all, if he drags his feet, you may end up walking away!
0 votes
Luke Wojcik, Agent, Chicago, IL
Wed Nov 14, 2012
Sounds like you are dealing with an unrealistic seller. Have your agent call the sellers agent to see what is going on and if they are willing to talk around market value prices. If that/s not the case i would move on and watch the price drop as time goes on.
0 votes
Brendan Ross, Agent, Chicago, IL
Wed Nov 14, 2012
I agree with previous posters; the most important things:

- get an agent
- feel out the seller/listing agent (he may not budge whatsoever)
- get the data and hard facts to back up your valuation


Brendan Ross
(773) 220-2982
ross@imovechicago.com
0 votes
JIM Michaels, Agent, Chicago, IL
Wed Nov 14, 2012
let me handle the transactions

I take the "ego" out of the negotiation which you will be dealing with from the seller
0 votes
Bill J Delig…, Agent, Naperville, IL
Tue Nov 13, 2012
Just because you think the home is worth $100k less than list price and just because you may have the data showing as much, it means nothing if the seller is not willing to budge. Are you working with a Realtor? ...if not I do not suggest you negotiate your offer on your own. Work with a Realtor who can provide you with a market analysis and their expertise. If the seller isn't willing to budge, move on to another opportunity.
0 votes
John Potter, , Cook County, IL
Tue Nov 13, 2012
Pay for an appraisal report before making offer. then pay for bank appraisal for loan.
0 votes
Juan Martinez, Agent, Chicago, IL
Tue Nov 13, 2012
A fair price amount for a buyer is often different than a seller's idea of a fair price.
As a seller you want to get as much as possible and as a buyer you'd like to buy it as low as possible.
I'd find reasons to justify your lower offer to the seller with comps, repair estimates if applicable, area crime rate statistics, registered sex offenders in the neighborhood, etc.
If they won't come down on the price, look for other opportunities and if your figures were accurate you can come back in a few weeks or months and catch it when they drop the price because they realized the value was in fact lower.
Obviously you're not going to pay more than what you intended to pay unless you realize that you are the one with the inaccurate perception of the value which is possible, we're human.
But at the end of the day if the seller is not motivated even having the best negotiator on your side might not make a big difference.
Best wishes.
0 votes
Barbara Bied…, Agent, Chicago, IL
Tue Nov 13, 2012
Are you working with an agent? Barbara Biederman, bbiederman@citypointrealty.com, 773-914-5309
0 votes
Ron Thomas, Agent, Fresno, CA
Tue Nov 13, 2012
Before you spend a lot of time and your Realtor's time:
Ask your Realtor to talk to the Listing Agent;
With $100,000 difference, it may be that the Seller is intractable and unreasonable,
It may be better to move on than trying to teach the pig to sing.
0 votes
Ivan Sagel, Agent, Chicago, IL
Tue Nov 13, 2012
Matthew,

You need to support your position with market trend data and accurate comparable recent sales. And always try to keep things positive during the process.

Best of luck,

Ivan Sagel
312.515.7823
Ivan@atproperties.com
0 votes
Philip Sencer, Agent, Chicago, IL
Tue Nov 13, 2012
Who says it is 100K below market value? What is that based on? Sellers often list property higher than it is worth. Eventually they will lower it based on their motivation level. How long has it been on the market? Buyers frequently do not know what 'market value' is if they are not looking at property on a regular basis usually with an agent who can send them everything available. Web sites like trulia etc are fine, but not as good as directly from the MLS.
0 votes
Josh Weinberg…, Agent, Chicago, IL
Tue Nov 13, 2012
It is important to have your Realtor run a Comparative Market Analysis (CMA). Sometime it is tough to find exact comps, but if you can find homes that are similar, that will help justify what the price should be.

Best of luck!
0 votes
Galina Persky, Agent, IL,
Tue Nov 13, 2012
Get an agent from the area!!!!
0 votes
Matt Laricy, Agent, Chicago, IL
Tue Nov 13, 2012
Have your agent draw you up a CMA to determine the value. From there go about making your offer. Maybe they will be willing to play ball.
0 votes
Sari Levy, Agent, Addison, IL
Tue Nov 13, 2012
Complicated. First, there's what the house is worth and then there's what the seller is willing to take. If it's really priced 50% above fair market value then chances are that the seller is being unrealistic. Buyers are often incredulous that seller's won't listen to reason but there's nothing you can do about that.

But building a case for the valuation is key to even having a chance. Your realtor needs to put together an analysis of what the home is worth and present it in a compelling fashion. Don't have a realtor? Then you will probably lack credibility with the listing agent and seller.
Web Reference:  http://LucidRealty.com
0 votes
Phil Rotondo, Agent, Melbourne, FL
Tue Nov 13, 2012
Ask a local agent to provide you with recent sales of nearby homes that are comparable to the one that interests you. This will give you an idea of the value of the property so that you can make a reasonable offer.
0 votes
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