Hi Ginger, I agree that you want to work with the online estimates with caution - they are off the mark as often as they are on. But you are on to something, and that is the a "well constructed and credible" market analysis is what you need. As with any analysis its value and credibility comes from the integrity of the input. A great buyers agent is what you need - to help you evaluate this property and any others, to negotiate and usher your transactions to close.
A solid market analysis will immediately flush out over-pricing, and while a $400,000 gap seems huge, it is possible. It will also help you identify properties that are priced really well, and they are out there too and move fast.
Overpricing is the biggest marketing blunder a seller can make, and I still see plenty of it in the market. This analysis will guide you and support your offer. I have mine at the ready when I present an offer to support my "....let me show you why we believe our offer is a fair one." An offer that is supported by the facts of the market is far more likely to succeed that one that is not. Put another way, while I cannot guarantee a seller will accept, it is tough for him to run from the facts of the market.
Sounds like you've found a potentially great deal - align yourself with great resources - starting with an agent that has the analytic abilities to produce a great market analysis, proven negotiation skills, communication and servicing standards that meet your expecctations (and keep those high - we are out there!), and references that they will share so you can affirm her claims.
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