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Asked by Angelo, Indianapolis, IN Tue Dec 9, 2008

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Answers

12
Dp2, , Virginia
Wed Dec 10, 2008
Dunes, Bill Eckler, and Erik Armstrong nailed it: run the numbers.

Bill and I differ on one point: I'd use 0-3 months comps instead of 4-6 months comps in this market.

Erik and I also differ on one point: INFORMED buyers DO have more power than sellers in this market. He's correct that every seller has--or at least should have--a bottom-line figure in mind. However, if the seller has to sell and has insufficient resources/time to wait to find a buyer willing to meet his/her bottom-line, then s/he will either soften on the price or risk losing his/her property via short-sale or foreclosure. INFORMED buyers know this, and they also realize that the supply is high and the demand is low right now.

On the other hand, uninformed buyers and sellers are playing Russian Roulette with Patriot Missiles in this market.
1 vote
Mariam Rahma…, Agent, Indianapolis, IN
Wed Dec 10, 2008
It is certainly a buyers market, meaning the ball will usually be in your court throughout negotiations. 15% below asking is pretty typical in our current marketplace. Some of the key elements that will determine how low you can go - how long has the house been on the market? What did the current owner pay for the house? What improvements have been made? Of course recent sold properties in the neighborhood should be looked at as well before submitting an offer. Your Realtor should easily gather this information for you to allow you to make an educated and prepared offer.

Thank you and Good Luck!
0 votes
Erik Armstro…, , 47802
Wed Dec 10, 2008
In real estate practice, "Rules of Thumb" don't work...Math however still works. Have an agent provide you with a CMA (Competitive Market Anaylisis). This will help you determine a good starting point as well as help you determine at what point you would be over paying for the home.

As far as the other part of you question...Yes, it's a "buyer's market" but buyer's have no more power than a seller does. The seller has a number in their mind and if you don't offer that number or greater it doesn't really matter what you hear on the national news has to say. As far as market conditions there is a good chance if the seller is working with an agent they have already adjusted the price based on the market...a CMA will tell you for sure.
0 votes
Bill Eckler, Agent, Venice, FL
Wed Dec 10, 2008
Angelo.

Your friend has good intentiona and 15% below the asking price may work. However, there is a better way of determining where your offer should be initiated.

Ask your agent to provide you with all of the comps for recently sold property (4-6 months) located within your general location. This information will provide a "snap shot" for your market. You can further review this information to find clarity for your initial offer.

After considering this information you may come to the understanding that an offer of 20% under the asking price is reasonable or that 10% is more realistic. The important factor now is that you have reliable and accurate information to refer to during during your negotiations.

The reality in this market, as your friend is pointing out, is that sellers expect buyers to make offers well under their asking price.....it's a matter of identifying what is reasonable within the current local market.

Best of luck.

the Eckler TeamMichael Saunders & Company
billeckler@michaelsaunders.com
941-408-5363
0 votes
James Gordon…, Agent, Hamilton, OH
Wed Dec 10, 2008
You haqve to look at the whole picture. I just listed a 3 bedroom condo with a garage for 84,900. There is currently a 2 bedroom with no garage in the same complex for sale at 98,900. An offer at 15% less would be insulting to my clients but in my opinion 20% off on the 2 bed unit would be in the ballpark for a final sale price.
You have to look at comparable properties and what has sold in the last 90-120 days.


Jim Gordon
Sibcy Cline Realtors® 513-886-5250
Web Reference:  http://www.Find1Home.com
0 votes
Eric Karrfalt, Agent, Noblesville, IN
Wed Dec 10, 2008
Lots of good answers here. Not a good idea to go into an offer just thinking of offering "x"% off asking. Put it in perspective. Lets say the home is already marked 50% off. It does no good to then offer another 15% off that price. Look at the whole package. Asking price, time on market, comp values, available financing, incentives are just some of the things that come into play when negotiating an offer. Sometimes good deals are exactly that....they are good deals and worth paying list, or even more sometimes. Don't get caught tripping over dimes to pick up nickles. Now a strategy that is familiar to some is once you establish what you want to pay for a home, based on comps, fair values, or the value may just be a number you pull out of the air, offer an amount less than that which allows you to counter back with the seller splitting the difference each time till you arrive at the figure you wanted to pay. Also remember that there are other priorities in an offer that are not price related that have value to a seller that might lead them to accept lower offers. Cash is king. It eliminates uncertainity of time and appraisal issues in the eyes of a seller. Quick closings can be of value. Inspections. If you limit the exposure of a seller in a dollar amount, lets say any major item over $2000 for instance, a seller might be inclined to work with your offer. The uncertainity of small inspection issues is removed, therefore they might be willing to accept a lesser priced offer. Also remember that even in our current market, homes are selling, population is growing and some areas are doing well. Buying power may not be as strong as you might be led to believe. It is a buyers market, but all things in perspective.
0 votes
Mike Perron, Agent, Indianapolis, IN
Wed Dec 10, 2008
As others have indicated, there are a lot of variables to consider and there is no one size fit all answer to your question. It's true that right now is one of the best opportunities in recent time to be on the buyer side of a real estate transaction as there are many "deals" available. That being said, many of the homes currently for sale have been either reduced significantly or priced aggressively from the get go as a current reflection of what the market says the home is worth, thus creating a "deal." The seller of the home in question could have already priced the home correctly with regard to market conditions and your 15% below list offer isn't in the cards (....or maybe it is).

An experienced buyer's agent who is familiar with the neighborhood will be able to help you formulate an informed decision and be able to guide you in the right direction. Before you submit an offer make sure your agent and yourself look very closely at the current market conditions in the specific area as real estate values in the Indy area can vary greatly block by block. This will include having your realtor do a comparative market analysis, looking at how long the property has been on the market, and doing some solid in-depth research. Once you have examined the required info you can come up with an informed game plan on how to approach your unique situation based on the findings and any potential concessions you may want to ask for.

The seller most likely will have already set a bottom line as to what they are comfortable netting. You will need to set a reasonable boundry as to what you are comfortable with offering if it is the home your really want. Keep in mind that sellers sometimes do get offended by 'low-ball offers' and they might not even consider responding to the offer if it is way out of line. Then again, your buyer agent's research might indicate that the seller's list price is way out of line thus creating justification for a low offer.

Short Answer: There is never ever a set percentage where to come in with your offer. Hopefully, through informed research and negotiations you will be able to come to comfortable and acceptable terms with the seller and get the home you really want.

Best of Luck,

Mike Perron
REMAX Ultimate

(317) 352-5995
mike@mikeperron.com
0 votes
Shirley DeMe…, Agent, Carmel, IN
Tue Dec 9, 2008
You are right it is a good market for buyers. But, there are some things to consider when going 15% lower with an offer. How long has the house been on the market, what is the CMA (comparable market anaylsis) saying, is it bank owned, or a repo, HUD home. Another thought you don't want to neglect is how much do you want the house? If you are really set on this house you don't want to insult your seller. You also may want to ask for help with closing costs....so there are some things to think about. You have to weigh it all out....

I know we all would like to get the best price for what ever it is we are buying but I will say houses right now are at good prices..compared to a couple of years ago. Hopefully your agent can help you with these things. All the best at getting your dream home.
0 votes
Voices Member, , Benton County, OR
Tue Dec 9, 2008
Angelo, Do not enter this with some kind of % in mind. Prices, interest rates, more foreclosed homes, and desperate sellers have changed all the rules. If you get the home for 15% less than the asking price and prices in your market drop another 10-20-25% then it wasn't such a good deal. Inform yourself about the market area you are looking in, look at housing trends, sales prices, how many jobs have been lost, how many homes have been sold, then come up with a price you are willing to pay and not regret your decision.


Start by clicking on the stats and trends here at Trulia and look at the information provided for the area you are thinking of buying in. Then check out this site..http://www.bhgrealestate.com/Views/Look/Default.aspx

You will find how many homes have been sold, average prices, housing trends, and much more. You can even break the info down to neighborhoods or zip codes.

Spend some time becoming informed and you will save money. Being informed will allow you to know a good agent when you meet them and a good agent appreciates an informed realistic client. Both will profit from the arrangement.
Best of Luck and good hunting, Dunes
0 votes
Cindy Brenem…, , 46123
Tue Dec 9, 2008
Angelo,

You ask some tough questions and there aren't any sure answers. Yes, it is somewhat of a buyer's market but seller's aren't just letting their homes go for nothing. The market may be down but the factors that determine just how low an offer a seller will accept still hold true. How long the home has been on the market and the seller's motivation for selling are the two primary determining factors. My best advice would be to consult with your Realtor and get information about the home you are considering purchasing. How long has it been on the market? Have they been aggressive in their pricing? What has been the activity in the neighborhood? Your Realtor will be able to help you assess this information and help you make a fair but reasonable offer. If you need help gathering that information, or are not currently working with a Realtor, I would be more than happy to assist you. Please feel free to contact me.
Web Reference:  http://www.HomesByCindyB.com
0 votes
Martin Walli…, , 46703
Tue Dec 9, 2008
How many houses has your friend bought? Did he get any of them for 15% below asking price?

Your real estate agent should be able to help you with deciding on a fair price to offer. Remember that even in a buyers market, the selling price is eventually determined by what a seller is willing to sell and a buyer is willing to pay. There are too many variables involved in determining a fair market value to use a standard discount formula... condition, location, time on market, sold comparables, recent price reductions, motivation factors, etc.

If your goal is to get a counter offer, make sure you don't p.o. the seller by making a low ball offer. He may just reject your offer outright.

Another thing to consider... if you were trying to sell a $150,000 house, would you accept an offer for $127,500?
0 votes
Jody Jones, Agent, Elkhart, IN
Tue Dec 9, 2008
It depends on the seller/their motivation, how long the house has been up for sale. I presume you are working with an agent. If you are making an offer, have your agent pull recent sales in the neighborhood. That will give you some idea of the current prices. I have been in some neighborhoods recently that were selling for $60,000 and up 3 yrs ago and now are selling for almost 1/2 of of that and still are having a hard time to sell. Good luck!
0 votes
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