NBW: agree with Larry, but it's very important to try and "know" the seller when going into the negotiation process.
JR: "Know" the seller?
NBW:Of course, you don't want anyone to be angry, but do try and push the limits to what they may sell it for. You need to gauge what is a fair price, and then drop it down lower in your favor. People can be insulted at any price offer, so don't worry about that. You don't want that, but don't make that a consideration when offering. I'm going to give you an example:
$1,000,000 asking price (it's a round number, so it's easy)
You do your research, and find that based on the market it's fair value really somewhere around $925,000.
You want a good deal...maybe $850,000. So you offer at $725,000, thinking that they will hopefully split the difference and counter at about $862,500.
JR: And the seller tells the listing agent "Are they CRAZY!? I'm not GIVING MY HOUSE AWAY!? I have to get 950,000 or I can't buy that condo I'm looking at plus put away 500,000 for my retirement! Tell them to go to h*ll! Tell them they have to come up."
NBW: You're offering low, but you need to offer low knowing that they will usually try and counter higher than your offer. If you want the home for $900,000 and offer that, then they'll probably counter in at $950,000 find the common ground.
JR: I call this "TV negotiating 101". In other words, it's what people who learn negotiating from television shows do.
NBW: Some people can be insulted in a situation like the above, where you just offered nearly 30% below asking price. If you have the numbers to back it up, and know that you're making offers that are in line with factual data, you can't do anything if the seller gets insulted and doesn't want to negotiate at all. Just remember that sellers usually price a bit higher knowing that buyer's are going to offer lower. They factor in that you will not pay the full asking price. So if you offer 6-7% lower, they will most likely counter midway to see if you'll accept 3-4% off the asking price. Do your homework on the home and then push to get at least 10% off.
JR: NBW do you know what fair market value is? You said the house has a FMV of 925,000. Why should the seller take 850,000?