All things being equal, how much should a prospective home buyer offer
to a home seller. If I go too far below the asking price, I could
insult the seller and he won't want to deal with me again. If I go too
near the seller's asking price, I stant to lose a lot of money. Any
general rule of thumb?
1% less, 5% 10% ?????
It all depneds on how long the house has been on the market. I had one on
the market for a long time and it was listed over the tax value. I took
about 10 % less than the asking price but it was about the tax value . I
also bought a house that had been on the market for about a year. I offered
10 % less than the asking price. It was already listed just under the tax
value. They did not take it. About 2 months later I offered about 5 % less
and they took it. If the housing market if really selling the house may not
stay on the market a month. Then you might as well offer 5 % less and be
ready to go the full ammount if that is not accepted.
If you don't know it, the tax value is public record and you should be able
to get it.
Is this a privite sell or through an agent ? If through an agent then you
don't have to worry about insulting the seller.
In most places the assessed value ("tax value") has no relationship to
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That's not totally true. In some cases the
assessor is far behind (like 5 years). OTOH, some
are fairly up to date, but all assessors offices
record the sales prices of homes, so you can check
recent sale prices of similar homes.
There are no more rules of thumb. People are often offering MORE than
asking price if they really want a house in a hot market. Offer what you
think is fair. Do some research in the area and give it a fair shot up
front. Markets do change and a year ago, potential buyer were bidding
against each other beyond asking price.
If you offer more, you are not losing money, but if you offer too little,
you can lose the house. .
One possible scenario Asking price is $200,000, it is the house of your
dreams so you offer 190k
Offer is pondered, but another buyer offers 195k. He get house, you get to
look for another. You never find the house of your dreams. What is $5000
over the next 30 years? About $14 a month plus interest. Not much in an
appreciating market. So you move on, find a house at the price you want to
pay, but over then next few years you invest $10k in repairs. Now you lost
money by comparison.
Sometimes the asking price is ridiculously high. If you have a feel for the
market, you don't even make an offer, but just move on. Maybe in six months
you will find the price to be back in line and ca grab it.
Another scenario from the sellers POV. This was real and happened to a
co-worker last May. Realtor advised listing his house for $370. He said he
"needed" to get $395. Had one offer of $380, but he refused it as he
"needed" his figure to make it work moving to new house. Four months later,
he dropped price, got and accepted an offer for $370. Being a bit greedy,
he really did lose 10k by pricing too high.
"Insulting" the seller is hogwash the realtor tells you. Try to assess
the value by looking at similar homes sales in the area, which your
agent should provide to you if she wants to earn her part of the
commission. Then take into account repairs/updates that need to be
I would have thought that until I put my condo on the market. I was
sking $180k and eventually settled for $160k. Along the way, one couple
checked the place out, went away and called the realtor later... I
don't remember the exact numbers, but they offered something like $45k
and claimed the place needed $80k in repairs! WTF? You could have blown
the whole apartment out the side of the building with a bomb and it
wouldn't have cost $80k to fix... I still have no clue what they were
Some buyers are weird and some realtors are a bit unscrupulous. Sounds
like this one was a combination of both.
When I sold my last house, the first buyer I encountered underbid my house
and passed along a letter of credit that was only $500 over what they bid
(making it look as though they couldn't go higher). I got another bid the
next day for $250 under my asking price and took it. The first bidder
called me up and told me he actually was able to qualify for a much bigger
loan. It seems his realtor instructed him to get multiple letters of
credit from his mortgage broker so they could support whatever bid they put
in, but it would make it look like they had little to no wiggle room in the
bid. That's the way I took it, and I told him he should consider getting
another realtor before he continued his home search.
My experience with realtors is that they will try to get a contract with the
seller by painting a rosy picture with a high value. Then they tell the
buyer to bid high because they work on commission. Remember, unless the
realtor is a buyer's agent, the realtor is supposed to represent the seller,
not the buyer. Even then, from my experience, realtors represent themselves
ahead of anyone else.
My experience buying this time of year was that it tends to be a buyers
market, especially if you're buying where it's cold. You may be able
to go pretty low if there's not much interest in the house. See if you
can figure out if other people are interested. Don't trust your agent
on this point. They want the sale and will try to stampede you into
bidding high. Try calling the selling agent's office and chatting up
the agent's secretary, without revealing who you are. We offered about
5% less than the asking price, and ended up splitting the difference,
in a market (DC) where coming in low is very unusual. (It was at the
time anyway.) My sense of it is they priced the house as if it wasn't
a dead time of year and hoped for the best, but it didn't work for
Don't worry about insulting anyone. If he doesn't want to deal with
you again, it's only because he thinks you'll never reach the price
he's wlling to sell at.
But to begin with, how much dealing with are we talking about. Only
offering a higher price. That takes about one minute.
My friend just bought a house for 100,000 dollars less than the asking
price. It has a small barn and a hen house and some building
without walls, I don't know what it was built for, and 4 bedrooms, and
central AC, and a remodelled kitchen, and 3 acres, and is still
pretty close to town. He hasn't volunteered what the asking price
was, but I'm thinking 350 or 400. But he got it for 100G less.
(BTW, in Baltimore County at least, there is a webpage with actual
prices at closing, I'm told. I'm not going to spy on my friend, but
if there is one where you live, you can find out what similar houses
have sold for. I was told in law school that in many jurisdictions,
what gets recorded will say 1 dollar and other valuable consideration,
so that people won't know the price. Maybe that's not true here, or
maybe they take the price of the stamps, the real estate transfer tax,
and work back to compute the sales price.)
I presume he wasn't told this until after the closing, or at least
after the contract, but the man hadn't gotten a single offer on the
house, and he wants to move. It's not the modern style that most
people want. I think iirc it was built in 1918.,
Now, if the guy asks 200 but would settle for 160 and you offer 100,
and a day after it is turned down you offer 101, and 2 days later 102,
they're going to think you will never get high enough, and the realtor
might not even call you back, perhaps. But that's not because they're
insulted. It's because they have other things to do.
Believe you me, my friend didn't pay 900G for a 1 million dollar
house. The house isn't worth that and he doesn't have the money. He
paid something like 33 or 25 percent less than the asking price, and
that was his final bid. First bid if different was less. OTOH, he
and his wife had a place to live and they could afford to pass on this
if he didn't get it.
Don't forget that the bubble is about to burst. Sales were down 1.9%
this week, the first time they've gone down in a year or two. I hope
my friend allowed for this, but I'm sure he did.
Remove NOPSAM to email me. Please let
me know if you have posted also.
No one will be 'insulted" by a low bid. They might refuse it, but it
will not prevent them from accepting your next bid.
Your real problem here is that you don't seem to have any idea what the
property is really worth. I suggest you need to get a professional
appraisal of the property. It will be worth the cost. If it is a
development with a lot of like homes, you can do a little research yourself
and get a good idea. Same type home in the same development sold recently
is what you want. Most local taxing authorities now have recent sales
histories for homes on line. Be sure to get several examples. You can even
use that in bargaining.
You may want to get a professional to represent you in this deal.
I need to add to that statement that you do not want someone who is paid
on commission to represent you. If on commission they get more the more you
pay. They will not be interested in saving you money. They will want you
to spend as much as possible as quickly as possible. A fixed fee
professional is on your side. You may find an attorney who will do this
part of the job for you and will also check over the legal parts of the
transactions to avoid problems with that.
You don't want to use the bank's appraiser to get an accurate value. Somehow
their value always equals just enough to make the mortgage work. Also,
beware an appraiser who asks you what you think the place is worth. Some
appraisers think they are doing you a favor by pricing something where you
want it. You'll want an honest, knowledgeable, licensed appraiser who can
give you a fair price between a willing seller and willing buyer.
This is something nearly everyone overlooks. Try visting the neighborhood
during non-sales hours. Like the morning commute or a Saturday afternoon.
Or if it's next to a school during start/ending times for classes. You want
to get a good picture of what it'll be like to actually LIVE there during
times that might be stress-inducing.
We passed up on a place because the next door neighbor's yard had a huge dog
and nearly no grass. A sure sign the damned thing was out there 24x7 and
undoubtedly barking all the damned time. Sure enough, when biking through
that neighborhood the next spring the damned dog was out there in a barking
frenzy. No thanks. And don't get me started on the people that move out
to the countryside and then bitch about the smell of manure used for
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