It's a Buyer's Market but you Can't Steal a Home
Don't Try to Rip off that Home Seller
It is tempting for buyers, especially when they read about how desperate sellers are, to make a low-ball offer when they find a home they like.
Problem is, that low-ball offer may offend a seller. And it may offend enough so that the seller refuses to do business with the buyer. This may be rarer now that the housing market is mired in a deep slump. But not all sellers are desperate. And not all will tolerate insultingly low offers.
What is a Fair Offer?
The problem is it's not always easy to tell what is a fair offer and what is a low-ball one. That's especially true now, with housing prices falling in most major metropolitan areas. According to the National Association of Realtors, the median sales price of an existing home came in at $175,400 in December of last year. That's way down from an average median sales price of $230,200 in July of 2006.
Zillow.com, an online provider of real estate data, has more bad news for home sellers. The site reports that 76 percent of homes lost value in 2008.
This means that a fair offer today is far different from a fair offer in 2006. But even though housing prices have dipped, a fair offer does not mean one that's tens of thousands of dollars lower than a seller's initial asking price. If a seller, for instance, is asking for $180,000 for a home, buyers should probably not offer $120,000. That would be insulting, and it's highly unlikely that a seller would budge that much on an asking price.
But, if a buyer offers $170,000 for that same home? Who knows? The seller might be willing to accept that offer or, perhaps, sell the home for $174,000. That's still a significant reduction in favor of the buyer.
The Art of Negotiation
This is all part of the art of negotiation. Top real estate agents know this, and will work with buyers to make sure that their initial offer is a fair one, one designed to get their clients the best deal possible without insulting the seller while doing so.
To arrive at a fair offer, real estate agents study what other asking prices similar homes in the neighborhood have fetched. They also take into consideration other factors: If the house has been sitting on the market for several months, the sellers might be more willing to accept a lower offer. If the house sits on a busy street or near railroad tracks, the odds are good that the sellers haven't received as many offers. That could mean, again, that the sellers are willing to accept a lower, though still fair, offer.
Buyers who aren't working with real estate agents should employ the same logic when making offers. No one wants to overpay. But beginning negotiations with an insultingly low offer can cause bad feelings and possibly scuttle any chance of a deal.
Other Concessions
Buyers should also remember that they may be able to win concessions on factors other than a home's asking price.
Sellers today are more willing to compromise on a number of different factors. Buyers might be able to negotiate a more favorable closing or move-in date. They might be able to convince sellers to repair that old roof or replace an old window. They may be able to negotiate some cash upfront to make the repairs themselves. And if buyers like the kitchen refrigerator, they may be able to convince the sellers to leave it behind for them.
The key, though, is to be fair and pleasant to the sellers. Just because the market now favors buyers, doesn't mean that buyers have a free pass to rip off sellers. Homeowners still expect fair offers for their homes.
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