Q: Is there a standard dollar amount or percentage that should be taken off a seller’s asking price when considering how much to offer? Also, is it standard practice for a buyer’s real estate agent to "get a feel" from the seller’s agent as to whether an offer of $225,000 on a $250,000 house would be acceptable, prior to showing the house?
A: One advantage to working with a Realtor is that you gain the advantage of their experience and knowledge as to the standard real estate negotiating and transaction practices in your area. But what is standard differs in different areas — and in real estate, markets are hyperlocal, so standard practices vary state by state, city by city, and even in different neighborhoods within the same city.
Mindset Management
You have asked yes or no questions, so I’ll give mostly fact-based answers. However, your question contains an undercurrent of suspicion or distrust in your Realtor’s skill, strategy or decision-making. How did you choose your Realtor? Was it by referral? Were her past clients thrilled with her, or not so much? It is really essential that you trust your Realtor to represent your interests; if not, you might not have found the right Realtor fit for you, yet. Depending on how this offer shakes out, you may want to revisit that issue.
Need-to-Knows
To specifically answer your questions, there is no standard dollar amount that you should discount from the list price to arrive at an offer price. Frankly, it is not even standard everywhere that the sales price will be lower than the list price — at certain price points in some geographic markets, homes area actually selling above asking, even in this buyer’s market.
Some of this variability is due to the fact that list prices range widely in the way they are set — they might be at, above or below the fair market value of the home. For example, the seller of a particular home might set the list price quite a bit lower than its actual value to drive buyer interest and elicit multiple offers, resulting in a sale price over the asking price. Rather than having an arbitrary rule of offering so much above or below asking, the better way to approach the issue of finding an offer price is to get a sense for the range of the fair market value of the home via a comparative market analysis (CMA) — an analysis of the current market activity and recent sales of similar homes in the area. This should generate a fair market-value range for your target property; the width of the range will depend on how similar and recent the comparable sales analyzed are.
Also, ask your Realtor to show you the average number of days similar homes are staying on the market before selling, and the sold homes’ average list-price-to-sale-price ratio. If almost every home in that neighborhood is selling for 8 percent below asking, that is information that should help you narrow the range and get closer to an actual offer price. …CONTINUED
Now, with all that information, you should have narrowed down the universe of possible offer prices to a fairly small range. The final two pieces of information you need are (a) the details of the seller’s situation and motivation level, and (b) your own time frame, situation and how much you want the place! Not only do I think it is standard for a Realtor to contact the listing agent to discuss the seller’s situation before making an offer, I think it’s advisable, at the very least. Some sellers can’t go below a certain point, financially. Other times, there’s another offer on the table. Still other times, the sellers have priorities other than getting top dollar for their home, which your Realtor can learn only in a pre-offer discussion with the listing agent.
Whether that conversation should include the discussion of a specific potential offer price is a fact-specific judgment I cannot make without all the facts, but if you have chosen a Realtor who you trust and who has a recent track record of successfully representing buyers of properties in your area, I would give her the benefit of the doubt and let her work her magic for you.
Action Plan
1. Ask your Realtor to prepare a comparative market analysis (CMA) and a resulting offer-price-range recommendation, then to review it with you.
2. Make sure you pay attention to the list-price-to-sale-price ratio and the average number of days on the market. Compare the number of days your target home has been on the market, and use that information to narrow the range of possible offer prices.
3. Factor in the data your Realtor gleans from her conversation with the listing agent about the seller’s situation.
4. Take into account what you can afford for monthly payment, down payment and closing costs, and how much you want the place, and decide on how much to offer. Good luck!
Tara-Nicholle Nelson is author of "The Savvy Woman’s Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Ask her a real estate question online or visit her Web site, www.rethinkrealestate.com.
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