When I am working with a buyer and an offer is being made, the buyer will ask, “What should I offer?” To respond to this question, my first step is to provide the buyer with comparable properties that have sold recently and collectively we form an opinion on what the home is worth. If the home needs some repairs or updating, that is taken into account on the price.
The next question from the buyer may be, “How much lower can we offer?” Let’s say for example that the home is priced at $250,000 and after reviewing the comparable sales it is determined that the home is in fact worth $250,00. The next consideration should be how long the home has been on the market (keeping in mind that we are in a seller’s market). If the home just went on the market, the chances are much lower that the seller will accept a lower offer. In addition, there is a chance that another buyer may submit an offer. In our current market, homes that are priced right sell quickly!
Say the house has been on the market for 60 days. How low of an offer is advised? In low-medium priced homes, anything that is 90% below asking price is considered a low-ball offer. Some may think it doesn’t hurt to try, but in fact it can. I have personally experienced sellers rejecting low-ball offers and declining to even counter. If the buyer truly is only willing to pay the lower price, than by all means make the offer with the awareness that it may be strongly rejected. In my role, whether I represent the buyer or the seller, I try to maintain amicable negotiations throughout the process. A low-ball offer, even if it leads to successful negotiations can start things off on the wrong foot.
I did an analysis of all the home sales in a specific area of St. Pete (Central Oak Park Neighborhood) for the last 60 days (mid-March – May). The average sale price for these homes was 96.5% of the asking price. That tells us that sellers are getting very close to asking price and they are not accepting low offers! The except is those homes that are overpriced and not selling at all!
So what would I advise offering on that $250,000 house that has been on the market 2 days? If the buyer says they really want the house, then offer $250,000. If it has been on the market 2 weeks and the list agent says that no other offers are currently expected, then offer $240-245,000. If it has been on the market for 60 days, then an offer of $230,000 would not be unjustified in my opinion.
Buyers typically want to buy low and sellers want to sell high. Working with both buyers and sellers balances my perspective. In some cases I have been selling a client’s home while at the same time procuring a new one. I ponder their expectations for selling their home above market value and not accommodating their buyer’s repair requests while at the same time submitting a low offer on their new home and expecting the seller to make repairs!