House is listed for X. What should I offer? Continuing the train of thought from some of the comments on another post, let’s talk more about pricing. I’d maintain that listing price has very little if anything to do with market price. As I said before, we suggested a listing price of $675,000 for a house that was then listed for $775,000 with another agent (about a 13% difference). Back in “the day” (2005), pricing was almost as easy as looking at the comparable properties and adding a little. Odds are there was a buyer. Now were spending much more time looking at and visiting comparable properties. Pricing is more important than ever.
Certain things remain true in any market:
1) An accurately priced house for the given market will sell.
2) An over priced house when listed will sell for less than it would have had it been appropriately priced on day one.
3) The first offer is often the best. This isn’t always the case but negotiating the first offer may be smart. Tends to matter more the closer you are to the listing date. A few months ago, we wrote an offer that was rejected by virtue of no response. It was too low for the seller to reject on paper. I talked to the agent and said, “I’m shocked that they won’t even counter.” He was surprised at my position. A couple of months went by and all of a sudden the house is on the market for $100 more than our original not-worth-responding-to offer. The closing price was less than my buyer would have paid on day one and the seller held a vacant house for two extra months.
4) The listing price sets the seller’s expectations. A seller that receives a “market price offer” on an overpriced listing is likely to think it is too low.
5) The listing price might come down without actually coming down. Say what? If the seller pays for work on the property the listing price is less likely to come down but the market value should have increased, closing the gap between the two.
When it comes to writing an offer, you have to consider all of the above and look at what the market is today. In order to have a discussion like this, I think we have to assume the buyer is ready, willing and able to enter the market today and remove the “market may drop, stay flat or increase conversation.” Everybody wants to buy low and sell high but markets don’t stop.
The comparative market analysis works just for the buyer just as it does the seller. Look at the comparable properties; sold and active. Does your offer make sense based on everything you can identify about the property and the seller? I know I place less value to listing history/sales of the subject property than others as I consider today’s market value to be more important. The balance is to get your lowest offer accepted without prompting a counter from the seller as in most cases, going back and forth with counters will raise the accepted price (we have recently had buyer’s counter a seller’s counter back to the starting price and get it accepted. Part of your agent’s job is to provide support as to why the offer is good as it is written (or why it is bad if it is and representing the seller). Sure, every once in a while a blind squirrel finds a nut. A rationally unreasonable (thought that was softer than lowball) offer may stick. No one ever said that emotion (or desperation) doesn’t play a role in real estate.
This is getting a little long so let the comments begin.