Deciding on price depends on market trends, urgency
There is no foolproof strategy for buying a property at just the right price. There are several reasons for this. In the first place, although the listing inventory is high in most places, sellers are not equally motivated to sell.
There are sellers who would like to sell, but who don’t have to sell. If they don’t get their price, they either stay put or rent out the property until the market turns. Sellers who don’t need to sell are often resistant to negotiating the price.
Motivated sellers, on the other hand, need to sell. They could be transferred by their employer and have to relocate quickly. Or, they might be facing financial hardship. Or, perhaps they have already bought another home. These sellers have a deadline to meet. They are usually open to considering all offers.
Another factor that will affect what price you decide to offer is the condition of the local real estate market. National, statewide and even regional home-sale trends may not apply to your neighborhood. For instance, in Alameda County (home to Oakland, Calif.) the median home price was down 2.2 percent between November 2006 and November 2007. However, just across the bay in San Francisco County, the median price jumped 6.9 percent during the period, according to DataQuick Information Systems.
HOUSE HUNTING TIP: Before making a decision on how much to offer initially, investigate your local housing market. Find out as much as possible about the most recent sales in your target neighborhood.
Did homes similar to one you’d like to buy sell for close to the list price? Or, did they sell for much less, or maybe even for more than the seller asked? Do you have a lot of inventory to choose from, or is the kind of house you’re looking for in short supply? Your real estate agent can help you collect this information.
Look at sales information for the past six months to determine if prices are rising, steady or declining. If prices are dropping, a low initial offer price is warranted. Where prices are holding or rising, you may have less opportunity to buy at a discounted price.
Try to find out if there is flexibility in the list price. Your agent might be able to get a sense of the seller’s willingness to bargain by having a discussion about price with the seller’s agent. Ask your agent to present your offer in person to the sellers and their agent, if possible. This can provide your agent an opportunity to find out if there is hope for reaching a satisfactory resolution, or if further negotiation is a waste of time.
Your first offer can make a big impact on the seller. Very low offers are sometimes rejected outright. In this situation, give the sellers time to cool off. Then, raise your price some and make another offer to show your sincerity.
An ideal offer price is one that is close enough to the seller’s ideal price that they won’t risk losing the opportunity by countering back with a higher price. However, since many sellers counter any offer that is lower than the list price, you might want to offer less than you’re willing to pay so that you can increase your price when the seller counters. That is unless you’re competing with other buyers. If you are competing, your first offer may need to be your best offer.
When there is a chasm between the buyer’s and seller’s price, counteroffering back and forth can bring about the desired result. But, it requires patience and fortitude.
THE CLOSING: You need to stick to your price — or close to it — and be willing to walk away if you don’t reach a meeting of the minds.
Dian Hymer is author of “House Hunting, The Take-Along Workbook for Home Buyers” and “Starting Out, The Complete Home Buyer’s Guide,” Chronicle Books.Copyright 2008 Dian Hymer