Monday, April 23, 2018 / by Teresa Dipeso
How Much Below Asking Price Should You Offer?
How much below asking price should you offer on a house? Or is it something you shouldn't try at all? The not-so-simple answer: It all depends on the market you're in and other factors you should weigh before you lowball with abandon.
Every home buyer wants to score a deal, after all. But set your offer toolow, and you could risk offending the sellers and having them write you off completely. As such, it's all about striking the right balance. Here are some questions to ask yourself to help you figure out that happy medium.
Are you in a buyer's or seller's market?
“Your ability to present a lower offer will depend greatly on current market conditions—meaning if it's a buyer's or seller's market,” suggests Cynthia Jacinta Keskinkaya, co-founder of the Keskinkaya Dartley Team at Douglas Elliman in New York City.
So before you make any offer, determine what type of market you're in. Traditionally, buyer's markets come with a lot of flexibility on price, because available inventory is high and houses tend to sit on the market for longer. Here, sellers tend to be more willing to negotiate because offers are few and far between.
"In a buyer's market, I would not hesitate to submit an offer that's around 10% below asking," advises Chris Cloud of EXIT Heritage Realty in Haymarket, VA. "Most sellers will at least see that as worthy of a counteroffer."
In a seller's market, on the other hand, it's much harder to go below asking price at all, because inventory is low, and multiple buyers tend to be interested in the same properties. So, in this case, it's best not to lowball at all, and offer list price. Your agent can help you determine which market you're currently in, or here's more advice on how to tell if you're in a buyer's or seller's market.
How long has the listing been active?
"By paying attention to the property history, you can get a better idea of the demand for that house," notes Jennifer Carlson of Coldwell Banker in East Greenwich, RI. "Two days on the market? Probably not a good idea to go in with a lowball offer $50,000 below asking price. A whole year on the market, with price reductions? Go ahead and roll the dice. The longer a house has been on the market, the less of an upper hand the seller has in negotiation."
However, Michael Russell of Ratchet Straps USA also emphasizes the importance of making sure a lowball offer doesn't insult the seller, if you want it to be taken seriously. "The rule I've always followed is to never go more than 25% below the listed price," he says. "Chances are, after fees, commission, and sentimental value, the sellers are already hurting. If you dip below that point, they may disregard your offer entirely."
Fortunately, info on how long a house has been on the market can be easily found on most listings—or if not, any good real estate agent will have access to this information through the multiple listing service. Ask them to pull it up for you, and use it as a reference as you draw up your offer.
How does the price compare to similar homes in the area?
Once you have a general sense of how much wiggle room you have to work with, it's time to look more specifically at recent sales in your desired neighborhood. Ask your agent to work up a comparative market analysis (also called a comp or CMA), which will show you the list and sale prices for similar homes that have sold in the last few months. Use that as your guide.
"The comparables should be your go-to on a first offer," says Shane Lee on behalf of Realtyhop. "If, for instance, a similar property in the same neighborhood is quoted $10K less, then it makes sense for you to go $10K below the asking price."
How badly do you want the home?
Last but not least, ask yourself: How would you feel if your offer got rejected? If you think that you'll regret missing out on the home, it may be worth it to consider offering exactly what they're asking for—or a bit more—to seal the deal that the home will be yours.
"If you want the home badly enough, you need to make the seller an offer they can’t refuse," advises Jenny Ditty Kang, JD, a real estate agent with WR Realtors in Louisville, KY.
However, if you think you'll be able to move onto the next property without issue, there's no harm in trying to score a deal.
This last piece of advice may be the most subjective of all, but it's true. Remember, submitting a low offer is always a risk. Ultimately, it's up to you to determine how much of a gamble you're willing to take on the house.
courtesy of realtor.com