River City Blog

No buyer wants to pay more for a property than they absolutely have to. So how do you set about making an offer that will be taken seriously, yet is not just paying the asking price? In my humble opinion, many buyers make a fundamental mistake. They make an offer that is too low. That’s right, I said too low. Here’s an example: Let’s take a property offered for sale at $100,000. Assume that the property is listed within its range of value. A buyer wants to buy the property and offers $80,000 with reasonable certainty that the seller will not, and most likely cannot, take this offer. The buyer just wants the seller to show his hand. What is he willing to take? The buyer expects a counter offer. Most sellers are aware that they need to have some wiggle room when they set their asking price. Let’s say that this particular seller’s bottom line is $96,000 but he is hoping for more. Upon receiving the $80,000 offer he will, most likely, wonder if the buyer is either serious, or capable. If he can be persuaded to make a counter offer, he probably won’t come off his price much, if at all. He may counter at something like $99,000 or $98,000.

Now what if the same buyer made an offer in what I like to refer to as, “in the painful area”. For example, they offer $95,000. Assuming that the offer is otherwise acceptable and the only thing left to resolve is the final price, the seller may agonize over whether it is worth making a counter offer and risk losing the sale. If the seller does, in fact, counter then the buyer can be sure that an offer below $95,000 was not going to work. However, the seller might just take that $95,000 offer and the buyer probably gets a better deal than if he had “low balled” the initial offer.

Obviously, the above example is totally hypothetical. The numbers are all made up. But I have seen this scenario play out time and time again. Each transaction is unique. A savvy buyer will not merely negotiate based on the seller’s asking price. An agent representing the buyer can conduct a market analysis to assist the buyer in making an informed decision. If the property is over-priced, then negotiating a small concession from the asking price might be a mistake in itself. If, in fact, the seller has unwittingly underpriced the property, the buyer may be quite happy to pay the asking price and snap up a bargain! Every buyer and seller’s circumstances and motivations are different. Keep in mind that there are numerous components of a purchase agreement including closing costs, property taxes, possession, inspections, inclusions and exclusions. Don’t get so focused on price that you leave money on the table in other areas. Whichever side of the real estate transaction you find yourself on, make sure you are represented by an experienced agent who knows the local market. Buyer and sellers ask your Realtor to do a comparative market analysis before you list, or before you make an offer.