Should I Offer a Lower Price?
by Realtor® and U.S. Army Veteran Ed Kunkel, Jr.
When should I offer a lower price, or a higher price than the seller is asking?
How negotiable is the price? The short answer to this is – How negotiable is the seller?
Every seller is different, as is every agent representing every seller is different. Some sellers actually understand what the market is doing and could be open to negotiating, while other sellers are concerned about issues that have no bearing on the homes true market value, and may not even entertain an offer that is lower than their list price.
My best advice for when to “dicker with the sticker” is this: First of all, don’t use advice from people that haven’t purchased Real Estate since the first Bush Administration or longer. Get advice from people that understand the market conditions as they exist now. When you have your initial consultation with your agent, have them show you the statistics that surround your interests:
- What price range are you working in?
- What location do you want to live in?
- What is the average price for a home that meets your basic criteria, and how does the list price compare with the sale price as an average?
If you take the time to look over the statistics of what kind of market activity is going on in your area of interest, it will likely help you put together a tangible plan for successfully negotiating a sale. I’ve heard lots of old school advice from people with the best of intentions, “If the offer doesn’t make you feel embarrassed, it’s not low enough.” Is that good advice? How open do you think a seller would be negotiating with you if you write them an insulting offer?
Put yourself in the seller’s shoes, how would you react to receiving a bad low ball offer? You would probably reject the offer, and you would not likely have any confidence in the buyer if they tried to make counteroffers that look better than their initial offer. That low ball strategy is not going to work for you when you’re competing with other buyers that are offering more money, and better terms.
There’s a better way to get a good deal on a home, while making it a win-win environment for everyone. If your only motivation is to attempt your luck at getting something for nothing, you’re wasting your time and the time and energy of others.
When you’re dickering with the sticker, it’s important to note – everything counts. Everything you ask for from the seller has an effect on their bottom line, and should be accounted for when you’re negotiating your offer amount and terms. If you’re making a full price offer on a house of $230,000 and are including a request that the seller pay all your closing costs, it’s not actually a full price offer.
Assuming your closing costs amount to 3½% of the purchase price, you are making an offer to the seller of $221,950. So let’s say the seller accepts your offer, and after having the home inspected, you ask for repairs to be made. The repair estimates amount to $2,400 – taking more from the seller’s bottom line. Now your offer price is $219,550, which equates to a 5% reduction from the original list value.
Depending upon the market conditions that you’re working in, this may be enough of a reduction to cause a seller to seek other options – like checking in with his back-up buyer. This is all the more reason to take the time and understand what is going on in your market. What is reasonable to negotiate, and what practice or behavior is too risky if you want to be sure that you have the home secured? You may want your offer to be for more money if you will be asking for concessions like closing costs. Instead of giving the seller a laundry list of repair items, you may want to negotiate for the seller to include a home warranty.
To summarize, your success in finding a home and negotiating a great deal will depend on how well you and your agent are taking the time to understand the condition of your market. Learning the hard way of taking shots in the dark can be painful – especially when it involves finding the one home that all your hopes are set on, only to watch another more educated buyer secure it out from under you. Be the educated consumer that knows what they want, and knows what they have to do stand above the competition, while also knowing how to negotiate price, terms and conditions for the best possible deal. Knowledge is power, and nothing extraordinary comes easy. Make the effort to be in the know, and you will be the envy of your peers.
Ed Kunkel, Jr. is a Managing Broker/Realtor® at Keller Williams Realty in Olympia, Washington. Visit Ed here. Ed’s Military History: Veteran – U.S. Army and Air Force Reserve; Highest rank, E5; 11 years combined military service.