How Much Below the Listing Price Should You Offer ?

by Dian Hymer

A home is all the more satisfying if you buy it for the lowest price possible. This presents a challenge. Sellers invariably want to get the highest possible price. So, you should be prepared to negotiate.

Negotiating conjures up visions of haggling or bickering. But, this is just one way to look at the process. To negotiate also means to "confer" and to "settle". Most of us confer with others--colleagues, family, friends--and settle differences every day of our lives.

If the idea of negotiating for a home makes you uneasy, try to think of it as a process. During the process you and the sellers will confer to see if you can settle on a purchase agreement.

A home purchase negotiation typically starts with the buyers, who make an offer to purchase the property at a price and terms acceptable to them. The sellers either accept the offer, or they propose a counteroffer to the buyers' offer. The counteroffer modifies the buyers' offer with a price and terms that are acceptable to the sellers. The ball is then in the buyers' court. They can either accept the sellers' counteroffer or counter back with further modifications.

The process usually involves give and take on the part of both parties. Finally, if the buyers and sellers are able to reach a meeting of the minds on price and on all the terms of the contract, the deal is done. The contract is "ratified".

First Time Tip: The price on your initial offer sets the tone for the negotiations. A low price can be insulting to sellers. But, it may be justified if the sellers are out of touch with the market and are unrealistic about the value of their home.

An initial offer ten percent or more below the asking price sends a message to the sellers that you think their home is over-priced. An offer that is within five percent of the purchase price tells the sellers that you want to buy their home, but you're hoping for a discount on their asking price.

Before you decide what price to offer, ask your agent to prepare a comparative market analysis of the home you're considering. This will give you sales information on similar homes that have sold within the past six months. How well priced is the home you're considering in relationship to the comparable homes that sold?

Market conditions will also influence your initial offer price. Find out if you are buying in a buyer's or seller's market. In a buyer's market, there are many more homes for sale than there are buyers. Buyers usually have more luxury to negotiate price in a buyer's market.

A seller's market is one where there are few homes for sale and plenty of buyers. You may have to pay the asking price or more to buy in a seller's market. Your initial price may even have to be for more than the list price.

Another factor to consider is the complexity of your offer. Sellers will often give a price discount for a "clean" offer. A clean offer is one with few contingencies. (Most purchase contracts include financing and inspection contingencies.) The more contingencies, the higher the risk factor from the sellers' standpoint because there are more chances for the sale to fail.

The Closing: If you're making an offer contingent on the sale of your current home and you want the sellers to respond, you should plan on offering more than you would if your contract didn't include the sale contingency.

Copyright 2002-2006 Dian Hymer. Distributed by Inman News Features