Making A Low Offer In A Buyers Market
(The cooling real estate market is beginning to emerge as a buyer’s market – where there is a surplus of homes, and sellers are more open to lower offers. )
This type of market atmosphere brings about a lot of buyers who have been hiding in the woodwork and waiting to come out for the bargains. Although we are in a buyer’s market, prices are not exactly dropping quickly, and many sellers are not going to budge on their pricing.
There is however, much more room for negotiating in a buyer’s market as opposed to a seller’s market. If you are looking to buy a house right now, there are a few things you should keep in mind when making “lowball” offers on a house in a saturated market.
Although many sellers are going to accept a lot of offers they normally wouldn’t in a hot market, you should be careful to not offend anyone.
A September 9, 2006 article from Bankrate.com, by Steve McLinden, “Lowballing in a cool housing market,” gives some tips for buyers looking to get a deal on their new abode.
“With a temporary overabundance of housing on the market in many parts of the country, low bidders are truly in their element for the first time in about a decade. Offers that were laughed off just 18 months ago by confident sellers are suddenly being considered. Owners who once advised their agents to ignore offers by lowballers no longer have that luxury in most markets.”
The most helpful tip for making a lower offer during this time is to know the seller’s motives.
If a person has not been in their home for long, they are probably not going to sell it for much less than they bought it for – most are hoping to at least break even if they can not make a profit.
They key is to look for people who are desperate, I know this sounds bad, but if you are looking for a deal, this is where to find them.
“As always, homes most likely to sell at a big discount are those in dire need of wholesale repairs, pre-foreclosure homes and those owned by other highly motivated people (transferring out of town, buying another home and not able to afford two mortgages, had recent death in family, investor who bought at the wrong time, etc.). To them, offers of up to 15 percent or more under market are a little more palatable. Knowing the seller's motives always gives you much more traction with any negotiable purchase -- especially a house.”
When thinking about what to offer on a certain property, there are a few general guidelines. Traditionally, most homes sell for about 5 percent below the asking price. In a seller’s market it is about 2 percent below, and in a buyer’s market you can usually expect to offer about 8 or 9 percent below the asking price without offending anyone.
Of course, it all depends on the specific situation and home, but this gives you a pretty good idea on the etiquette of it all.
Overall, remember these few things when making your offer:
“Keep silent on what your top price is and what mortgage amount you've been pre-qualified for. These can be used against you in the negotiation game. The amount you can borrow needn't come out until the contract phase, after you've agreed on price. And enter negotiations armed. If you can produce "comps" of similar area homes that sold at similar discounts, you have leverage. Your buyer's agent should be able to do this as part of his or her services.”
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