The question above is one that I have heard dozens of times over the years. Some home buyers hear about the deal that their friend or relative got when they bought a home, and they're curious to see if this is the norm.
In a nutshell, there is no standard formula for real estate prices. Just as there is no "national" real estate market (markets are local), there is no set percentage that can be negotiated off of a listing price.
My answer to the question in the title is as follows:
"I wish I could tell you that you can get 3% off, or 5%, or any specific amount, but this is something that has to be evaluated on a case-by-case basis once you find some places that interest you. We'll have to see how long it's been on the market, whether or not and when they reduced it, stuff like that.
A home that needs some work might be easier to negotiate than one that's in perfect condition, or a place that's vacant might mean they're making two payments already.
Truthfully, I can give you a better answer once you've found a place that you want to pursue."
A little long-winded? Perhaps, but it's also the best answer that I can offer.
If you are a home buyer reading this post, I hope this comes in handy. If you're an agent, feel free to steal this answer for your own purposes. :-)
I'm not typically one to advocate memorizing scripts for various situations, since it's more natural to put things in your own words, but if you're new to the business, this gives you an outline to start from.
Thanks for reading!
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There is no set formula as to what a seller will take off the price-all transactions and sellers are different it depends on their situation.
Crouch - Not a bad script and I would appreciate that advice as a buyer. Case by case ... makes sense to me.
Jason - I wish I had a dime for every time I was asked that question. It's becoming a standard practice lately with the large inventory of short sales and bank owned properties.
Every case is different. I had a buyer think that because she watched HGTV and they said so, she could start at 10% off the price and work from there. I told her that in the REAL world and in our area, that would not work and only tick off the sellers. She thought she was right...and she lost the house because the sellers outright rejected her offer. I told her to please listen to me and not the TV.
Diane Casale
Really good script, and the truth. I sometimes tell them the market average - but averages just do not answer for particular cases.
Also - some homes are just priced to sell, while others are priced for wishful thinking.
Good afternoon Jason,
What you have come up with is the truth! Every home on the market has their own story and needs to be looked at case by case..Good script!!
Jason, working as a buyers agent it is our duty to pass on what we know if that will help with educating our client. However, many times as you know, we don't and can't get the full scoop to recommend an offer. There is no rule of thumb when we list a property that we are going to puff it X% to allow for a X% offer. This is going to be more relative to your particular market and be more specific then generalized. Wouldn't you like to have a buck for everytime you get this questions? Best wishes on passing along your expertise.
Jason, it all depends on the the needs wants and personal situation. Mortgage amount can makea different also
There are many different seller personalities out there, but I have yet to meet a seller who wants to give their property away.
Jason, I hang on your every word on technology stuff, so maybe I can make a small contribution to your script. Frankly, the "% off" has nothing to do with condition or time on market, and speculating otherwise could be misleading. A property only has value relative to the other properties available at that moment. Ability to appraise must also be one of the top considerations in deciding to buy a property. I believe an agent should never speculate on a seller's financial situation (eg vacant = 2 payments = better deal). If you are representing the buyer, your goal is presumably the best possible choice at that moment.
Good stuff Jason! And I agree it makes sense to first concentrate on finding a home the buyer is interested in before trying to conclude anything at all about what an offer price should be or what price to expect to get that house for. WAY too many variables to generalize a % of asking price.
Leslie - I appreciate your input, and I agree that a vacant home may not necessarily mean double payments, which is why I said "might". :-)
Overall, I'm not sure I understand your point on this one. Are you saying that condition, time on the market, and whether a property is occupied never play a part in negotiating on behalf of the buyer? This seems naive to me. Pricing decisions aren't ever made in a vacuum, and there are plenty of variables - the ones I mentioned are merely examples.
Part of our fiduciary responsibility includes advising them on the best path to take, and buyers pretty much always ask, "What should we offer?"
Jason - This is a good answer. I find that it varies quite a bit depending on the price range in our area.
At the 'low" end (under $400K) the question really is how much over asking do I need to go, due to the multiple offers. But there are lots of factors to consider, even more so at the higher price points where location, time on market, condition, view, play such a key role.
The point which you so clearly make is it is NOT a simple answer and you need the experise and knwoledge of a REALTOR who knows the market and the comps.
Jeff
Jason - your right their is no set formula. Thanks for sharing you explanation its the best I've heard yet.
sending my best
t
I do agree with your thoughts on how to present the answer to that question, "how much will the seller come down?" There is no set rate, although I've noticed sellers don't want to come down any at all, but they will consider coming down a little. They balk if you ask for huge amounts off, such as $30,000-$40,000.,etc. I know it depends on condition, history of days on the market, etc. But most sellers "Love" their home, it has their memories in it and it's still theirs! Kind of like when someone is in a parking spot you want...they take their dear sweet time getting out of it!!!
I tell them pretty much the same thing that you do. And sometimes I bring it up even before I show property. I explain that with any property that they might think about buying, we will sit down and evaluate it according to their needs as well comps. Appraisals are coming in low here, so I make sure that they understand the purpose of an appraisal.
Hi Jason, this is a case by case basis. First, find the property and then depending on the condition, problems, marketing time there are so many issues that will have to be introduced to be able to negotiate. No one wants to give away their home.
Featured @ Club Chaos
Jason:
Everyone wants to know what the "norm" is in an offer price. You are right - there is no norm. You have to pull the comps of what has sold in the area, what is currently on as competition and what is under agreement. What they paid for it as well as the assessment have no direct bearing on what the seller will accept as a price. But, all the information has to be looked at to make an intelligent decision.
This is a question I get all of the time! My answer is similar, but not as eloquent as yours. It's a shame that some buyers automatically think that they can always get a property for less than asking price. I've seen people lose houses to other buyers because they refused to listen to my advice that the house was priced right and would most probably sell for asking price or more. They insisted on offering less. And lost.
The flip side to this is that sellers think they must be at least 10% above market price as a list price to allow for negotiations because buyers are making low offers. In this manner, buyers and sellers both are stuck in a mindset that may work against them.
Jason, You nailed it...It is case by case....depending on circumstances and frankly ...even moods.
Jason - I hear this question all the time and your reply is great. Every home is different, every neighborhood is different and every seller's situation is different. This is why it's so important to hire a professional. I've heard so many stories where the buyer purchased a For Sale By Owner for $50K less than asking price. However the buyer was unaware that the house was overpriced by $60K.
I like keeping up with the most recent stats regarding percent of list price for sold listings and throw that into the mix with the caveat that this does not take into account seller concessions such as closing costs, distressed sales etc. We really must look at each property individually.
Excellent article BTW.
Great answer Jason, we give something different but the same. There is no standard on how much you can get off, in our market 1/3 sell at asking, 1/3 2-5% off and the rest lower, we never know until we put an offer on the table.
Jason famous last words, "How much will they really take?" Great answer and script. Thanks.
Jason, you really DO have to find a particular home before determining an offer! After looking at similar homes, I usually do a market analysis of the homes recently sold in the area to determine a "possible" selling price for my buyers. Since they have looked at several competing properties, they are usually comfortable with a range at that point!
Jason: I agree that the answer to this question must be property and market specific.
Homes are unique so it's a case by case study!!! Good post Jason!
Yes, this question comes up a lot and I have to agree with those that say there is no answer. Some sellers will consider nothing less than a full price offer. Some will negotiate.
I can print out Trendgraphix reports that will show the percentage of list price to sales price ratios for any given ZIP code in Sacramento, but those are just average numbers and don't really mean anything. Plus, the percentages are computed on the original sales price, not the price at the time of sale, which is more than likely a reduced price. You can't use average % numbers on a deal because every home is unique.
Unfortunately there are several media "experts" out there giving advice, about a year ago I saw Suze Orman tell her audience, "it is a buyers market and you should never, ever pay more that half of what the home is listed for" I was floored. I just hope I have a buyer ready when she puts her home on the market!
All markets are different, even neighborhoods next to each other can vary quite a bit
So true, their is no magic bullet. When I have had a lower priced property with a seller in need of a quick contract who prices under the market value I have gotten multiple offers in a day, but others may have had other factors that did not make this happen. My two cents is that pricing is situational. You make a check list of all the factors that could lead to a contract or not, add in the needs of the sellers, and give them an educated response. I have also elarned from short sales to breng in a price reductionaddendum that gives me automatic price reductions at decided intervals. I find it best to do this at signing.
I think every buyer ask that question or "What do you think they will take?"
I think every buyer ask that question or "What do you think they will take?"
It is like an adult under garment, DEPENDS.
Ty[ically when all is said and done, we end up about 96% of list price, IF the home was accurately priced to begin with.
Jason, yes, condition and market time might affect whether a seller can negotiate, but they might not. I don't think these elements should be the starting point in selecting and negotiating a "buyable" house.
In our market, there is a slew of homes in the $550,000 - $800,000 price range, several hundred in St. Charles, Batavia and Geneva alone. Absorption rate is at least 48 months, and longer for older homes on acreage. Especially for the newer homes (under 10 years), many of these homes have sellers that are over-leveraged. This price point requires a significant % down for (Conventional + 20% down, jumbos and 80/10/10s are hard to qualify for since they need two appraisals and with slow sales, that makes it even harder)
We're not terribly troubled for foreclosures (yet), but when you make a list of what has sold, you see that 40-50% of the sales in the past 6 months have been relos, estate sales, court-ordered, foreclosures and short sales -- non-arms-length transactions. This info is available on the transfer docs if you can't tell from the mls. This has driven down the selling price for comparable homes by at least 20% in the past year.
While we are pulling homes to show, we print of the Listing Time sheets and we also pull the county recorder of deed site info for virtually every house. The buyer gets this. I want to show that we need to find houses that the seller can sell and that will appraise. If the seller is over-leveraged, and the agent can't verify whether the seller can bring money to the table to close, I counsel my buyer to move on. Mind you, these aren't short sales, just homes that are now over-priced for this market. We also pull this info for sold comps as the buyer narrows in on houses.
So the list price, time on market and condition become secondary to the relative value of a property. Buyers need to select a property that is a better value than the other choices on the market. Included in my estimation of the value is (a) Desirability: does the home offer more features, better location, and of course better condition? (b) Saleability: can the seller actually close for fair market value?
I can spend hours with a buyer running pricing scenarios for various homes -- in fact it's exactly the same as pricing a listing. They see that % of list to sale is not the most important element of their decision-making. (I also do assessed value-sold price analysis, but that's another lecture.) When I present an offer, it is backed up with a letter with our analysis to the listing agent (and presumably her seller). I have found that this approach almost always gets the offer accepted very quickly, sometimes in a few hours, and my sales have (so far) almost always appraised out. I have only lost one sale to low appraisal in the past year, and that was in a distressed subdivision (bankrupt builder) and financing was almost impossible.
I don't know how well this translates in writing, but it certainly works well face to face. Sorry, didn't mean to hijack with this dreadfully long comment! I just don't want you to think I am a complete buffoon based on my parital comment above.
Sounds similar to my normal response...This is what the average is for the market today. But that is as a result of alot of single transactions, like yours will be. We could be AT list price, we could be at the bottom rung. It depends on a variety of factors that we will know about once your have determined which you would like to call home.
Thank you
I hate getting this question, unless I'm sitting in front of the client...then I can use the opportunity to educate them and I give them examples. I guess when equity sales were the norm, we did have a general idea of what we could offer, based on price reductions, comps and days on the market....but those days are gone. Each home is unique.
I can't remember my last buyer client who did not ask this question. My standard answer is that it doesn't matter how much we think the generic seller will come down. What matters is a thorough analysis of the market value of the home. If it is underpriced, and we act quickly enough, we may be able to get the home for just a little over what they are asking. If it is grossly overpriced, and the seller comes down a big bunch, it could still be overpriced and we will have to move on.
Great script and definitely need to know what properties my clients are interested in before rendering an opinion. Typically in our market the sold to list price ratio is 97% - 98% from the CURRENT list price (some communities are still selling at 100% of the list price . . . and some are at 94% but the lower end is rarer than the higher end). We have this information in specific producable numbers at our fingertips thanks to a great MLS. I give hard copies of the information setting forth same via HAR MLS to my buyers. Our houses have always been priced very tightly. It's sometimes hard to convince out of town buyers even with the information is in black and white. It sometimes costs them a house or two until they get it at which time, they make an appropriate offer which is accepted by the seller.
The good news is that our "tight" market has created stability through the years. We've managed to weather the most recent market adjustments fairly well.
Leslie - Thanks for stopping back by to clarify. I think you may have proven my original point with your longer comment - markets are local and that's part of what dictates value. Desirability and saleability are certainly part of the equation, as you stated. Good stuff!
My script has been the same for 28 years. "There is only one way to find out. Do you want to write an offer now or do you want to write it up this evening?"
Jason, you are right. Markets are local. What I find by selling by the water is that many are selling for full price because there just aren't that many! It is truly an education for buyers when they realize that there is NO FLEX in many of the home prices. They just don't get it. My spiel is close to yours. If they don't face reality then they don't get the house!
I agree that markets are very local. In Seattle, I work with sales stats everyday and it changes a lot from neighborhood to neighborhood. Some areas that were in decline are the new haven, and others still decline. You can't make any assumptions. I do my homework first, then look at the results. Great discussion.
Tim - That's actually pretty much what I say when they have already chosen a house (or even two, in some rare cases). The script above is what I use when they ask as a general question (i.e. no specific property in mind yet).
Very sensible answer and an honest one, too. There are many factors to consider in every case!
Jason,
While I normally tell buyers that the average is 95% list to sale price in my area, I also explain that average does not = every. Otherwise, my script sounds suspiciously like yours...
Hi JAson, this would have really come in handy when I was new to the business. :-) Many people out there want definite answers about a real estate market that is far from definite. The market is changing all the time, at least it is here in sunny Central Florida, and all I can do is help buyers understand as much about the game as possible.
Never as much as the buyers would like them to. I had a friend show me a contract yesterday (on a sale I am not involved in). Aaking price was $99,000, not a short sale or foreclosure. Nice little house on a half an acre. Well worth the price.
The offer was for $70,000, plus assistance with closing costs, plus a home warranty! To say the least the sellers were not amused and will likely take off less money from the price (if they even bother to respond) than they would have if the offer had been more reasonable. It seems like most buyers feel that ALL property owners are in trouble and have to accept lowball offers. This is very far from the truth, especially in Zephyrhills with our retiree population.
What amazes me is that if the buyers can only pay 70K, why in the same hill are they being shown properties so much higher than that level. The agent should know the territory better and realize that this "dog won't hunt".
Showing homes in Lakeway last week, my long-time client told me that his "financial guy" told him if he couldn't get 15% off the list price on *any* home, it was time to move on to the next one. I asked where this "guru" was...and was told "California." Ding, ding, ding! We're not in California anymore, Toto! We're in Austin, TX - arguably the best market in the country. 15% off list is not happening anytime soon - at least not on anything we were looking at....
Jason - good answers to the question, you seem to have addressed most of what will affect the seller's counter. Of course a lot of it just depends upon how stubborn the seller is.
I agree that there is no standard. Rather, it is better to just talk about value (actual and perceived) and react accordingly. Thank you for sharing this post.
It's best to run the comps. Here in Santa Clarita inventory is low. Often homes now go over list. So many factors go into making a sound offer.
Good advice Jason. Its a matter of educating our clients and managing their expecations. Usually the unsaid question behind the question is, how can I get the best deal and ensure I haven't paid too much.
I find offering too little initially on the right home may end up costing buyers more. Sellers usually have a bottom line. Unless there is underlying extreme motivation, coming in way off the "Won't go a penny lower" line will only result in a full price counter offer, or no resonse. Future offers aren't taken as seriously and the seller will be less accomodating. Assuming you have done your due dilligence and established market value via CMA, come in within the low end of reasonable and see what happens. You'll likely get further, faster, than the "Tug-o-war" approach. Sometimes you can nudge the sellers bottom line, but only if you're close enough to it to temp the seller to bite.
I'm always surprised when they ask this question before we've even gone to look at houses. Good answer.
Jason, thank you for the permission to use this!!!
You might not need a script, if you use that as your script. Case by case scenario. Perfect.
I agree - case by case basis. I'll show the buyers what the comps have sold for, and the list vs sale price % difference. Sometimes I'll be surprised by a very strong offer and other times the buyers still want to start low just to see what happens.
I get that one, too. And my answer is similar. We also have the conversation about over-priced homes v those that are priced well...
Well sometimes when I am ask that question, I just say, well sometimes they sell for more than there asking,
Jason - I agree, it's common questions that must be addressed in just about every situation. The answer is based on a case-by-case basis.....good post.
One of those 'I wish I had a dollar for every time' questions. I think people actually expect you to give them a dollar amount answer.
Yes, it seems that question is on everyone's mind. Many buyers think the foreclosures will negotiate a lot and in our area at least the prices start off very low and more than competitive so depending on the condition and location of the property, multiple offers and selling over asking price is happening a lot with foreclosure properties.
Definitely case-by-case! Thanks for sharing.
Every transaction is different, there's not set answer for me .
Thanks for the post today.
Patricia/Seacoast NH
Couldn't agree more with what has been said here today. Every market is different, every home sale is unique. Without doing a thorough analysis of the area, there's no way to say what they "should" take. And even then, there's no guarantee that they "will" take! Turn off the TV! As much as I like HGTV, until they explain how they can paint a room for $20.00, I won't believe anything they say!
Jason,
It really is on a case-by-case basis. If two people fall in love with the same house, its going to be a lot different from a house that has been on the market for months and months and months.
Lori Cofer
That is a good answer to the question, and certainly true. Each situation is unique.
Jason - This is a good, sensible answer. it's almost impossible to answer that kind of general question.
The most difficult part of working with buyers is getting them to offer a realistic price. No matter how low the list price they want to offer less .