Stop making those low-ball offers because you are wasting your energy…. Most of the time!
While we are definitely operating in a “buyers market” in real estate today, simply making offers of 20 percent or more off the list price without regard to fair market value is a waste of your time. I make this assertion based on information provided by the Greater Chattanooga Association of Realtors regarding the percent of last list price received on homes sold in the last year.
As the data on the graph on page 2 relates, of all the homes sold in our market in 2011, the average home closed within 5.5 percent of the last listed price, not 20 percent off the list price.
While this “list price to sold price variance” expanded by -.4 percent in 2011 from the previous year, this is a relatively small movement when compared to the movement following the financial crisis of 2008. For example, in the peak of the market in 2006 we saw months where the amount of negotiation hovered at -1 percent of the list price. This was brought on by a short supply of properties, relative to the number of willing and able buyers, thus known as a seller’s market.
I am not saying that there is never a time when an offer of 20 percent off the list price, or even more, is not warranted by a prospective buyer. Before preparing an offer to purchase, sit down with an experienced Realtor to review comparable homes which have sold within the last six months. From this analysis, you can determine what the true fair market value for the home is and then make your offer accordingly.
If a property is actually fairly priced for the condition and location, then making low-ball offers that are not going to be close to acceptable may just be a futile effort. You may run the risk of offending an owner who may become less negotiable after their feelings are hurt.
If it turns out that the property is in fact overpriced for its location and condition, then by all means make an appropriate offer. You may even want to include your comparables with the offer to help explain your logic to a property owner. I do not purport that every property on the market for sale is priced at fair market value and next week I will reveal the difference between the original list price and final price received.