I just answered a question on Trulia Voices - a potential home buyer is wondering if she should meet the seller's counter. The property was listed for $350,000, they offered $310,000, got a counter for $335,000, responded with $317,000 and the seller has come back with $325,000. I answered as follows:
"How far is $325,000 from the comps? Part of your decision needs to include consideration of how much YOU like the property and how long you plan to live there. I think many buyers have lost sight of the fact that their purchase is that of a HOME primarily and an investment secondarily. This change in the market is not forever, we've had down markets before and real estate tends to come back every time. Historically appreciating between 5 and 6% per year. If the purchase price isn't too far off from the comps, then I'd say that the difference between $317k and $325k is not significant enough for you to walk away from the what could be the home of your dreams! (now - if I was counseling the seller, I'd use the same tactic - to lose a deal over less than $10k in today's market is plain nuts!). You can also put a clause in the contract that gives you an option to renegotiate or to walk away if the property doesn't appraise for its purhcase price."
In today's market we are seeing all sorts of tough negotiations. Even in an area with a low market absoprtion rate - where the numbers indicate a seller's market - the buyers still have the upper hand and the seller really needs to rely on the negotiating skills of their agent to get them the best deal possible. That seller also needs to understand that although the market may be improving, the property needs to appraise. Bank appraisals are based on most recent closed sales - it still might be hard to get a higher appraisal, until there is more data to support the stronger numbers.
There have been lots of questions posed recently on Trulia Voices regarding list price vs sale price vs offer price. I think that buyers need to recognize that offers aren't necessarily relevant to list prices. List prices are based on all sorts of things: what the seller "needs" to make their move, to cover their mortgage, to recoup their improvements, or whatever they think the value of their home is. All of those things are very important to the potential seller, but have little if anything to do with the actual value of the property. A listing agent's fiduciary responsibililty is to provide a seller with all the information needed to set a realistic list price - that doesn't always mean that the property is listed realistically. Offers should be made based on the value of the property, not relative to the list price.
This goes both ways - sellers who are listed unrealistically need to understand what the market will bear. Feedback from buyers and agents will start to paint the picture, and, if they are lucky enough to get an offer the appraisal will provide the final check and balance. Buyers who are looking for a deal also have to understand that if a property is priced fairly (and there are absolutely listings out there that are priced well), it may fetch asking price - or above in some cases - and if it is a home that they really want, then their offer has to be strong.
Contact me directly for more information on how my negotiating skills can work for you! Visit my Basking Ridge website to search homes for sale in Basking Ridge and surrounding areas.
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