Buyers often ask me "Can I put in a really low offer on this house?" The short, simple answer to that is that anyone can offer whatever they wish on a property. What really matters is if the offer will be looked at...and even considered. A few times I've had clients who really, really liked a particular home, but ended up heartbroken because, in their attempt to "get a steal" because "it's a buyer's market," they either poisoned the seller against them or wasted time in a competitive foreclosure market by offering w-a-a-y below asking price.
Lets take a look at a typical scenario:
Buyer A is approved for a loan that will allow them to buy a home priced up to $200,000. The question comes up about the possibility of offering say $200,000 on a property priced at $225,000 (which is a 12.5% discount).
There's absolutely nothing wrong with offering that, if comparable properties in the area are going for the lower price.
In reality, chances are, that offer won't even get a response. Generally speaking in the Tucson market, prices being asked nowadays are fairly close to what the market is bringing. If the seller is asking more than what the market is showing, you can just about guarantee that asking for a discount like this is going to be met with rejection instead of a counter-offer back. If it is a bank-owned house, you don't have to deal with the "human factor" i.e. "ego" like you would with one that is owned by a human being - there's nobody that would take personal offense or get cranky about a "lowball" offer - but they have their bottom line too, and a rejection is a rejection.
In the Tucson real estate market of today, many bank-owned homes (aka REO, foreclosure) are underpriced and seeing multiple offers in the first week or two. Taking the time to submit a lowball offer and wait for a response can often be an exercise in futility - with a more realistic offer (many times OVER the asking price, but within comparables for the area) snapping it up before another offer can be made.
Most often, a home priced above market IS owned by a real-live person who is still attached to their property emotionally, and either can't or won't face the reality of the marketplace. Many times, the home will have been sitting on the market quite a while (DOM or, Days On Market), and will probably remain there for quite a while until the seller either takes it off of the market or comes to grips with it & eventually lowers the price.
If you see a home that is priced at $225,000 and want to offer $200,000 on it - I have no problem putting together the offer...just realize that the likelihood of positive results are close to nil in today's market. We could get lucky, just don't count on it!
Something else to factor into an offer is whether you want the seller to help pay your "closing costs" which generally run about 3% of the purchase price ($6000 on a $200,000 home). Typically, sellers in today's market are willing to help out that way, but not with a large discount on the asking price included...it is like asking them for 2 discounts at the same time - similar to showing up at a resort offering "Locals Only Summer Rates" and wanting a AAA discount on top of it. You might get one, but not both.
I also work with investors who are market-savvy, looking at capitalization rates, market saturation ratios, historic vacancy rates & projected growth patterns...the principles work the same way: If the property works for you, and you want it, messing around may cost you a good property.
Smart investors know where the market is & are willing to pay the price because it is right. Amateurs, blowhards & wannabes "paper the town" with offers looking for "the steal of the decade" while others make money.
Comments(17)