I don't want to insult the seller.
How often have we heard that comment from fence-sitting buyers? Even if it's not stated explicitly, it's clear that many buyers today are looking for significant bargains. I'm not talking about the conscienceless low ballers who want thirty or forty percent slashed from the listing price, but regular people with hearts trying to buy at the best possible price. My favorite way to deal with this situation is to stick with the basics of comparable sales.
The fundamental fact of real estate today is that the market has declined from previous years. Even the most reluctant sellers are finally understanding that their nest egg from four years ago is now a much smaller egg than before. Comps are the universally understood guideline that helps determine just how much the value has fallen and allows sellers to set a rational market price. When I work with buyers, we always study the comps in the neighborhoods we are interested in so we can see the trends of the last few years and identify realistic standards for square foot pricing. For example, in one Sonoma County neighborhood, the average square foot price has declined from $280 to approximately $220. If my clients are looking at a 2,000 square foot house, they know that the house value is probably around $440,000 compared to $560,000 previously.
This is where the question starting this post comes into play. If I have done my homework with the buyers and done a good job of explaining comps, they will come to any house tour with an initial idea about what the current market value of the house is, regardless of listing price. Particularly in relatively homogeneous markets where homes were built at the same time with identical or similar floor plans, every recent sale informs us of current pricing. To keep things interesting, each home will have been maintained differently and some owners may have made significant and thoughtful improvements before becoming sellers. All those factors are part of coming up with a buying strategy, but the underlying value of the house should be known by studying the comps and verifying the condition of the house during a careful tour.
Most buyers that I have worked with take the comps and the tour information and come up with roughly the same valuation that I do. This isn't rocket science. If the identical house next door sold for $400,000 last week, it's unlikely this house will sell for either $300,000 or $500,000.
So, we now have a fence sitting buyer who knows the realistic market value of a property. What should they offer? If they have been careful listeners to your market reality discussions, they will understand that well priced homes sell quickly and overpriced homes languish. If the property they are interested in is new to the market but appears to be on target with pricing, I don't think offers more than 10% below listing price make sense. In some of our neighborhoods that are trending towards seller's markets, a full price offer might even be in order. What your buyers have to understand is that the seller and listing agent looked at the same comps you looked at and thought for a long time about setting a price. Your offer will only be insulting if you assume the people on the other side of the table didn't do their homework.