Here is another day-to-day, yet very real scenario that happens to many of our buyers and sellers in the real estate market these days.

For Sellers:

It doesn't matter what your original listing price is - especially when you did not get it priced correctly in the first place. Sellers often "know" how much the house is worth - either based on a realtor's or appraiser's opinion of the market value. This number is typically a price "range", not a fix number. Again, because it is an opinion of value, it can vary.

Many times, in reality, Sellers "pad" this price with NEGOTIATION room. If the "room" is somewhat reasonable, and the house is in top market condition, you could price it near the top price. However, this pricing should be reserved only for tip top market condition and most houses just aren't in the top notch (even though most Sellers think their houses are. No, it's really not! Don't get offended, but it's just the truth). Thus, most houses should be priced (perhaps) at the middle, in my opinion.

It also does not mean that you had padded the "market value" with room for negotiation, then some to pay off your credit card debts and then some more for the Hawaii vacation you plan to take. If you had done that at first, say that the market value is around $300,000 and you had originally listed it for $340,000. Then 8 months later, you wondered why your real estate agent had not brought you an offer. Much to your dislike, you understand the situation and priced it then correctly at $300,000. 3 weeks later, your real estate agent called you with an offer of $270,000. You almost have a heart attack. Your response to your agent, "I cant accept this offer.... It's too low. I've lowered it from $340,000. That's a ridiculous offer. It's a difference of $70,000. Oh no, I just cant give away my house like that!"...

Straight up, down to reality: If you as the Seller had originally priced it correctly at $300,000, you could perhaps get an offer in 3 weeks. After closing and funding, you could be on your merry way in about 2 months from the beginning of your process till the end. Remember that the further away you are from your listing date, the further you will be from your correct listing price.

For Buyers:
 

You had done your due diligence. You are eyeing a few neighborhoods because of its location and its high acclaimed school rating. Then you noticed this house was priced at $300,000 - within your budget. But your real estate agent also told you that it's been on the market for 8 months! You smell a deal there. You are a bargain hunter. You like the house. You put in an offer of $270,000. Market is indicating that it's valued around $300,000. Regardless of what the market says, you want your real estate agent to put in that $270,000. You want to see how low they will go. After all it's been 8 months!

24 hours later, you received a counter-offer of $295,000. You are startled! "What? They've only lowered $5,000?". So, you counter their counter at $275,000. So, you get the gist of the counters and counters. Eventually you say this, "The sellers must not be very serious in selling. They've only come off their price $10,000. That's not showing he is serious in moving on. Look, I've come up $15,000. I'm up to $285,000 now. I dont think I will do much more than that. They must not want to sell their house."

The deal stalls out.

This could be a real scenerio. The point of the blog is that It doesn't quite matter what your starting point is. It becomes important if it is within reason. What good does it do if you were a seller who were $60,000 originally overpriced? Who would actually purchase your house for $60,000 over? What good does it do if you were a buyer and you started off with a low-ball offer, 25% below market value? Why would a seller under normal market conditions entertain your offer? Think again. Both sides of that party should not say, "I've come from my original price of XXX. The other party hasn't moved too much." Does it really matter (if you are not reasonable to begin with)?