What's your pricing strategy when writing an offer for your buyer?

Anna,

There are various strategies, but you first have to figure out what is the real price that you are looking to achieve, and then start negotiating with that price in mind.

Brian

Anna--Lately I have been recommendening that my Buyer Agents invest in the $99 Desk Top Appraisal which a client of mine has started producing before they submit an Offer. This can be done if the Buyers are serious, and it adds some punch to your Offer on all levels. If you would like to know more about this, contact me. We are rigt down the road from you, and I am very committed to SctiveRain.

We generally advise our buyers of what has sold lately and in what time frame and then let them make the decision.  If we feel the market is really tight  we usually advise they come closer to list.  If the market is really slow then maybe we'll advise a little lower offer.

It seems as though every house and situation is different... therefore, we take the appropriate approach to the situation.  Looks like you have received some great advice!

Anna: It seems to me that scenario number two is the best one, at least from where I stand. Do you agree?

To me, there are so many variables that go into a price range I suggest to my client. 

Are they buying as investors or owner occupied?  There is no emotion for an investor.  They are only interested in if the numbers work.  Someone looking for a new home has an emotional attachment.  If an investor is rejected - they either revise their offer or move on to another property.  The emotional attachment says "I wanted THAT house".  The grief over losing that special property to another buyer can be devastating for some buyers.

Cash or financed offer?  Cash is still king for many sellers.  There is no finance qualifier, no dickering on price - simply do you want it or not.  You can negotiate a quick COE date with cash.

Do you need seller assistance for closing costs?  Don't lowball AND ask for concessions!

REO, short sale, investor flip or regular sale?  Each has a different formula for what they are looking for on the bottom line.  REO - get rid of it quickly, but for a minimum acceptable net.  Short sale - requires investor approval and they look hard at BPO and appraised value.  They want it priced at the market.  Investor flip - is looking to make money and move on to the next project.  If it's got a few months age - they're losing money with passing time.  Regular sale - depends on why they are selling.

Days on the market?  The more days on the market, more bargaining power.  BUT not if the seller is overpriced and won't budge.  There's a lot of inventory to chose from in some markets.  If it's well aged, there is some factor why it isn't selling:  overpriced, construction defects, cosmetic defects, seller attachment etc

Location, location, location?  Is it a highly desireable area with few sales, or is every other house on the block on the market.  I had one client put cash offers in on two houses in one subdivision within HOURS of posting on the MLS.  We were in backup position on both!  Both offers exceeded the asking price and we didn't get either.

Comps - is it priced too high, too low or just right?   If it is priced right for the area and comps - that's the price to offer.  Too low - we've had agents in the area price a listing below market to promote a best and highest bidding situation with multiple offers.

How bad do you want this property? And along with that - will it appraise?  You may want that particular property and are willing to bid higher than the comps - but it best be a cash deal or you're coming to the table with additional money.  Your lender won't finance your dream location if it won't appraise for the contract price.

My best answer - it depends...

The mindset of a buyer...such a mystery!  

I always get a good chuckle when my clients are both buying and selling and they are so offended by an offer that isn't THAT bad in my opinion but they want to do the same to someone else.  It never makes sense to me.  

The biggest hurdle I have to get over is clients who view updates and upgrades as something that HAS to be done.  Wallpaper is cosmetic but a leaky roof is a different story.  If a home is competitively priced but needs updates, that's a different story than one that is overpriced and is not updated.  

Anna,

I do a buyers CMA first. If they want the house I tell them not to screw around and lose it, especially if it's priced well.

Anna,

Both approaches work. You need to strategize with the buyer as to which one they will be comfortable with. You also need to explain the possible return lob from the seller. In out market, a low offer will get a counter offer - guaranteed. So, don't paint yourself into a corner.

Anna

If you want to get the best deal on a home for the buyers.  It is best to make an offer at the point where it is just below what the seller expected.  If you hit that mark they will probably sell the home and be worried your buyer is going to leave.  If you are over 7 percent the seller is usually insulted and does not believe the buyer is real.  At that point your buyer loses and pays close to full price or walks.

Listing agents tell their sellers to price the home at the market and it will sell. Some tell sellers to not price above leaving wiggle room.

Why should buyers agents tell buyers any different. If the seller has it at market value, you can bet that's the price they're looking for.

Thanks for a great post and some awesome comments - I learn on AR every day!

After reviewing comps and features/benefits of the home, I ask my Buyers where they want to wind up, i.e., what is the most they are willing to pay for this home. We formulate strategy together once we've answered that question. I do hate countering back/forth. Usually on second counter, I will ask my Buyers to off the highest amount they're willing to pay and ask the Seller to accept or reject our offer. That somehow sounds nicer than "take it or leave it."

I agree with Lori #37, no need to sound gruff when giving a firm offer.  As a buyer's agent, it's also a waste of time to generate pages of market data, since that applies to a market - not an individual property.  I frequently receive offers attached to emails that say, "Our offer is supported by comps and market data I'd be glad to share with you."  Huh?  Why would I, as a listing agent, give a squat about arguments that support an offer that is lower than what the seller wants?  The only data I care about is what I used to set the listing price!  As a buyer, my strategy for developing an offer price is to ask how much the buyer is willing to pay.  Any strategizing past that is a waste of time.

I think the process starts with a market analysis of the house in question - IF the realtor thinks it's priced correctly then the offer should come in close to asking - It's all about pricing and value of the home and that's where the buyer's agent's experise comes in...

As a professional it is my job to provide my clients knowledge beyond the information of comps and the like.  I want to look at the transaction not only in the minute, but get a broader perspective on it.  Will my client feel good about this in a year, in 5 years?  Will the agent on the other side of the table not run and hide when I have a client.  Will everyone at the table feel as though they did the best they could in this transaction.  Congratulations on your feature.  It is well deserved for sparking such interest and great comments.