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Perception vs. Reality in Price Negotiation

Real Estate Agent with Kearney Realty Co.
You have probably seen the attached picture before - is it a picture of a young women or an old women? The answer is it depends on how you are looking at it. How you perceive it.


One definition of reality is: "all of your experiences that determine how things appear to you". I agree with this on many levels - I believe you make your own reality and what you know and believe as well as your past experiences effect what is "real" for you. A slum dweller in India has a much different reality than a socialite living in Beverly Hills.


The key word in the definition above is experiences. I submit that this definition is not as true as it once was. Don't worry, I will tie in to real estate in a moment.


In the past (B.C. through the 19th century), reality was based on what one actually experienced. All inputs to opinion were very localized. For example, when there was a famine, chances were that you were hungry. Perceived reality equaled actual reality. There were no outside forces to sway your perception.


During the last century, technology in all of its forms have provided us a wider set of inputs. I guess this is called globalization. We have access to and know more about more subjects. Where we used to just be concerned with our local experience, we now are fed data on an ever-broadening spectrum of subjects. Google (verb) whatever subject you can imagine and have instant access to other's research and opinion's. It is no longer our own experiences that form our perceived reality it is the experiences and knowledge of others.


My point is that our perceived reality may not always equal our actual reality due to the influence of non-localized information. I run into people all the time who can't believe the sorry state of our real estate market. The problem is that they have no actual experience with the market, their perceptions are based on outside information. When people come in from out-of-town, (or locals who have not been paying attention to the trends) they assume that values have dropped at least 20%.  When in fact they have remained relatively stable over the past 5 years.  They come from that paradigm when they submit very low offers.  It is easy for sellers to realize that these low ball offers do not fit with the market.


Right now, the media has plenty of negative news to report. There is blood in the water and the sharks are in a frenzy. Foreclosure's in CA, value loss in Michigan, empty buildings in Florida, etc. Bad news all around, a fact. The problem is that people take that news and equate that news to all other areas. The message is that the market is bad, the conclusion is that the market is bad everywhere.


I get asked all the time what a reasonable offer would be.  My answer depends upon many factors but hard data also helps bring a good perspective to the negotiations.  Over the last year in Boulder County, real estate transactions have had the following average negotiation percentages in each price range:

$0 - $250k       3.15%    (1,307)

$250 - $500k    2.95%    (1,550)

$500 - $750k    3.99%    (498)

$750 - $1 MM    5.24%    (141)

$1 - 1.25MM      8.2%     (58)

$1.25 - $1.5MM  8.35%   (35)

$1.5 - $2MM      9.9%     (22)

>$2MM              8.65%   (23)

Numbers in parenthesis represent the number of sales in that price range.

Perception does not always equal reality. While the market in Boulder County is not stellar, it is much better than what you would think by listening to the news. Prices are holding, properties are selling and foreclosures are not a big part of our market. We are very lucky and I'm spreading the word! When you are ready to buy or sell give me a call. I'm here to help. Neil 303-818-4055 For more Boulder area real estate facts and statistics visit neilkearney.com