The market in the DC metro area is red hot in some spots. I recently made an offer on a property in Dupont Circle that received 9 offers and escalated probably 10% over list price. A home in North Arlington also went way over list price - and not to my buyer! So what are you supposed to do if you want to buy a home in this spring market? The sellers' market is alive and well in parts of Washington DC and close in suburbs. It is easy to get discouraged as you make multiple offers in a month or two and come away without a home.
You want to buy a home but you think you will never win the bidding war. You only have so much money - what are you supposed to do?
You still can purchase the house of your dreams if you are willing to expand your search. Rather than start looking at the homes that are just listed, try reversing your search criteria and look at the homes that have been on the market for a month or longer. Buyers immediately move to the newest listings and throw offers at those homes! If a property is over priced when it first comes on the market, it may not receive any offers. It lingers on the market for a few weeks and then the seller has to reduce the price. By then the "damage" is done. The seller has missed that window of opportunity where lots of buyers want to buy and now the seller is grateful when someone - like you - comes along with an offer.. If you are the first person to make an offer, the seller might be willing to shave thousands of dollars off the price or to make concessions in other areas to sweeten the deal.
When to Offer a Lower Price
An owner who has to move by a specific deadline is motivated to sell. Someone who is moving for a new job will want to wrap up the process of selling the house in time to relocate and start over. If the deadline is fast approaching, the owner may be willing to cut a deal. You can ask the real estate agent why the owner is selling the house, but he or she may not be able or willing to tell you.
How to Negotiate
If you want to offer the seller an amount below the asking price, make a reasonable proposal. The seller may be willing to make a counteroffer and negotiate, but not if you make an absurdly low initial offer. Remember that the purpose is to buy a home - not establish superiority over the seller. A ridiculously low offer is just going to annoy or even insult the seller and shut down any future negotiations.
Submit a written purchase offer specifying the price you are willing to pay with all the relevant terms and conditions that you need. The offer should be accompanied by a solid “earnest money deposit,” large enough to demonstrate that you are genuinely interested in the house. Set a short time limit for the owner to accept or reject your offer. That can help you avoid getting into a bidding war with other potential buyers.
If the owner makes a counteroffer that is lower than the asking price but higher than what you are comfortable paying, you don’t have to accept it. No matter how much you love the house, you shouldn’t borrow more than you can comfortable with.
Don't give up though. Make a counteroffer yourself which is lower than the seller's counter but higher than your initial offer. Search for that happy spot that bridges the gap. See if the owner is willing to make other concessions if he or she doesn't want to budge on price. You could ask the owner to make repairs or pay some of the closing costs.
If you and the seller are unable to agree on a price, be prepared to walk away. You may find another house you like even more at a lower price in the near future.
Don’t Be Afraid to Negotiate
Don't assume that there are no homes out there for you. You just have to look a little harder in a hot market. Depending on the micro-market and the owner’s circumstances, the seller might be willing to significantly lower the price of the house, but you won’t know unless you make an offer. Your real estate agent can provide you with advice and guide you through the negotiation process.
Change Your Price Point
This is not a suggestion to increase your price point. If you are being outbid on homes, then you need to look at homes with lower list prices. If you drop your search range by $50,000 then you can bid more for a home and have a chance of winning. It isn't that the people you have been bidding against have more money - it is that they are looking in a price range where their money goes further. They got smart. Why aren't you? There are homes that will meet your needs and most of your wants. At a slightly lower acquisition price you will have some extra money to put in your wants later.
There is a happy outcome for you - you just need to look for it in different places.