What percentage is it reasonable to lower your offer when you want to bid on a house that's been on the market for over a year?
My wife and I are contemplating investing in a new home. It seems like there are deals to be had in certain markets. I also think negotiating home purchase prices is more art than science. Any tips on how to do this well for houses that have been on the market for a long time.
Answers ( 2 )
Say a house is 495K, so you offer 450K - that's 45K difference, near 10%. But they would likely come back with 465 to 475K - that would probably go.
When you make an offer, consider what would be a middle ground for that offer. Don't just think of how low, but how low and what would be a reasonable counteroffer. Think in terms of negotiating, not just bidding.
So let's say the house has been on the market for a year, and the asking price is 575K. And they haven't reduced the price at all. So what are they thinking? If the price hasn't been reduced, they aren't that motivated to sell and likely think their property is worth that price. So you either have to prove to them that a lower offer is justified, say by an appraisal or by comps, or you have to figure out why they aren't selling. You have to look at other properties in the area, what's happening there may give you some of the story.
Usually a property on the market for more than a few months will have a price reduction to stimulate interest. If they haven't reduced the price, then they may be in LaLa Land, assuming that it's worth it no matter what. And with that thinking you can't really expect to negotiate, they have held onto it for that long, they might as well hold out longer.
So, if a house is listed at 889K and they often do need a little bit of work, and it's been on the market for awhile, then you might make an offer of 850K, see how they bite. But if you offered 829K they'd probably flat out say no. It's a dance it is. But you have to know that buying a house is about negotiating a deal. You don't know what's on the other person's mind. If they are motivated, they may take a much lower offer. If they can hold out, then they will, for the price they want. You can do your research and see what's happening in that area, and why. And then make your offer.
A good strategy is to speak with the agent, or better yet, the seller. Every seller has their own motivation for selling their house. One might be purchasing a new home elsewhere. One might just be sick of managing tenants and wants to get out of the landlord business altogether. Another may need exactly $53,000 out of the deal to go and buy a boat to sail around the world! Once you understand the seller's motivation and needs you can attack the problem in many innovative ways. I would consider working on seller financing options to help both parties get what they want. Another strategy can be to get the house under contract, and use the inspection to negotiate a fair price. You can help the seller's ego by offering close to asking, what they want, and then appeal to their reason using the inspection as a tool. This may be something like "I agree that this house is definitely worth $400,000, but the inspection revealed that I would have to totally replace the deck. Here is a contractors estimate for $10,000. Because I am assuming this risk, a more fair price for me to pay might be $385,000."
Good luck and happy hunting!