How much is a home worth?
Whatever a buyer is willing to pay, goes the old axiom.
True enough, in that a specific home is not a basic commodity where prices are set by the wider marketplace.
But that old maxim leaves out an important component: What is the seller willing to accept?
“Even in this market, sellers are saying ‘no’ to offers,” observes Jim Gramata, a Chicago broker with @properties.
When a buyer submits an initial offer, “it’s like a game of chess,” Gramata continues. “If you don’t know the moves or counters a seller may respond with, you are less likely to put together a deal.”
Now, the negotiation game has notched up in complexity. For one thing, prices are hardly predictable – falling in many markets when they have traditionally risen from year to year. And, factors like how much a seller owes in mortgage is gaining importance as a bit of information a buyer might use to determine a seller’s “break-even” point.
Here, a look at forces either helping or hindering buyers and sellers to agree on a number:
Friends and family tend to offer their “expert” advice to buyers, usually by coming up with a rule of thumb like, “You should pay at least ten percent under the list price,” observes Mike Crowley, president of the National Association of Exclusive Buyers’ Agents.
Standards like these never make sense, says Crowley, but in this market where list prices can be more apt to be unrealistic, they are especially misleading. For instance, a home may have been sitting on the market for months, and now its price is 25 percent too high. When it finally sells, it will be at least one-quarter under list, while other comparables priced to market conditions can close near list, Crowley explains.
Motivations May –
Or May Not – Matter
Buyers can have a “take it or leave it” attitude given all the properties on the market – unless they find a special home they really love, notes Cheryl Bare, a Century 21 agent in Waldorf, Md. “I then ask, how far are you willing to go … Looking at mortgage payments at different price points can help buyers decide.”
Agents have more information at their fingertips to help discern a seller’s motivation, from databases showing foreclosure notices to the amount of mortgage a seller holds. Such data can help discern a seller‘s reaction, says Crowley, but you can‘t ever read a seller‘s mind. He adds: “If a buyer wants to offer $250,000, and the mortgage is $265,000, I will tell the buyer that the seller has a decision about taking a loss.”
Talk Eases Bruised Egos
When a client has an offer on a home, David Kennedy of Exclusive Buyers Realty in San Antonio asks the seller’s agent if he can be there when the offer is presented. “They don’t always allow it, but I at least try to be talk with them via conference call.”
A former appraiser, Kennedy says that a determining a fair sales price isn’t an exact science, it’s an opinion based upon relevant information.
So, when a seller is receiving an offer, Kennedy likes to elaborate on how the number was derived, For instance, a similar model home may have sold for more, but it had new appliances, and his buyer, an avid cook, wants to upgrade the kitchen.
When there are verbal explanations, and not just numerical information traded back and forth, it doesn’t necessarily mean sellers and buyers will come to an agreement, but it does help alleviate seller anger at a perceived low offer, concludes Crowley.