Ask An Agent: How Much Should I Offer Below the Asking Price?

• June 10, 2009
• 4 Comments

by Mark Wellborn

In this week’s installment of Ask An Agent, a reader wonders if there is a rule for how much under the asking price she should bid on a property that she is interested in. Coldwell Banker’s David Bediz offers up some insight.

Question: Is there a rule of thumb in this market for how much under the asking price a potential buyer should initially offer for a listing? 10 percent below? 20 percent below? It seems that today there is more leeway than in the strong markets of years past.

Answer: This seems like an easy question, but unfortunately there is no easy answer. The truth is that there are a number of factors at play, no matter the market or the seller. The important thing to remember is that the simple rules of supply and demand usually prevail. If it’s an attractive property at a good price, there is likely to be competition and it will probably sell quickly and get close to the asking price. If there are issues with the property or the price is too high, or both, you can usually underbid and negotiate with the sellers.

The rule of thumb we use with our buyers is usually based on the number of days that a home has been on the market at a given listing price. A new property (on the market for less than two weeks) is likely to get multiple offers if it is attractive and priced well. That said, a property that has just reduced its price significantly (more than $10,000 for a one or two-bedroom condo) in the past week or two may also garner interest, even if it has been listed for several months.

If the price has remained the same on a listing for more than two weeks, we feel it is okay for our buyers to offer a price that is somewhat less than asking, usually around 3 to 5%. If it has been on the market at the same price for two months or longer, we recommend being more aggressive and offering 8 to 10% below asking. And, if the property is great but we can show hard data supporting a much lower price, we easily recommend coming in as much as 30% under asking. A seller can get upset, ruffle his feathers and even tell us to get lost, but it’s worth trying them out to see if they will listen to reason.

In most cases, a property that has been listed for over two weeks at a given price will sell within 5% of the current asking price (and usually it’s within 3%). However, there are exceptions, so as long as you are not absolutely in love with the property and can afford to let it go, it’s usually worth it to try for the lowest justifiable offer you can make, even 10 or 20% under asking. The worst thing that can happen is the seller will say no. The best that can happen is the seller will negotiate further down than he or she would have liked and you’ll increase your value.

Everything changes when another buyer is present, so be careful if there’s even a hint of competition. If you really like the property, you should have your agent check all the active and recently sold comparable properties to make sure the price you offer is reasonable, and err on the side of offering closer to the list price. Bidding usually favors the bold, so if you can’t afford to lose, you should probably start bidding at asking price.

Bidding on short sales and foreclosures is a little trickier, but in the end the seller (or for short sales, the bank) is simply interested in maximizing their net proceeds and therefore the rules are virtually the same. The process can take a little longer but the strategies are identical: no competition, bid low and be strong; with other buyers, bid high and be generous.

This article originally published at http://dc.urbanturf.com/articles/blog/ask_an_agent_how_much_should_i_offer_below_the_asking_price/1010

4 Comments

1. Jan Johnson said at 12:02 pm on Wednesday June 10, 2009:

   Great, nuanced answer! Just to add one thing: if your offer letter explains how you arrived at the number you are offering it’s much less likely to offend the seller. Using either investment value based on comparable rents, or comparable sales with things like $/sqft as the anchor will hopefully allow the seller to see the offer as rational (rather than insulting) which, even if they don’t accept it, may prompt a reasonable negotiation.

1. LookingtoBuy said at 12:39 pm on Wednesday June 10, 2009:

   For someone who has been making unsuccessful offers on homes for the last three months, this is incredibly helpful. Thanks.

1. aj said at 9:47 am on Thursday June 11, 2009:

   I saw my dream house (condo) go within 2 days of the price lowering - and there was a bit of a bidding war. When a condo I had also had my eye on came down in price again (about $50,000 reduction in 90 days), I made them an offer within 24 hours for the full asking price, less closing costs.  it was worth it to me to get the place I wanted at the right price, an I did get a 4% reduction of sorts with the closing help.  I think it is worth it to offer what the owners are asking if it is a fair or better than fair price and you want to lock in the sale.  as the author wrote above, if it is a good price, someone else will buy it very quickly.

1. NotMyRealName said at 3:45 pm on Thursday June 11, 2009:

   LookingToBuy,

   We had 10 offers out-bid before going under contract (over about the last four months).  We went from under-to-close-to-asking price, what we thought were “fair” offers, to asking price plus some seller subsidy, to above asking price with escalations.

   This is especially true if you are looking in highly desirable neighborhoods.

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