We're often asked by our clients, “How much under the listing price should we offer?” This is an excellent question. The answer is difficult. There are four basic ways that sellers price their homes.
1. Ridiculously Overpriced...
These sellers have listened to a real estate agent over-inflate the value of their home in an effort to obtain the listing. There’s a natural tendency on the part of sellers to list with the real estate agent who gives them the highest promise. Some real estate agents give the seller a high “value” in an effort to obtain the listing.
These homes can be 10% to 20% overpriced. These sellers may need a “dose of reality” for a few months before they begin to realize that their home is way overpriced as compared to others in the area.
The longer an overpriced home is for sale, the more likely we can get the seller to face reality and sell at a fair price.
2. A Little Overpriced...
Perhaps 75% of all homes for sale are priced in this range. These sellers fall into two categories:
- Those who feel their home is worth every penny of their asking price.
- Those who want to leave a little “negotiating” room. These homes can be 5% to 10% overpriced.
3. Priced At Fair Market Value...
These sellers have carefully and realistically studied other homes for sale. They’ve priced their homes very competitively. These homes usually sell within four weeks at or very near the listed price.
In an active market, timing is everything.
In the good old days, you might have the luxury of viewing a home several times – even dragging your relatives to see it – before you actually made an offer.
“He/she who hesitates is lost” aptly explains buyers who dally when making a buying decision today.
4. Priced Below Fair Market Value...Quick Sale Price
These homes are priced below value. Perhaps the seller wants a fast sale.
Perhaps the real estate agent recommended too low a price.
These homes usually sell within 7 to 10 days, at or above the listed price.
There usually are competing offers in this situation, and you may need to make your first offer your best offer.
So to answer the question “How much under the listing price should we offer?”
Will need to be answered with a question. "Is the home you are considering priced at Fair Market Value?"
So whether you are the Buyer or Seller, always be thinking "Fair Market Value" this should satisfy both parties at the negotiating table.
Thanks for reading...