There was a nice article in today’s Trulia newsletter which did a remarkably good job of covering the topic of how much to offer for a home, whether buying or listing. See http://info.trulia.com/index.php?s=57 .
I would like to point out some of the author’s observations (in quotes) and how they relate to recent transactions I have been involved with…
1. “Buyers think they need to run spreadsheets and do fancy math to make a smart offer.” I have seen people lose deals due to analysis paralysis or trying to be “smarter than the market.” One couple in particular made a low ball offer on one of my listings. After a week of negotiations, this buyer was still so far from our asking price that we gave up trying to make a deal work. The next day we received a cash offer for the price we were trying to get this couple up to. Now that the home is under contract with the cash buyer, the other buyer suddenly realizes they have lost the house they really wanted to buy. For less than 2% of the purchase price. I have said this to both buyers and sellers…”A spreadsheet and price/square foot does not take into account floor plan, finishes or location.” We are talking about real property and homes people live in. There is more to residential real estate than the numbers. An experienced agent is key in helping a client to understand the differences.
2. “The fact that you bought or refinanced the place at a given value 5 or 6 years ago is entirely irrelevant to what it’s worth today.” I would add that what the seller paid for the home 10 years ago is also irrelevant. I like to find out what a seller owes on a home, whether I am listing it or representing the buyer, so I can understand if a short sale will be likely. Otherwise, what someone paid or owes for a property has nothing to do with current value.
3. “As a seller, the more competition you have, the lower you should tweak your list price to attract buyers to come see your home.” If you are shopping for a ski jacket and find two that are almost identical, but one is priced 5% less than the other, which one will you buy? If you found two identical ski jackets that were priced the same but one had a stain on it, which would you buy? Home buyers think the same way. It’s a price war AND a beauty contest and you better win both if you want to sell your home for the most money possible.
Enough of my comments. Go read the entire article, because it’s really good. http://info.trulia.com/index.php?s=57