YOUR BID ON THAT NEW HOME - How Low Can it Be?
As a home buyer, intuitively, you might think there would be incredible bargains galore here in Chicago. Average prices have fallen, and inventories and market time has risen all over the city, and in most suburbs. Wouldn't sellers be desperate to sell in this environment, and accept ANY price?
Not necessarily, according to many experienced real estate professionals serving Chicago and the suburbs. Even today, Dean's Team has found that not-thought-out "lowball" offers often draw outright rejection from sellers. Other sellers counter-offer very close to the asking price, in the face of a too-low offer, rather than being open to meaningful negotiation.
We've seen this happen many times in our own real estate business. When our Team lists a home, we, like many other successful Real Estate Listing Specialists here in the city, counsel our clients to price very competitively, and not "test the waters" at a price level unlikely to draw a buyer.
If sellers refuse to list realistically, we often walk away. We do work with sellers willing to take our advice and price competitively - often, at levels far lower than those seen in the last couple of years. Those most motivated to sell quickly price at their "lowest acceptable level," designed to generate interest quickly, and a prompt, closed sale.
Once sellers agree to this bottom-line asking price, most are unlikely to go down much further - despite increased market times, and, perhaps several interim price reductions.
Often times, low prices offered by potential buyers polarize the sellers, who often to refuse to sell to the lowball buyers "out of principal!" Buyers, then, may be forced to go even higher than they originally intended if they want to buy that particular home.
We have seen a few buyers contacting our Team after working, unsuccessfully, with several different agents over the last few months or a year. If we find they have made several offers not accepted on other homes, we probe for the reason. Those offering multiple low offers, almost out of habit, rarely end up closing on a desirable new home.
According to Kathleen Weaver-Zech, Dean's Team Director of Buyer's Agency Services, "a few buyers are more motivated by MAKING A KILLER DEAL than getting the house they want at a realistic, yet affordable, price. Buyers have to ask themselves what their priority is - to get an attractive discount on a well-priced house, or to steal the house for an unreasonable price? If the bargaining itself is the main motivation, they are often not successful."
In practice, we have seen homes with a history of several price reductions. When the price is reduced to that which the market will accept, however, the house usually sells very close to the asking price. Even properties selling short - for less than the mortgage loan balance owed to the bank - are selling close to a reduced, competitive, market-based asking price.
Stealing a home for pennies on the dollar? That is very rare, indeed!
We counsel our buyer clients to carefully look at the prices houses of similar size and condition have sold recently for nearby, figuring in a bit of a discount for today's sluggish market conditions.
A buyer needs to also consider time on market, as well as the recency of the last price reduction. Sellers that have just reduced their price considerably may not be eager to accept a very low price until they see how the market responds to their new price level.
Our Team then examines how much debt is outstanding against the home, using public records online. Those with high loan balances, and less available equity, are usually less inclined to bargain much off their asking price.
When was the house last purchased, and for how much? Those purchasing at top-of-market prices within the past four years or so may be finding they will have to sell for lower than they originally paid in order to sell today. Psychologically, some sellers are hesitant to go below their original price. However, if their mortgage balance was low compared to their purchase price, they might have some room to work a deal.
We also look for clues of strong motivation to sell. Is the house vacant, and perhaps the owners are holding two mortgages? Has the elderly owner recently moved to an assisted living facility, and will he be willing to accept a little less, given his likely strong equity position, with no outstanding mortgage?
Has the seller been relocated out of town by his employer, with perhaps a reimbursement program for sales and Realtor fees as incentive to move to his company's new location?
Even in situations where strong seller motivation seems clear, most sellers, lenders, or relocation companies will still consider only reasonably-conceived, market-based offers.
Offer strategically!
See Mary Ellen Podmolik's story today in The Chicago Tribune.
DEAN MOSS & DEAN'S TEAM CHICAGO
