Making an offer below the asking price
- Thread starter DonG
- Start date
Hi Don
The asking price is simply that, the 'asking' price
Sometimes, the asking price is good value, othertimes, not.
You offer what you think the property is worth to you
My daughter is negotiating to buy her second property. We researched the market and the asking price is a bit hopeful, but within the usual parameters for the area.
Her target area generally sells at 8% less than the advertised price, so we applied this generic discounting factor, took off a bit more and started under the next $10,000 mark.
Lo and behold, the reply came that the vendor 'wouldn't sell for less than ... about 7% (in dollars) below the advertised price'.
We left it about a week, and I went back in with an offer just over the $10,000 border, but still about 11% under asking.
I expect this game to continue for a while but essentially she will pay no more than she wants to pay, and the vendor will sell for no less than he will accept.
However:
If she buys successfully at 10% under asking, then she will have 'earned' about $20,000 for a couple of weeks haggling. Not bad at an hourly rate.
Always be prepared to walk away
Trust your own judgement
The Deal of a Lifetime comes around every Tuesday
You can always ring the Agent and say 'circumstances have changed a bit here, and I am now prepared to offer $y for the property'
Never be afraid to eat humble pie. If you think the deal is good enough, even humble pie is delicious
Look after your own interests at all times. If that means paying full asking price, then do so in the knowledge that the longer you hold the property, the more it will forgive you.
Above all, never be afraid to buy. It's scary, and it takes courage, but if you don't buy then nothing will change. There is two weeks between a bad and a good haircut, and a remarkably short time between a mediocre deal and a great deal.
Good Luck and enjoy the process
Cheers
Kristine
The asking price is simply that, the 'asking' price
Sometimes, the asking price is good value, othertimes, not.
You offer what you think the property is worth to you
My daughter is negotiating to buy her second property. We researched the market and the asking price is a bit hopeful, but within the usual parameters for the area.
Her target area generally sells at 8% less than the advertised price, so we applied this generic discounting factor, took off a bit more and started under the next $10,000 mark.
Lo and behold, the reply came that the vendor 'wouldn't sell for less than ... about 7% (in dollars) below the advertised price'.
We left it about a week, and I went back in with an offer just over the $10,000 border, but still about 11% under asking.
I expect this game to continue for a while but essentially she will pay no more than she wants to pay, and the vendor will sell for no less than he will accept.
However:
If she buys successfully at 10% under asking, then she will have 'earned' about $20,000 for a couple of weeks haggling. Not bad at an hourly rate.
Always be prepared to walk away
Trust your own judgement
The Deal of a Lifetime comes around every Tuesday
You can always ring the Agent and say 'circumstances have changed a bit here, and I am now prepared to offer $y for the property'
Never be afraid to eat humble pie. If you think the deal is good enough, even humble pie is delicious
Look after your own interests at all times. If that means paying full asking price, then do so in the knowledge that the longer you hold the property, the more it will forgive you.
Above all, never be afraid to buy. It's scary, and it takes courage, but if you don't buy then nothing will change. There is two weeks between a bad and a good haircut, and a remarkably short time between a mediocre deal and a great deal.
Good Luck and enjoy the process
Cheers
Kristine
Kudos to Kristine. What a great post. 
It is stupid advice. What if the asking price was 30% over value? Then you're still paying 10% too much.
Offer a little below what you know the market value to actually be.
It all depends on what you think the house is worth, and how accurate the asking price is. Research extensively.
Yes, you can sometimes get 20% off the asking price, but if that asking price has been inflated by 30% you are kidding yourself that you have got a bargain.
We sold my mother's house in March and received substantially more than we expected, even though we had set the listing price after considerable research. Property sold in 3 days for 99% of the asking price. Apparently it was exactly what the purchasers were looking for and obviously worth the price to them as they had been looking in the area for some time.
Marg
Yes, you can sometimes get 20% off the asking price, but if that asking price has been inflated by 30% you are kidding yourself that you have got a bargain.
We sold my mother's house in March and received substantially more than we expected, even though we had set the listing price after considerable research. Property sold in 3 days for 99% of the asking price. Apparently it was exactly what the purchasers were looking for and obviously worth the price to them as they had been looking in the area for some time.
Marg
I am curious to know when people say do your research, exactly where should I be researching.
I do read the property magazines and compare areas where we would like to buy, but really is there any one or two places that has reliable information that we should be using.
When we bought our first IP I think we let our heart rule our heads. Buyers regret really, even though I am very happy with the place. It was bought for future personal use ( many years away yet) whereas this next one will be purely for "investment".
L
I do read the property magazines and compare areas where we would like to buy, but really is there any one or two places that has reliable information that we should be using.
When we bought our first IP I think we let our heart rule our heads. Buyers regret really, even though I am very happy with the place. It was bought for future personal use ( many years away yet) whereas this next one will be purely for "investment".
L
Second Propertunity 20% is stupid figure.. you will get disappointed easilly.
I would pay more then asking price if the property is 50% under market value.
Theres no one size fits all...
L and P research, knowing what property your looking for, what comparable sales there are, whats currently on the market, the list price your going to negotiate on, what its really worth compared to others and what would be a dead set bargain and what would be market price for the specific property. Confused ya?
I also always look at what potential each deal presents, and what value i can add, how can increase yeilds etc...
need to be flexible with your purchasing requirements.
I would pay more then asking price if the property is 50% under market value.
Theres no one size fits all...
L and P research, knowing what property your looking for, what comparable sales there are, whats currently on the market, the list price your going to negotiate on, what its really worth compared to others and what would be a dead set bargain and what would be market price for the specific property. Confused ya?
I also always look at what potential each deal presents, and what value i can add, how can increase yeilds etc...
need to be flexible with your purchasing requirements.
I think in this instance research is finding out what a comparable property or properties have sold for in the area. Find a property that is similar to the one you are looking at and find out what it sold for. Do this a few times and you will get an idea at what a particular property is worth.
Search sold property listings, call up re agents, search sites like RP data. Two similar houses in two different suburbs could have 100% difference in market value.
Search sold property listings, call up re agents, search sites like RP data. Two similar houses in two different suburbs could have 100% difference in market value.
I've put in 3 offers this week:
17% below; 10% below; 10% below asking price
None of these offers were successful, but to us based on our knowledge of the market these were fair offers for a PPOR.
You offer what you think the place is worth. I think the first two agents were surprised when they counteroffered and I said thanks but no thanks we offered what we are prepared to pay and that's it
17% below; 10% below; 10% below asking price
None of these offers were successful, but to us based on our knowledge of the market these were fair offers for a PPOR.
You offer what you think the place is worth. I think the first two agents were surprised when they counteroffered and I said thanks but no thanks we offered what we are prepared to pay and that's it
Exactly. I've answered posts of this nature before and the "rules of thumb" concocted by gurus or expert negotiators (who also largely happen to be authors) when it comes to "how much to offer" mean nothing. Due dilgence is required before any major purchase, and that includes assets that are usually your single largest investment.
If you don't want to employ a valuer or BA to do the work for you, then at least invest in some recent sales info, keep tabs on the market (properly) and be aware of current price movements. Sometimes price tags mean very little, and just because you got x% off the actual asking price means nothing if you paid over market for it in the end.
All true. There's two houses near my old place both listed for around $140,000. Sure, you could get them for $120,000 which is a nice discount, but why would you? They're only worth about $90,000.
I'm also sure the vendors* would be utterly ecstatic if someone offered them $120k
*vendor's wife is complaining the agent won't drop the price to $110k on one of them. Vendor's wife isn't the vendor. Nuff said, really.
I'm also sure the vendors* would be utterly ecstatic if someone offered them $120k
*vendor's wife is complaining the agent won't drop the price to $110k on one of them. Vendor's wife isn't the vendor. Nuff said, really.
DonG, I have never approached offers based on a flat % discount off the asking price. What would you do, if the property is marketed in a price range eg $500-550k?
I think that theory is a load of horse manure........
Kristine, Prop & Jacque have made, as always, some very salient points. I would re-iterate, when looking to buy a property, to be able to make your own assessment on its worth without reference to any price guide from the agent.
You should see a property, and have a pretty good idea of what its worth in the first few minutes of seeing it (even virtually through re.com. google earth & streetview).
I can recount a very recent conversation with a REA on a property that I really liked (as a PPOR) but couldn't bid for it unfortunately. It was marketed at $650-700k. There was never any doubt its was worth mid-7's and maybe even more. When the REA rang to ask me if I was interested, I told him that the price I expect the property to sell for was in excess of my budget (not really, but I was wanting to engage him in the conversation). He asked me what i thought it was worth and told him - $750k maybe more if you get a few bidders on the day that are keen. I could tell he was somewhat surprised at my number, "how did you get that figure?" he asked. "There has been nothing on the market similar to this for some time" he continued.
"Just based on refreshed 2/3 bedroom period homes in the area over the past few months" I responded. He then when to ask a number of other questions for which we talked for sometime. The whole tone of the conversation turned. He knew that I knew the prices for the area and we didn't talk the normal REA/buyer banter (which so boring anyway!).
Will that benefit me in negotiations in the future - who knows, but he'll have at the back of his mind, that I will not be an easy target for the typical property marketing spin.
And for the record, the property sold for $750k.
I think that theory is a load of horse manure........
Kristine, Prop & Jacque have made, as always, some very salient points. I would re-iterate, when looking to buy a property, to be able to make your own assessment on its worth without reference to any price guide from the agent.
You should see a property, and have a pretty good idea of what its worth in the first few minutes of seeing it (even virtually through re.com. google earth & streetview).
I can recount a very recent conversation with a REA on a property that I really liked (as a PPOR) but couldn't bid for it unfortunately. It was marketed at $650-700k. There was never any doubt its was worth mid-7's and maybe even more. When the REA rang to ask me if I was interested, I told him that the price I expect the property to sell for was in excess of my budget (not really, but I was wanting to engage him in the conversation). He asked me what i thought it was worth and told him - $750k maybe more if you get a few bidders on the day that are keen. I could tell he was somewhat surprised at my number, "how did you get that figure?" he asked. "There has been nothing on the market similar to this for some time" he continued.
"Just based on refreshed 2/3 bedroom period homes in the area over the past few months" I responded. He then when to ask a number of other questions for which we talked for sometime. The whole tone of the conversation turned. He knew that I knew the prices for the area and we didn't talk the normal REA/buyer banter (which so boring anyway!).
Will that benefit me in negotiations in the future - who knows, but he'll have at the back of his mind, that I will not be an easy target for the typical property marketing spin.
And for the record, the property sold for $750k.
One thing to note here in my experience is the RE Agent's method. Some agents go by the book and do put all offers to the vendor, but many do the "hang on a tic, I'll give them a call" bullkrap, and then call you back in two minutes saying they won't accept your offer. I have dealt with both of these types of agents and it's a really hardly fought-out mind game with some of them. My current purchase that is going through ended up being 8% below the asking, but it's a reasonable figure in the market up here and it's for a PPOR. Offering a % is dependent on the property. I've offered 20% less for a block and it got accepted, and I've also bought at 105% before too when the market was hot, without regret.
Just learnt the hard way...
If you like it, just offer close to what you think it's actually, seriously worth (to you). Then come up a bit more if that's what the vendor wants. Get in, look decisive, don't muck around!
We mucked around and missed out.
If you like it, just offer close to what you think it's actually, seriously worth (to you). Then come up a bit more if that's what the vendor wants. Get in, look decisive, don't muck around!
We mucked around and missed out.
Might add that He will, or should, remember you as a reliable serious investor and more importantly, potential buyer at the right price.....easy peasy really...
interesting thread...
One question i would like to ask, is, how do people approach this as an advertised priced.......:
"Offers Over $180,000 Considered"
........And you would like to offer less?
Do you offer less then the 180k thinking that there is a risk that the vendor (or more importantly the agent) may not even consider it...
One thought i have is to offer a conditional offer of 180k (or even 185k) and specify in my offer that it is conditional on reports, independent valuations and inspections, and then from that information, amend my original offer with a new a lower offer (which is then justifiable).
Is that a good plan of attack or will it put the agent/vendor offside?
Either way, how do you get them to consider an offer for less when they are saying that "offers over $x will be considered"?
Thanks
g
One question i would like to ask, is, how do people approach this as an advertised priced.......:
"Offers Over $180,000 Considered"
........And you would like to offer less?
Do you offer less then the 180k thinking that there is a risk that the vendor (or more importantly the agent) may not even consider it...
One thought i have is to offer a conditional offer of 180k (or even 185k) and specify in my offer that it is conditional on reports, independent valuations and inspections, and then from that information, amend my original offer with a new a lower offer (which is then justifiable).
Is that a good plan of attack or will it put the agent/vendor offside?
Either way, how do you get them to consider an offer for less when they are saying that "offers over $x will be considered"?
Thanks
g
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If I had a low offer with all those conditions I wouldn't look at it (unless I was desperate).
If you word it like that it sounds like you are trying to get it even lower.
I'd wait for another offer.
Make your offer, You can do that stuff in the cooling off period. No need to go into details I don't think.
A friend had her house on for $519. Dropped it to offers over $450. Took $448. She had purchased elsewhere.
Vendor's prices
Read it as
"Offers over $x mean 'If I let you get away there will never be such a sucker again' "
