Recently I wrote an article “Logan Homes Selling for 11% Less than Original List Price”
I observed that during January and February the gap between the original list price, and actual home sales price was pretty significant. My point with this article was essentially to show that home sellers in Cache Valley needed to price their homes right if they wan them to sell. Homes won’t sell for prices they may have sold for in 2007, and sellers need to be realistic when pricing their home.
I need to explain the original list price stat a little bit better. When people initially put their home for sale they usually price their homes high “just to make sure” they aren’t underpricing their home. Of course they want to get as much money out of their house as possible. This initial price is almost always higher than what their real estate agent recommends. After the home has been on the market for a few weeks with little or no results, the sellers realize that they need to lower the price. When there are still no offers, future price drops are also common. Most homes change their list price multiple times before it actually sells, especially in “sellers markets” like we are currently in.
This is especially common with the Luxury Home market, where there is a huge surplus of inventory, and where many of the homes have been on the market for more than a year. Some of these homes have seen price drops and the list price is 20-30% less than the original asking price. When these homes sell, it greatly ups the average discrepancy between original list price and actual sold price.
So, just because there was an 11% gap during February, doesn’t mean that all homes can, will, or should sell for 11% less than the listed price. The market is not a sellers market for homes priced less than $160,000.
There is no generalized formula of how much less than list price you should offer as every property is unique and every seller is in a different situation.
The important thing isn’t the list price, or the initial list price, but what the property is worth to you. How does this home compare with the other properties you have looked at? How bad would you feel if you didn’t get the property? Some properties are listed at deal prices while others are substantially overpriced.
Figure out what market value of the property is by having your buyers agent run a Comparitive Market Analysis (CMA).Use this value, as well as your personal opinion of how much this property is worth in relation to the other properties you can buy. You should also consider how long the property has been on the market at its present price, how much the seller owes, and any other factors that may make the seller motivated.
Unless there are other offers on the table, sellers will almost always lower their price, and/or help contribute towards closings costs. Your initial offer should be a little bit lower than what you are really willing to pay for the property. Sometimes sellers will surprise you and take it. When making the offer, you want to be careful not to offend the seller. Sometimes pride and emotional attachment can prevent a seller from doing what is actually in their best interest.