Understanding what drives the market breeds buyer success
Regardless of what the real estate numbers show for the Washington metro area, the perception remains that it is still a buyer’s market. Buoyed by the lowest interest rates in 40 years and the promise of a deal, homebuyers routinely make offers considerably lower than the asking price.
But making a really low-ball offer can be a dangerous game. If the offer insults the seller, he may walk away from the negotiating table.
“There’s a tendency for homebuyers to believe they can ‘get a deal,’ especially after reading all of the national news about the problems in the housing market,” said Brian Block, branch vice president of Re/Max Allegiance in McLean.
In Northern Virginia, however, home values have risen 15 percent during the first five months of 2010, after dropping 20 percent to 35 percent in many areas over the past two to three years.
“So while a good number of low-ball offers are being made, those buyers are often losing out to full-price or close-to-full-price offers, and then adjusting their strategy,” Block said.
Buyers who have had success in this market know how to put together a “market-driven” offer that reflects the pricing adjustments that have occurred over the past several years. There is an art to coming in low.
“Buyers, of course, want to test the seller’s tolerance, but I think buyers realize that the deals out there are good based on the price being offered,” said Lise Howe of Coldwell Banker in Chevy Chase.
The buyer’s agent can play a significant role in the low-balling process.
A Realtor can research comparable sales in the neighborhood to analyze the right price to offer, Block said. “If the property is new to the market and in good condition, chances are that a low-ball offer will insult the seller.”
The goal is to find an unrealistic seller or a property that has gone stale after months on the market. These are the optimum low-ball scenarios. The seller will usually make a counteroffer that is closer to the asking price.
“I have seen more sellers this year willing to accept that the market has changed and we are not going to see the elevated prices of several years ago,” Howe said. “They are willing to put their homes on for the market price and if they have to bring a little money to the table, they are even willing to do that.”
The neighborhood was growing but with the economy in the tank. I was commuting every day to a new job in Baltimore and the sale wasn’t happening fast enough.
Our house showed well and attracted a lot of interest. There were three families who visited three times. We lowered the price to $625,000. At the end of June, our agent received a call from an agent for one of those families.
“The family loves the house, but they don’t want to insult you,” our agent told us, saying that the buyers’ agent was having a tough time coming up with the asking price, she said.
We received an e-mail with the comparables for our neighborhood. Not one of the homes had sold in the $600,000s in our immediate subdivision. There also had been foreclosures driving down the prices. We sent back comps for houses in the neighborhoods around us that had sold in the high $600,000s.
Our agent encouraged the buyers to make an offer anyway. They submitted their first bid at more than $40,000 below the asking price.
We thought long and hard about the offer. I could commute for another year until spring of 2011 but there was no guarantee that anything would change.
We countered and eventually agreed to a price of $587,000. We realized that prices may never be the same as 2005 and worse yet, our home might not appraise for anything over $600,000 in this market. We accepted the market reality and are moving on. What was most striking to us was the aggressive “low-ball” strategy undertaken by the buyer’s agent.
In the end, however, we were thankful to have any buyers at all. — Dean Bartoli Smith
