January 11th, 2009 Categories: Buying
All purchase offers should be really low. This is the common sentiment with most buyers in Montgomery County. Sellers are discounting homes 10%, 20%, 30% or more, right? Banks are desperate to sell their homes, aren’t they? In such a bad market, sellers are happy to get any offer, so a buyer should always offer way less than asking price…. right?
Well, not necessarily.
Buyers should first understand that a home’s list price has no direct relationship to a home’s current market value. The best way to gauge a home’s value is to look at recent, comparable sales – not the list price. Most sales prices are reduced from asking price. However, you may be surprised that many sellers are getting close to asking price… or more.
Actual sales statistics
Let’s look at all 2008 sales in Montgomery County and compare final sales price to the seller’s asking price:
Twice as many homes sold at or above list price compared to those that were reduced 7% or more. But how can this be possible in such a rotten real estate market? Remember, this analysis doesn’t provide insight on our home values. It shows how buyers and sellers come to an agreement for a successful sale. Here’s a couple key take-aways:
- There’s nothing wrong with paying close to list price if it’s at the right price already.
- Few homes sell for reductions of 10% or more. Don’t get me wrong – a buyer shouldn’t overpay for a home. Just understand the odds of closing a deal at a highly reduced price are low.
What about seller credits to buyers?
This is an excellent question that needs to be incorporated in this analysis. As loan underwriting requirements have tightened, buyers need credits from sellers more often. About one half of all sales had a credit of more than $1,000 to buyers in 2008; and the median credit was 3% of the sales price. To the seller, the real sales price is the sales price less credits. Revising the chart taking buyer credits into account:
Without factoring in buyer credits, the median list-to-sales ratio was a reduction was 2.7%. Including subsidies, however, takes this goes to 4.3%. Looking beyond a home’s list price, Montgomery County buyers should become educated on actual sales for their price range and areas of interest. When it’s time to make an offer on a home priced at or below market value, don’t hesitate to present an offer that’s close to list price. For homes priced over market value, negotiate more aggressively knowing that success with reductions 7% and more are pretty rare. Work the deal, but keep realistic expectations.
Interested in the analysis of a specific area in Montgomery County? Just let us know.