How to negotiate for an overpriced home
01/02/2014 1:53 PM
01/02/2014 1:54 PM
With the economy on the upswing, most homebuyers aren’t in the catbird’s seat of a few years ago. It seems like ancient history when buyers could practically dictate terms to sellers. Now the tables are turned in many – though not all – areas.
“Sellers clearly know they’re in a much stronger position now,” says Fred Meyer, a veteran real estate broker who sells property around Harvard University.
One manifestation of seller strength is that the owners of special properties, including homes with stunning views or special historical significance, are willing to wait it out rather than compromise on price.
As a rule, and even in strong sellers’ markets, homeowners who list their property for an unreasonably high price are eventually punished for their greed. However, the owners of some rare and truly exceptional homes can sometimes get away with pricing high and refusing to bargain.
One example involves an aeronautical engineering professor who owned an elegant property in a suburban enclave where lakeside lots were scarce. The professor and his wife, a social worker, had vague plans to retire but were under zero pressure to move. They waited for more than a year with no price cuts, yet ultimately found buyers willing to pay their high asking price.
“Even in a strong sellers’ market, that wait-and-see strategy only works for the owners of houses that are truly extraordinary in some way – such as for their architecture or unique setting. An overpriced house that’s not exceptional will just languish unsold until steep discounts are taken, says Meyer, who’s a real estate appraiser as well as a broker.
Do you love a home you believe to be overpriced? If so, these pointers could prove helpful as you seek to shape an offer:
Stay abreast of local property values. The asking price isn’t always a reliable measure of a property’s value, says Eric Tyson, the co-author of “Homebuying for Dummies.” Rather than relying on the owners’ opinion of their home’s worth, he suggests that buyers increase their own knowledge of neighborhood values.
Prior to offering a bid, Tyson says buyers should ask their agent to prepare a “comparative market analysis.” To do this, the agent should gather data on recent home sales in the immediate area. Then these should be adjusted, adding value, for instance, if the place you’re seeking to buy has a larger yard than the others.
Your evaluation of neighborhood sales should yield a general estimate of the value of a property that interests you. Then, if you’re opening with a low starting offer, Tyson encourages you to attach comparable sales data to support this. This is usually a better approach than complaining that the sellers are asking too much. Criticism that could backfire if they take it personally.
Assess the owners’ level of motivation to sell. Not everyone with property on the market wants to sell immediately, says Tom Early, a real estate broker and former president of the National Association of Exclusive Buyer Agents ( www.naeba.org).
“(Some) sellers ... are really just testing the market to see if their excessive expectations can be met,” he says.
How can you find out what’s caused the sellers to put their place on the market? Often, your agent can obtain answers by simply asking the sellers’ agent direct questions, according to Early.
How can you get less-than-eager sellers to bargain? One idea is to volunteer a late closing date in exchange for a price cut on the property.
Don’t be too hasty when responding to a seller’s counteroffer. Apart from the exceptions, most sellers are eager to move promptly, particularly if their home has gone unsold for weeks. But that doesn’t necessarily mean they’ll let their property go without a struggle over price.
“Nowadays, in neighborhoods where real estate has yet to rebound, it’s not unusual for negotiations between buyers and sellers to go for several rounds before an agreement is reached. If you really want the house, it’s worth pursuing the process, so long as the sellers are bargaining earnestly,” Early says.
As Early notes, some sellers have an emotional attachment to their property. That can cause them to make unreasonable counteroffers, even when they have an urgent need to sell. Should you respond to such a challenge on their terms? Not necessarily, says Early. In fact, failing to answer immediately could be an effective way to cause them to become more realistic. He calls this tactic the “walk-away.”
Temporarily disappearing from negotiations won’t cause unmotivated sellers to yield on price. But it might prompt motivated sellers to take a serious second look at your latest offer, especially if their property has sat unsold for a long time and they’ve received no other bids.
Recognize the signs of inflexible sellers. Early, who’s sold homes for more than two decades, says he can tell immediately when his clients become enamored of a home.
“Their eyes light up, and their excitement becomes obvious. For most people, home selection is an incredibly emotional thing,” he says.
Just as some people believe in a “one and only” in marriage, so others believe in a “soulmate” home.
But what should you do if the owners of a home you love demand a price you know to be excessive and all attempts to negotiate seem futile? In that case, Early recommends that you let go of the property and begin seeking another one immediately.
“Don’t fret about your ‘lost’ house. Even today, with the real estate recovery well underway, chances are you’ll find an even better house for a fair price,” Early says.
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