Pitching the right offer

Not so fast.

Sure, home prices are down - in some communities, way down - but so is the inventory of available houses, and the competition for good homes in some places is fierce. The fantasy of landing a lowball dream-deal could leave you empty-handed. So if you want to negotiate, tread carefully.

"The devil of a good deal is trying to get a great deal," said Steven Savarese, owner of Century 21 Adams in Arlington. "Clearly prices have come down, but we're not seeing a dramatic shift in negotiation leverage over to the buyer's side."

For example, Savarese recounted how one client tried to play the market on a $450,000 house in Arlington.

The house needed wiring and plumbing improvements and some asbestos removal, but the seller was upfront about this and set the selling price accordingly. As the deal was about to close, however, Savarese's buyer tried to negotiate a lower price based on the needed work, coming in at 5 percent lower at $430,000.

Savarese warned his client against making such a lower bid. "I said, 'You understand that this could cost you the house.' And he said, 'I'm prepared for that.' "

The seller indeed walked away from the deal, and the buyer left Arlington in search of a bargain elsewhere.

"I think buyers learn pretty quickly that if they want to buy in this area," Savarese said, "they're not going to get that steal."

Chris Layton, owner of Layton Real Estate in Stoughton, has also seen deals fall apart that way. "Actually, it happens a little bit more now, because the competition for the properties is out there," Layton said. "So, if they go in and lowball it - let's say unreasonably - they're more than likely going to lose it. The difference between the listing price and the selling price isn't that great, these days."

Consider that owners who have put their homes up for sale in a down market likely have to sell now, and so may have lowered the price accordingly. Discuss with a broker how much discount might already be packed into that listing price.

"If it's been on the market 120 days, maybe it has already come down 5 to 10 percent," said Alex Coon, Boston marketing manager at the online real estate brokerage Redfin. "And maybe cumulatively you can get 3 to 5 percent off the sale price. You've saved, maybe not 20 percent, but 15 percent."

From the peak of the market in the fall of 2005, home prices in the Boston area have fallen around 16 percent, and are now about where they were in June 2003, according to Standard & Poor's Case-Shiller Home Price index, the most widely followed barometer of real estate prices.

That, of course, doesn't mean all home prices are down equally.

Redfin recently analyzed how much buyers ultimately paid for their homes compared to what sellers originally tried to sell for, looking at just recent transactions. In Boston, for example, Redfin found that South Boston had the largest gap between where sellers started, and where they ended, nearly 10 percent. In the South End, sales came in 7.5 percent below original list price. Farther out, some of the largest drops from list price occurred in wealthier suburbs, with properties in Wellesley selling 16 percent below, Hingham 13 percent, and Winchester 9 percent. Sales in Arlington and Ashland, meanwhile, settled at 4 percent below list price, while North Reading and Somerville were at 8 percent.

"The mistake buyers are making these days is trying to offer 20 percent less, not even considering the price is a good deal, already," said Richard Rosa, broker and co-owner at Buyers Brokers Only in Haverhill. "But the investors are out there, ready to pounce."

Last month, Rosa showed a client a multifamily fixer-upper in Lawrence for $130,000 on a Thursday. Rosa's client moved quickly, offering $145,000 the following day. Not fast enough. In just that little time, there were 14 other offers - 10 above what Rosa's client was willing to pay.

A competitive market and lower prices doesn't mean you can't lowball or negotiate. You just have to know a lot about the market in which you're trying to buy.

Understand the competition: Is there other interest in the property? If so you may have to do more homework to feel out where the seller may settle, or conversely, be clear about what your response will be if another bidder comes in higher than what you originally had, or would have offered. In these cases, it really helps to have a clear sense of how badly you want the property. If competition proves low on a property, craft an offer that gives as generously as possible to a seller on areas not solely about price.

Also, ask your broker for a three-month report on the average sale price to list price, as well as to the original asking price. If buyers are negotiating with the sellers, rather than just snapping up homes, the price differences will show it. One guide, said Coon: Look in neighborhoods where properties are selling for more than 3 to 5 percent off the list price.

Another strategy is to look at the number of days a house is on the market. A seller who's been on the market for 155 days might be more open to deal-making. On the other hand, he could just be stubborn. "You've got to dive in and try to find the story," said Coon. "The story is where you find out the deal."

Then, when you do make a lower offer, don't just shave $20,000 off the number. Coon says you have to humanize the process from the beginning.

"The biggest thing we do, is we have them write letters to the seller," said Coon. "If you're going to put in a really low offer on somebody's house, give a decent explanation of who you are and why. Make a human introduction to the seller."

And pitch creatively. Time may be as valuable as money to the seller. Can you accommodate the seller's closing dates? Can you expedite the home inspection and purchase-and-sales agreement process on your end?

"You structure an offer that's most advantageous for the buyer in price, but also more attractive to the seller in areas that don't cost the buyer a whole lot," Savarese said.

Being more aggressive can also work. Layton cited a recent transaction where a third-party appraiser helped one of his buyers convince the sellers that the house was overpriced.

"The buyers paid for an appraiser, because we felt that the seller was just asking way too much," said Layton. "We were able to put in an offer that . . . showed that the likelihood of that seller getting any more money was small."

Coon also recommended looking for estate sales, in which heirs view the house for sale as a "pure piece of equity. They want their money and they just want to get it sold to someone who'll buy it."

But when it comes to foreclosure properties, take heed. Banks don't always operate like sellers and agents.

"They're so computerized now, it's just numbers and dates," said Rosa. "If a bank is listing at $200,000, it's not unusual for it to say no to $175,000 or $180,000. Banks would prefer to wait a month and drop the price from $200,000 to $190,000. They may ultimately sell it for $160,000, but they're not going to do it for four or five months."