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Throwing an accurate low ball

Posted by Rona Fischman April 12, 2012 02:07 PM

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Asking prices are a fiction. Sellers and their agents make them up. Reasonable people get objective information based on comparable sales. Reasonable people pay attention to those sales and don’t price their house hundreds of thousands over what people are paying for properties similar to theirs. But not all sellers are reasonable. Some sellers get attached to their made-up price. As a buyer, if you are proud of getting money off an inflated price, you have bought the propaganda that asking prices mean something in the real world.

The data is out there for those of you who are skilled at mining it. So, if you are a do-it-yourselfer, here are some tips:

If you see a price is way out of whack with the recent comparable sales in the area, look for they “why.” Figure out what the price means to in the seller. If you know why it is there, you can negotiate accordingly.

If the seller bought before the bubble, he/she is counting on some profit. Do the math and know what the profit looks like to the seller.

If there is no profit, it is powerful to know the break-even point for the seller. Any of these things can explain what looks like a silly-inflated price:

Some can sell at the price they paid for it plus costs, and feel proud of not losing equity.

Some can sell at their purchase price, but lose the cost of their fees. (It feels like a much bigger loss if he/she sells for less than what he/she paid.)

Some could be able to get out without bringing money to the table, or not. Avoiding the need to bring cash makes a lot of difference to the seller. This one also may be an economic show-stopper. If the seller can’t pay to get out, he/she can’t sell.

Here are some comments from a while back, when we discussed “low balling” before:

nZone wrote:
I have the same dilemma as MarkCCC. I didn't think I low-ball the seller at all. List price @ $349,900. I offered $320,000. They countered with $347,000. I countered right back at $330,000. They said NO and refused to negotiate further. I was like...okay...good luck! The house was listed since fall 2010, and it's still available.

blackwater wrote:
If a counter offer of any kind is offered , and the buyer walks , it is pretty clear that the offer was a low ball.
I made an offer about 15% lower than the asking price. home was vacant, owner passed and the children were selling the inheritance. the 15% lower bid was what the house was worth to me, or what I was willing to pay for it. The seller came back and added $10k to the list. Their "counter" was higher than the list.
The house eventually sold for $10k less than asking. Also, asking price had been reduced over the 12+ months it had been on the market.

In my opinion, as long as you are looking at asking prices and percentages off asking prices, you are making a mistake in negotiation. When I hear someone throwing percentages off asking price around, I think that person does not have his eye on the right ball.

Percentages are for bragging rights, what really matters is dollars in or out of your pockets.

This blog is not written or edited by or the Boston Globe.
The author is solely responsible for the content.

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Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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