Getting a Deal on a House - Deep Discount Dilemmas
Buyer Tips & Realtor Tips - Deep Discount Hunters; As Gen Y comes out of the woodwork to buy on the heels of Gen X'ers talking about the deep discounts we saw in the years following 2008, we still run into disillusioned buyers thinking they're going to low-ball an offer to buy at a 10-20% discount off the asking price.
It's reasonable to go for a discount, who wouldn't? What a buyer needs to realize, there are only a certain number of homes in any market that are going to meet their needs and that they'll be satisfied with having ownership of. That being said, here's some things to ponder to help you succeed whether you are a buyer, or a buyer's agent.
Getting a Deal on House Today - Expect a 3-5% Discount:
This is good for buyers to read, but this post is also geared towards real estate agents and setting proper expectations. My business partner and fellow Realtor, Marty Snyder, and I pull local market information a lot for new buyers to help them understand the current nature of the market.
Setting Expectations for Success
For instance, we looked at 200 homes in two adjacent cities (Monroe and Lebanon Ohio) and had a "sit-down" with the buyer, and showed them asking price vs. sold price and nearly all the homes sold for 3-4% off the asking price, and only a couple homes sold for 5% off. Taking the time to explain to buyers, and show them factual data on what's generally acceptable helps set the stage for their success.
When Buyers Don't Listen
What happens when buyers don't listen? Well, the inherent danger here is they're not going to be happy when they lose out on the best or most desired homes they're looking at. Just as badly as a buyer wants a discount, a seller wants to net. It's a buyer's agent job to help a client save money on a purchase, but it's also a buyers agent job to help a client succeed in getting into a home they love and are happy with. Running around low-balling everything is sure to land a buyer in the "no-winner" category as they watch the most suitable homes sell to others for discounted but reasonable prices.
Now, a great buyer's agent will also point out when a home is obviously over-priced, what a reasonable price would be, and what a reasonably discounted price would be. In those cases it might be wise to ask for a small discount of the "reasonable price" and not the asking price, but also back up the offer with clear data (asking prices and sales history) demonstrating to the seller that they are overpriced and perhaps help them see reason.
Housing Market: Supply and Demand
It's important for buyers just starting out to understand supply and demand. Simple enough, if there are a lot of homes on the market, prices are generally down and it's more of a buyer's market, while if supply is shorter (like it is now) it tends to create a seller's market, the transition in between is a "balanced market". It's also important to understand that real estate is a highly "local phenomenon" and in any market you can find odd exceptions to the rule that positively or adversely affect a local market, regardless of national or state trends.
We still get a lot of buyers chomping at the bit to land a whopper deal, riding the fading wave of 2008-2012, but be assured, the days of deep discounts are gone. Don't get me wrong, once in a great while there's still a rare, phenomenal deal, but it's foolish to treat every home and every offer as thus. In the end, you're just asking for disappointment and will have to continue renting if that's your mindset and approach.
My advice is, start with a 5% discount and be prepared to come up a little if you really want the home. Too, your buyers agent should be able to let you know how popular the home is, whether it's generating a lot of interest or showings, and if it's a home you really truly want, you may want to consider 1-2% off or full asking price. Should multiple offers occur, prepare to offer over, and sometimes well over the asking price. This either happens because the property is highly desirable, or was priced low to begin with, coming up to meet market averages in the end due to multiple offers.
A lot of foreclosure home sellers are pricing their homes too low on purpose. When this happens, they are doing it with the intention of starting a bidding war and the price escalating to much higher levels. Don't expect to win a multiple offer situation if you're trying to low-ball your offers.
authored by Berkshire Hathaway HomeServices Professional Realty