Picking an Offer Price in Phoenix Real Estate

AvatarOne of my relocation clients recently purchased a home in Virginia. When discussing what price to offer on the home, he and his wife were told it was uncouth to offer more than five percent below the asking price. I’m guessing this assumes the asking price already was at the leading edge of the market.

Perhaps this is one of those areas where real estate is local. If there is a magic way of picking an offer price in the Phoenix real estate market, I’ve yet to find it. I can tell you that if anything more than five percent of asking price is considered uncouth, we have many, many rude buyers and agents in the Valley of the Sun.

What should a buyer consider when deciding on the right price to offer? Here are a few ideas … along with a few fallacies.

  1. DO take into consideration recent sales in the area. If the listing agent has done their job correctly and the seller has elected to take their advice, the home already should be priced in line with the comps. If it’s not, use the most recent sales as the baseline for your offer.
  2. DO take into consideration the absorption rate for the area. Inventory levels mean very little without being compared to the sales pace. If sales are brisk, more homes is less significant than in a market where sales are slow.
  3. DO take into consideration your own motivation to purchase this one home. If you absolutely want the home, why haggle over one or two thousand dollars. It sounds like a great deal of money, but spread over 36 to 60 months the extra $7 to $15 a month isn’t as significant.

Now for a couple of significant don’ts …

  1. DON’T base your offer on what the seller paid for the home, unless their purchase was fairly recent. On the one hand, you can get some idea of the equity they have in the house. On the other hand, just because they purchased their home in 1977 for around $50,000 doesn’t mean they’ll sell to you now for 30% below market value.
  2. DON’T base your offer on the days on market. Days on market can be as much a reflection of the lack of seller motivation as true seller motivation. Perhaps the home has been on the market for 10 months because the owner is holding out for “her price” rather than actually trying to sell.

As a general rule, don’t worry about insulting the seller. To tell the truth, I’ve felt a little bad when listing agents have reported back to me about sellers in tears. But that’s more a reflection of the market than anything my client and I have done. Buyers hold the upper hand and rightfully are using that leverage to its full advantage.

My goal with any offer is to help my clients find a price that at least will result in a counter offer rather than an outright rejection. Why? Because if the buyer really wants the home and answers a rejection with a new, higher offer, they’ve already lost some bargaining power.

Much as a buyer will look at multiple price reductions and figure there’s another one around the corner, sellers will look at rising offers and opt to wait for the next, higher offer. As I’ve said before, buying and selling real estate is a lot like a poker game. And there are times when one party or the other has to be prepared not only to bluff but to play out the bluff until the end.

[tags]Phoenix real estate, real estate negotiating[/tags]

Jonathan Dalton

Jonathan Dalton is a 40-plus-year resident of the Valley and has been helping folks buy and sell homes since 2004. He can be reached at 602-502-9693 or info at allphoenixrealestate.com.