Negotiating the offer

     Very often, we are asked, "How much should I offer." While we may have an idea if a property is reasonably priced for the current market, rarely would we have access to information about what the seller will accept. Typically today, properties sell on average for more than 95% of the asking price, and not infrequently, if there are multiple bidders, the selling price is higher than the asking price. 
     The answer to that question ultimately is your decision, based on the value of the property, what you can afford, and, what that property is worth to you. A vignette I tell buyers in a quandary over this is that I have purchased about 70 homes and paid full price for 3 of them -- the three I bought for my family's use. The others were for investment and therefore the price mattered. I never regretted paying full price for my own homes, when I decided one was right for me, it was no longer fungible, we refer to our home as "Our Dream House." 
     So, the only way to really know what a seller may accept is to make on offer. Not to avoid the question altogether, however, here are some thoughts. If a property has been on the market for some time, and the price has not yet been reduced, there may be more flexibility on the seller's part. Even though we work as the agent for the buyer, we would not normally recommend too low an initial offer. Too low an offer may get no counteroffer from the seller, and if you end up raising your offer in the absence of any counter from the seller, you've started off from a weak position.
     If a property is new on the market, and is both priced right and an appealing property, often times, if it's just what you want, the best approach in a strong market can be a full price offer, and promptly. The last thing you want is to delay and find that multiple offers have come in, forcing it to a "bidding war." 
     I should mention that the "Binder Contract" (q. v.) we use with our Buyer clients is designed to protect you as a buyer after it is signed by both parties. Once the seller has agreed to terms and signed the binder, both parties have a few days for attorney review. After the attorney review period, the seller is bound to sell to you, but you have a period of time for inspections, normally about 2 weeks, and if any significant problems are found that the seller is unwilling or unable to correct, you can cancel and receive your deposit back. 
     If you're interested in a property that receives other offers, you should know how that works. Customarily, the agent for the seller will come back to all bidders and ask for their "highest and best" offer. The Multiple Offer Procedure Form is one way this is handled, but even if is just a verbal request for highest and best, the form outlines the procedure, which is essentially an auction process, where the bidding is "blind," in that you won't know what the other bids are you are bidding against. Buyers often are unhappy when faced with this situation. The questions you ask yourself at that point include, at what price would you be unhappy to lose the property to another bidder? Recently we saw a bid for $60,000. over asking price to someone who decided that was the home he wanted. While that was a large additional sum, in that case it was but a premium of only about 12% over the asking price. Another home, listed at $220,000. sold for a bid of $225,000., and our buyers were deeply disappointed, as their bid was only $222,000., against our advice that that bid would not have a good chance of winning the auction. Apparently they were not convinced there really were any other offers, and thought that maybe they were being duped, that the other offer wasn't bonafide.