Archive for May, 2008

How much under asking price should I offer?

“How much under asking price should I offer?” is a question that I’m asked in any market and much more frequently in the current market.

I’ve been told by a student of economics these days that most questions about economics can be answered with one of two answers:  either  a)  China  or  b) it depends.   In this case, the answer is “it depends.”

There is no set rule because Sellers (and their agents) vary widely in how aggressively they price a property.  Some properties are worth–and are receiving offers–of full asking price, or even over in multiple offers, in this market.    Other properties are priced clearly too high…and you see them languishing on the market for months.

One thing I do when preparing to write an offer for Buyers is to print out all the recent sales of comparable properties and compare various factors such as location, square footage, amenities, etc., of the sold properties to the property they’re going to write an offer on.   In so doing, I print out a report that shows both the asking price and the selling price of these “comp” properties.

No matter what the market, you will find that the majority of sales occur within 3-5 percent of the asking price.   I’ve concluded there are two reasons for this happening.

First, if the “true” market value of a property is 10 percent or more below its asking price, the Seller usually isn’t ready to hear the truth and will reject the offer.   Otherwise, he would have lowered his price to a more defensible level to attract a quicker sale.

Secondly, and as a Santa Monica real estate agent this sometimes drives me nuts, many Buyers won’t write an offer much more than 5 percent below the asking price.   “It’s too embarrassing” and other variations on that theme I’ve heard over and over again.

So, while the answer to how much under asking price you should offer is “It depends” and may vary from property to property, the overall pattern is such that most sales will occur within 3-5 percent of listing price, even in the current market.

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May 7, 2008 at 10:06 pm Leave a comment


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