How Much Should I Offer on That Property?

How Much Should I Offer on That Property?

By Ron Snell

Just yesterday a fellow agent in my office and I were discussing this question with some of his
clients. They were insistent that they had done their research and they”knew” that they could
come in with an offer of about 60% of list. Were they right?

Well… they’re mostly wrong but occasionally right. Unfortunately, the times when they might
be right are the exceptions. A person can win the lottery and make a lot of noise about it, but
that doesn’t mean it’s likely you will win the lottery.

Getting a “good” listing for 60% of list price is rare. 80% isn’t common. 90% is approaching
reality.

If someone gets a property for 60% off of the list price, it isn’t usually because the Seller just
got diagnosed with a brain tumor or the wife just kicked the husband out of the house. Far
more often it happens because no one else wants the property and the owners are desperate
to get out from under it. Maybe it was a design that the owners thought was brilliantly creative
and everyone else thinks is a “What-were-they-smoking-when-they-designed-that-place?”
Maybe it just doesn’t have anything that says “WOW!”

Another reason for succeeding with a lower offer might be that the owners insisted on an
artificially high price and the listing agent(s) couldn’t talk them out of it. Then after a few years
of no showings, the owners are grudgingly accepting that they were wrong and they are just
going to have to swallow hard. There are still listings from the good old days when anyone
would pay anything to live in this part of Costa Rica, and if you paid too much back then,
well, reality check: today’s market is different. There is a new norm. Lots of people still want to
live here but are being more realistic about how much they will pay.

“The market” is an adjustment that takes a few years to self-correct. I’ve had an experienced
agent tell me, “Those houses are all priced under market”.And I have replied, ” If all the houses
are priced under market, wouldn’t that mean that the market has changed?”

So how should you proceed when making an offer?

1. Get to know the options in your price range, plus maybe a few houses above and below your
price range. It helps to have a feel for what you can get for how much. At each property, you
view, have the discussion: “Is this a pretty good value for today’s market?”

2. When you focus on a property you like, use your experience in #1 and discussions with your
agent to assess value in relation to its price. Then…

a. If it is a reasonably good value at the price it’s listed, come in with an offer that’s a little less
than that and include some ways to sweeten the deal for the owner (fast closing, all cash, etc)
to see if you can start a productive negotiation. You can always start a little lower than where
you are willing to end up so there’s room for some give and take.

b. If the property is clearly overpriced considering its value in today’s market, make an offer
that matches what you think the value is, even if that’s considerably lower than the list price.
Trust your gut and your agent and don’t overpay; that’s how people get trapped down the road
when it’s their turn to sell the property. A house with no ocean view an hour from the beaches
won’t magically get a view or move closer just before you want to sell it at a profit in 10 years!

As always, your starting point is your own research and an agent whom you trust because that
agent is honest, transparent, and knowledgeable. A trustworthy agent will never encourage you
to overpay, will submit whatever offer is comfortable for you, and will have your back in
negotiations once the conversation has begun.

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