Nearly always, buyers ask me “what should I offer?” Translation: “How low can I go.?”
As you will no doubt know, the Los Angeles real estate market for the most part does not favor buyers. Until recently there was a buying frenzy with as many as 8 nine offers or more on a property. In that situation the answer would be “How high can you go?”, especially when you would probably be competing with those pesky cash buyers who would not have loan and appraisal contingencies in place. Those days were not pretty for your average buyer.
Now the market has settled down somewhat with prices flattening and mortgage rates still low. However, there is still a shortage of inventory and it is still a sellers’ market. So where should you come in with your offer?
Hopefully you are working with your own Los Angeles Realtor® who will be able to advise you. If you think that working with the listing agent for the property is going to get you a better deal then think again. It is practically impossible for the agent representing the seller to solely represent your best interests. The seller is paying their fee and the representation you get will invariably reflect that fact.
Your agent will look at the comps (comparable prices) for the property. What similar properties have sold recently in the same neighborhood. By similar I mean, size, condition, location, etc. When similar properties are found it is much easier to compare and see how the home you are interested in is priced. When there have been no recent sales of similar properties knowing if the listed price is at or near market becomes more difficult. A condominium is a little easier to comp as we can base the value on the price per square foot within the same building.
A good listing agent is going to know their area and price the property at or near market value. A good buyer’s agent is going to have the same information. And for the purposes of this discussion we should assume that the property is well-priced. So, what should you offer? Usually your agent is going to talk to the listing agent to see if there is any flexibility on the price at all. This will depend on the seller’s situation and also if there are any other offers in the mix. If they need to sell quickly there may be some flexibility and the listing agent may encourage you to make an offer. Or they may say that the seller is firm on price.
You can make any offer you like but the idea is to encourage the seller to take you seriously. For sure if other offers have been submitted you should offer near or at asking price. If you are a cash buyer you may have the luxury of offering a little lower, but bottom line the seller is going to want to receive the most money so going too low is not likely to get you the property.
Generally if you like a home you will not be the only one who does and there are going to be multiple offers. Timing is a factor also. Look at how long the home has been on the market. If it was just listed it is usually in the seller’s nature to wait a bit before accepting anything lower than asking, if at all. If it has been on the market a while and maybe the price has already been reduced, you may have a better chance of offering less.
It is human nature to want a deal. But the word “deal” rarely factors into today’s Los Angeles home buying experience. If you want the home and it is priced right, give the seller what he or she wants before someone else does.
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