Hi all!

I was talking with my husband yesterday--he's working out-of-town right now--and he was telling me that when he took a break from all the reading he had to do, he was listening to two co-workers talk about the housing market. One is in the process of moving to another state, and just put an offer in on a new house there, and the other was saying to her "well, in this market, you offer at least 20% below what the listing price is..."

First off, anyone who knows my husband would expect him to speak up, but he chose not to this time--he wanted to hear what was being said. I'm not so sure I could have kept quiet...which is why I chose to write in my blog about negotiating an offer in this market.

Second...in ANY market, there are NO hard and fast rules about "always offer 10% less than what they ask" or "never pay full price." There is more to the picture than the listing price. ALL real estate is local. Even in today's market, there are areas of the country that the list price is the starting price and when you put in an offer, you put in what you are willing to pay over that. The key is knowing the market where you are planning to buy. Even within suburbs in a city the markets can be VERY different.

In my local multiple listing service, I ran a search to see what homes are selling for compared to their list prices in Fort Walton Beach, FL, and it's been steady since January 2007 that the sell-to-list ratio is at about 95%--meaning that on average, sellers are getting within 5% of their asking price. In 2006, it was at 90%, 2003, 2004, and 2005 it was 96%, 97% and 98% respectively. In 2002 it was at 95%. We've come full circle.

So HOW do you negotiate an offer on your dream home? Well, as I always preach...get pre-approved first to make sure you are not wasting your time looking for something more (or less) than you can afford.

When you've found the home that meets your needs, you like the neighbors, the neighborhood, the schools, the amenities, the distance to everything you want and need, look at the houses that have sold recently in that neighborhood. You can look at the property appraisers page to see what has sold, however, in Okaloosa County, Florida, it takes 30-60 days for those to update after the sale of a home. This is where it pays to work with a realtor. If the house was listed in the multiple listing service, they will have near real-time--at most within 2-3 days knowledge of how much the house next door sold for.

Your realtor can get a comparative market analysis for you on the home you're interested in. It shows if this home is over priced, or under priced in comparison with other homes that have sold recently in the neighborhood. While some sellers are still stuck in the "boom years" and expect to get more than they paid for their house then (or think that the should be able to get the price others did during that time), more and more sellers are being realistic, and as a result, are pricing their homes competitively. You see, every seller is different, as is every realtor. Some houses will still be out there over-priced, and some won't.

If the home looks like it's underpriced, ask why--what's the sellers motivation? They're tired of it and they just want out? They want to pay off bills? They need to move? Sometimes "they're just ready to move" is the answer. But that doesn't mean they can or want to "give" the house away. If you as a buyer holds to that "offer 20% less rule" you may lose out on the perfect house in the perfect neighborhood that all your kids absolutely love because it has the yard that has the treehouse in it. The house is exactly what you've pictured, and has the layout you were looking for, as well as the size yard you need, and it's close to everything you want and need.

Sometimes terms are a bigger issue than price. A buyer knows what they can afford, and they're looking at that price range, but they have very little to pay in the way of closing costs. A buyer can ask for closing costs to be paid, plus offer a lesser amount, and see what happens.

I always tell my buyers to ask for everything, but don't expect to get it. I tell my sellers what I'm told is the buyer's motivation (no money to pay closing costs), so then they can decide how to come back with a counteroffer. Sellers have their bottom line that they want/need to walk away from the sale from, and that's where they negotiate from. Just as the buyer has their limit, so does the seller--so in the negotiating process, everyone wants to get the best deal. It is possible that can happen.

As a seller, it is best to come back with some type of counteroffer. This is part of the negotiation process. Sometimes it may take going back and forth a few times to make it all work.

Now, short sales and bank-owned properties are a whole different ball game. While the "motivation" is that the bank needs to get this property off their books, there is nothing "personally" motivating a corporate entity to negotiate a sale of a home. These are instances where you have to be patient and wait for the answer to come back. Sometimes there will be multiple offers, and you have no idea what the other offers are. All that you know is that the bank will take the offer that nets them the most money.

Builders are also a different issue. Usually they are not very flexible on their price, but they will offer other amenities or upgrades instead.

So the point is...know your market, wherever you are buying OR selling. If you don't have the time to figure it out and do the research, find a good Realtor that knows your market to help you out. It will be well worth your time.