One of the most common and detrimental mistakes that a home buyer can make today is assuming that low-balling will be an effective negotiating tool because we are in a buyer’s market. The truth is that low-balling is a thing of the past and even though sellers are sometimes desperate in their attempts to sell, the number one thing to realize is that properties for sale in today’s market are ALL going to be under-priced.
In a market where selling is tough, sellers’ agents understand the need to price a listing appropriately from the start, which means you will rarely come across a place that is grossly over-priced. That being said, having your agent do a CMA (comparative market analysis) to determine if the place is priced appropriately is still valuable and may provide more peace of mind.
Generally speaking, you can also use your best judgment – that is, after having seen a number of properties you will gain a pretty good sense of what your money can buy. You will undoubtedly come across places that are priced better than others for a variety of reasons and this will allow you to feel comfortable with your choice.
Here’s what you need to understand about low-balling and why it will actually hurt negotiations. More than in any other sales industry, residential real estate has the highest personal/emotional component. As a buyer you should keep in mind that you are most likely buying the house or condo that someone else has lived in and grown attached to for the last several years. When you make an offer on a place, a seller will essentially see your offer as “the amount you are willing to pay” for their property and is something they will most likely take personally on some level.
Because most (if not all) sellers are already taking a significant hit in how they originally priced their place, offering MUCH less right from the start will undoubtedly leave a sour taste in a seller’s mind and you risk having the seller reject your offer without a counter. If this is the case, you can go back and change your initial offer (sure!) BUT the damage has already been done “so to speak” and further negotiations may be more difficult if a seller already has any kind of negative feeling.
The bottom line is: Listen to what your Chicago real estate agent suggests and trust that your agent will have your best interest in mind. He or she will still negotiate the BEST POSSIBLE offer on your behalf, but your offer needs to remain reasonable. Also, keep in mind that no matter what you buy in today’s market you will be “getting a deal” just by virtue of the fact that prices are lower than they would be in a more stable market. Buying today gives you built-in equity because when the market turns around (and it will!) your property will go back up in value; if you know you’ll be in a place for at least the next five years, by the time you sell you should expect to make a significant profit.