How to Know When to Offer List Price to the Seller
Why Would a Buyer Ever Give a Seller the Asking Price?
If you're in the market for a new home, and you've found one you like, you might not want to offer list price to the seller initially. You might believe it is human nature to want to negotiate.
But most people, if asked, will say they do not want to negotiate and sometimes feel uncomfortable offering to pay less than asking price.
Imagine how chaotic it would be if everything was negotiable. Suppose you walked into a bakery to buy a loaf of bread and, instead of ringing up your purchase, the baker asked you to submit a bid. How much would you offer? Wouldn't you rather hand over a $5 bill, wait for your change, and leave with your bread?
Yet, these very same people are expected to negotiate when buying a home. It doesn't matter if it's a newer home or older home; all home prices are negotiable. On the one hand, you don't want to pay more than you need to pay. You don't want to be taken advantage of. On the other hand, you want a good value and an affordable mortgage. That means you might need to negotiate. So how much do you offer? And why would a buyer ever give a seller the asking price?
Reasons to Offer the Seller List Price When Buying a Home
Say you've been looking for a beach house, and you've scoured oceanfront properties up and down the California coast. You find that everything is expensive, from San Diego to Eureka up north. But then you finally locate a great buy, and it's the least expensive oceanfront home anywhere because it's in foreclosure.
The first thought that may cross your mind is how low will the seller go? How cheaply could you buy that property? If you're not careful, you might make mistakes, such as overlooking the fact the home is already priced below market because it's in foreclosure. In this case, you might miss out on this deal if you offer anything less than the seller's asking price.
There are several reasons to offer list price to the seller:
To Gain Seller Cooperation
There are other factors inherent in the purchase contract that might be equally as important as the price. You might want the seller to pay for inspections or reports, which a seller is more likely to do if you pay list price.
To Lock out the Competition
In the event of multiple offers, you can bet another buyer might try to negotiate, making your offer look even better.
To Make the Listing Agent Look Good
You validate the suggested list price when you offer the list price. If the listing agent suggested that price, the listing agent might urge the seller to take your offer if for no other reason than it makes the listing agent look competent. A happy listing agent will find less wrong with your offer and might be inclined to overlook an item that the agent otherwise would encourage the seller to counter.
To Leave Room for Repair Negotiations
If you squeeze every dime out of the transaction on the front end, there might not be any room left for negotiating the cost of a repair. Plus, an irritated seller is unlikely to be receptive to a Request for Repair after you've slashed the sales price upfront. A seller might feel like you're adding insult to injury. Whereas, if you're paying list price, the seller might be willing to throw back a little of the cash in your direction.
If There Is No Nickel and Diming, There Is Less Resentment
It might not be important to you during negotiations to be on friendly terms with the seller, but it can come back to bite you after closing if the seller resents you.
If you like the home, and the price is attractive and acceptable to you, then buy it. Pay the list price. In the long run, it makes little difference as long as you own the home. You can lose the home otherwise. Before you negotiate, ask yourself: Is it worth losing the home over a few thousand dollars?
Your ace in the hole, if you're getting a loan, is that the home still needs to appraise at value. If you have offered list price, but it doesn't appraise at list price, the seller just might be willing to lower the price for you. In most instances, you can't go wrong by offering list price to the seller.