Ask A Realtor: Does It Hurt To Make Low Offers on Houses?

I recently had a client ask about just throwing out low offers to see if we could get a seller to “bite” on something.  My response is below and I thought others may find it interesting. – Jeremy

No, it doesn’t hurt to make low offers, but that is different from saying that it is actually useful to make low offers.   Frankly, the harm done is that it wastes your time looking at homes you can’t have.

The reality in the Colorado Springs area right now is that for typical homes there just isn’t that much “wiggle room” when it comes to negotiating price.  Here are some numbers for perspective:

Total homes sold in El Paso county over the past 6 months in which the list price was between $200-300k: 2041

Of those 2041, the number of homes which sold for 0-89% of the list price: 8 (0.39%)

Of those 2041, the number of homes which sold for 90-94% of list price: 91 (4.46%)

(Note: This data was based on the previous 180 days from the day I pulled the data.)

So combined, only 99 homes (4.85%) sold for more than 5% “off” list.  This means we have to write, on average, 21 offers to get one accepted for 5% less.  And we have to write, on average 256 offers in order to get one accepted for 10% less than list.

However, the real picture is even more bleak than that:

1.  If I take new construction offerings out of the equation the numbers are even worse.  (These are skewed because builders don’t reflect builder “incentives” in their list price and then once they apply the discounts they’re advertising it skews the ratio.)
2. Also not reflected is that 59 of the 99 had exactly $0 in seller concessions.  Whereas the overwhelming majority of transactions do have the seller paying some or all of the buyer’s closing costs, these homes sold at a greater discount did not.
3. A disproportionate number of these homes are also in areas where pricing is difficult due to lack of equivalent comps – this allows for a little more wiggle room on price.  Not too many of these homes are in “cookie cutter” neighborhoods such as the ones we’re looking in.

Does this mean you absolutely won’t be able to purchase something for 5% “off” or more?  No, but it does mean that it’s not a reliable game plan.

We need to look at homes that are already priced right, or at least close to it – especially when there are quite a few good homes out there that are already priced well.

Be sure to read the follow-up post about why homes stay on the market for a long time, and how their price may or may not factor into that.