You’ve found your dream come, but also found out that the price is well over what you can afford and are willing to spend on a new home. Should you give up on that home?
Not just yet.
An overpriced home might seem like it’s way out of your scope, but it’s still possible to put in an offer that is successfully accepted by the seller. Sure, attempting to purchase an overpriced home might be more challenging compared to a home that’s within your reach, but that doesn’t mean it’s impossible. There are ways to go approach the process to help increase the odds of you walking away with a successful deal.
Find Out if the Home is Truly Overpriced For the Current Market
Before you toss in a lowball offer, make sure you’re absolutely certain that the one is in fact priced too high. Don’t just rely on line listings that you’ve been browsing. Give your real estate agent a chance to pull a report of comparables, which are similar homes in the area that have recently sold. If the home you’re looking at is priced at $500,000, for instance, and other similar properties on the block just sold for $450,000, there’s clearly a discrepancy between the listing price and what they home is really valued at.
Stay on top of local property values, as the asking price isn’t always an accurate reflection of a property’s true value. Don’t rely on the owner’s opinion of what they think their home is worth, but rather boost your own own knowledge of neighborhood property values.
Determine How Long the listing Has Been on the Market
While there are many ways to determine whether or not a home is truly overpriced, a great way to do so is to find out how long it’s bene sitting on the market compared to what the average days on the market (DOM) is in that area, which your real estate agent will be able to determine. For instance, if the average DOM in the neighborhood is 30 days and the home in question has been on the market for 60, odds are its listing price is way over the mark.
Provide Documentation to Support a Lower Offer
When putting in an offer that’s significantly lower than the asking price, attach supporting documentation that serves as some sort of “proof” that the home may be overpriced. Without such evidence, the odds of the seller rejecting your offer will be pretty high. Ideally, you should go into the negotiating table with supporting information on paper along with your offer.
The comparative market analysis (CMA) that your real estate agent prepared for you that was used to base your offer price should be included with you offer. Such a detailed report will certainly help to support the low offer, and should include stats on a number of recent comparable sales in the neighborhood that show that the home is priced over market value.
Identify the Motivation Level of the Seller
Try to find out how motivated the seller is. Some sellers might not be overly motivated to sell, and may just be testing the waters to see if they can get a bite at the price point they’ve established. In this case, the seller may consider lowering their price after a lack of interest from buyers. If the seller overpriced the home in an effort to see what they can get, they might quickly realize that overpricing the home is not a sound strategy.
Others, however, might just be open to wheeling and dealing on price if they’re more motivated to get the one off their hands. Perhaps the home has been on the market for a long time, or the seller might have to meet a deadline because of job transfer or because they’ve already bought another home.
Of course others still might not be willing to budge, in which case their motivation level to sell is not very high.
Make Your Offer Stand Out
The offer price is certainly one way to get a seller’s attention, but it’s not the only way. Consider making other components of your offer more attractive including a hefty deposit amount, flexible closing date, limited number of contingencies, or a mortgage pre-approval letter. Such factors may be just enough to edge the seller’s decision in your favor.
Be Ready For Some Back-and-Forth Negotiating
The odds of the seller accepting your offer right off the bat are slim to none. As such, expect to have your offer countered, most likely more than once. It’s not uncommon for negotiations to a many rounds before an agreement is made between the two parties. If you’re really serious about the house, you’ll stick it out to the end, as long as the seller is not being unreasonable.
Be Ready to Walk Away
If you plan on making a low offer on an overpriced home, it’s important to keep in mind that things may not work out the way you had hoped. Some sellers will simply be unwilling to budge, regardless of what type of proof you show them or how sweet you make your offer in other ways. In this case, they won’t accept an offer no matter what you do, so you’d be doing yourself a favor by preparing yourself to let the deal slide and move on.
The Bottom Line
Putting in a lowball offer is not an ideal situation, but if you’ve done your homework and are certain that the offer you’re putting in is a fair one, any logical seller would at least think about entertaining the offer. Make an effort to gently show them what the current market dictates that their home is worth. Let them know that you love the home and are more than willing to pay what the current market shows that it’s worth. Tweak your offer so that other components aside form the offer price are attractive and worthy of a gander.
Last but not least, try not to make a strong emotional connection to the home and be ready for the deal to go nowhere if the seller is unwilling to budge. Keeping this last point in mind will lower the odds of major disappointment that can easily result from negotiations that have gone sour on an overpriced home.