Negotiating on Overpriced Listings

When negotiating with an unrealistic seller, it helps to gather as much information as possible. You want to know at what price the seller purchased the property. How much money, if any, did he put into the property? Are there any specific circumstances that have led to the seller putting his home on the market? This will help determine where the seller is coming from. He may be trying to recoup the money that he paid for the property. Or it may have been a labor of love, and he feels that his house is worth more. Either way, it’s going to take a lot of work to convince the seller to sell for less. If the seller doesn’t have to sell, then most likely he won’t. So it’s good to know the seller’s level of urgency. If the seller can wait it out for a couple of years, he will be unlikely to negotiate because he doesn’t have to; he’s merely testing the waters. “If somebody bites, great. If not, I’ll try it again when the market turns.”If the seller does need to sell, then you have something to work with. If possible, try to find out if there have been any other offers and at what price point. The listing agent may or may not be willing to give out this information. Legally, they can. As long as the seller is okay with it, the listing agent can disclose how much the other offers were for. But if the offers are low, many agents will not be willing to divulge this information. If you know that the seller has received a couple of offers that have been lower than hoped for, he may be getting a clue to where the home’s market value really lies. Market value is what people are willing to pay. If buyers keep coming in with offers at X, then clearly Y is not the right price. If you make a similar offer, he may no longer be surprised, and possibly ready to negotiate. The listing agent will also have more ammunition to talk the seller down. How the seller responded to past offers can also be insightful. Did the seller ignore low offers? In that case, it may be a better idea to make an offer at market value and say it’s your highest and best offer. If the seller’s pattern was to counter any low offers, then you may be able to start lower than what you’re willing to pay, and come up. This makes the seller feel like he’s getting something more out of you.In the case where there have been no offers, then Days on Market can be very telling. A listing that has been on the market for months, in an active market, is clearly overpriced. Having a strong understanding of the comps and a good rationale for your offer price can help the seller see the light. But it’s also important to make sure the listing agent agrees with your assessment, because it’s the listing agent who will advise the seller on how to respond.