Seattle

[WSUGoCougs]

Hi,

I am a first time home buyer and will begin touring homes and submitting offers in the next few weeks. Given the current market, I am curious as to how far below the asking price of a home I should offer.

These are a few new construction homes I have been looking at:

MLS# 28049476
MLS# 28070202
MLS# 28027091

What would you submit as an initial offer for these homes? And what factors (comps, days on market, etc) have the most weight when determining what to offer?

Thanks for your help!

[xay]

This is what I do for an old construction:

Look at the price in year somewhere between 1998-2002. Add 5-6% compunding to it per year and that gives me my starting price. For a new construction, you can find a comp in a similar area, find its price and then add a new home premium to it. I'd add upto 5% premium to a new home over an existing home as a new construction also has some risks associated with it 

[maxkash]

There are some good tips in this article:

http://www.smartmoney.com/deal-of-the-day/index.cfm?story=20080520-negotiating-tips&pgnum=1

This is a 2 page article and there is some opinion on new construction in the second page. Basically, it says that if there are other houses still for sale in the development, it can be more difficult to get them to come down in price. The alternative they recommend is to get them to throw in upgrades. I'm not sure if the houses you are looking at are built yet or not, but it is a consideration.

[JanelleS]

Three words:

Comps. Comps. Comps.

Check out how to run comps on Redfin.com.

[Glenn]

Redfin just published 17 techniques for determining when the seller is ready to cut a deal, which includes some handy links as well as our own advice. We linked to the SmartMoney article in that post, thanks for the tip...

[denismurf]

There's a current thread on the zillow.com blog with hard nosed comments on how to do offers in a downward trending market.

It would be helpful to me to know if it is "costly" for a brokerage, Redfin or other, to write up and present offers. Does the process consist mainly of a clerk's putting entries in boilerplate forms?

[Glenn]

It is costly for us to handle an offer. If we were merely transcribing what the client asked us to present, the cost would be minimal. But in most cases we discuss the market and review comparable properties with the client. With our client's permission, we also talk to the listing agent about the seller's frame of mind and try to find out if competing offers are expected. If we are in a competitive situation, we may put together a package including a personal letter and our client's financial statements to demonstrate our credibility as a buyer (sometimes this helps and sometimes it doesn't).

This does not mean that our focus is on closing a deal rather than getting a good price for our client. We know that what makes us different is a data-driven approach to negotiating and a fanatical commitment to customer service. MLS data show that we get a better price than traditional brokerages because of how we involve our client in the negotiating process, and because of how we pay our agents (customer service bonuses, not commissions). A Redfin agent gets the same customer satisfaction bonus whether a particular deal closes or not. Failed offers are, for us, a cost of doing business that the corporation absorbs, not the individual agent.

But we are conscious of how it affects our reputation when we submit an offer 12% below asking on a property in Queen Anne likely to get three or four offers at the asking price. And we do ask that our clients are as respectful of our time as we are of yours. We don't mind taking a run at a property that has been long on the market, especially for someone still trying to sound out the market. It's a little harder when we work with someone who has made a half-dozen offers, all far below list, on properties in neighborhoods where demand is still strong.

In those cases, we may ask the client if we can float the number past the listing agent and the seller before writing it up. Sometimes that works for the client, sometimes a more formal offer makes sense.

Regards, Glenn

Glenn Kelman
CEO, Redfin

Message Edited by Glenn on 06-16-2008 09:42 AM