Wondering how often people pay the 'asking price' for an investment property, and as a rule, what can one expect to have to pay, based on the first published asking price, e.g. is there a percentage added to the 'real' price by agents that is expected to be negotiated away?
I'd be prepared to even pay a premium if its the right sort of property. Brand new .. good size bedrooms .. quality carpets .. low community charges. If its a good deal in a great position with great potential, its a key investment. And 10 yrs down the track the pittance you paid on top to get a good asset proves worthwhile.
Of course, that doesnt prevent me from bargaining down on what i want either
I had the privelege of sitting in on a developer/realtor meeting for a particular off the plan 5 years ago. And the developer not only factored in an asking margin, he factored in a price that was explicitly higher than the current going market price. So the theory was .. if he makes any sales immediately .. its a bonus .. but it allows for him to absorb graduated sales over an extended period. As it was .. within 13 months he had his price and what looked expensive became the standard price. So he made his money.
It depends if the asking price is fair market price. Often the asking price is more than what the real estate agent thinks he/she can acheive and so they have factored in a certain amount of discounting. And sometimes the asking pice may be a little low as the vendors want a quick sale so the sale price meets or sometimes exceeds the asking price as there is competition from multiple buyers.
Or there is the case (like I have experienced in the last few days) where the vendor and real estate agent do not know that their property is listed at about 20% more than comparable sales in the area (including the house next door which is exactly the same) and have no idea why they have not had a single offer since listing the property two months ago.
It is very rare in a flat market where the selling price is equal to the asking price- this usually only happens in a bull market in my experience.
i would typically offer about 8% below asking price off the original ask price.
I have just listed one of my properties for sale and the agent convinced me it was a good idea to put a premium on the house to "try the market". There idea is that there is always some fool out there that doesn't know the true value of a property and will pay a higher price. The market isn't great in this area, not bad either but I believe asking a realistic price will get more people through and offers sooner.
Without highjacking this thread, any thoughts on why agents do this?
I would definitely not offer a set % below the asking price for every property.
The asking price could be anywhere compared to the market- it might be high as the vendors want to "try the market" as you put it, or it could be a reasonable price as they really want to sell. I wouldnt just blindly offer a certain percentage below the asking pice- I review sales data for similar properties, run the numbers to see how I think the property will perform and what return I expect and then work out what I would be prepared to pay for that property.
It might be 5% below the asking price, 10% below the asking price, 20% below the asking price or even equal to the asking price- it depends on the property.
Your offer price should reflect your research, not a set percentage below the asking price.
We have just bought a house at the asking price, after having our initial offer rejected, because our research showed it represented good value. The IP we bought in 2009 was bought 10% below the asking price, because it was what we were willing to pay, and the asking price was too high (according to me, anyway).
Each situation is different, do you own research and you'll come up with the right price for you.
PS – I would also disagree with adding a premium hoping to hook someone who doesn't know what they are doing. Whilst doing this, the people who are looking to buy are looking elsewhere, because your house is too expensive. Better to price it properly and attract some interest, rather than letting the property go stale, then reducing the price in a month or two anyway.
I agree with the posts above. Do your research, work out how much the property is worth to you and offer accordingly. At the same time, you don’t want to provide your final price up front. Instead, provide a credible offer that allows for some upward movement – hopefully you’ll meet the vendor at the price you’re willing to pay.
Like most of the guys who have replied I agree that it comes down to really doing your research. If you know what those types of properties in the area are worth, you will know if they are asking too much or offering it at a discount.
And then it comes to looking at your strategy and doing the profitability analysis. For example, I have paid $10,000 more than the asking price to secure a property that was going to be a quick turn around renovation project and net us over $100,000. Would I do it again? You bet.
My thoughts are that the asking price is always more than you should pay. To take a page from Robert Kiyosaki – you should look at 100 properties, offer on 10 and get exactly 3 acceptances. Of the 3 you would then cancel 2 and accept one.
If you get more than 3 acceptances, you know you are offering too high. If you get less, you are likely offering too low.
I worked with a guy once who rang about 20 shops to ask for their prices for a particular mobile phone. He shopped around and saved about $100.
He later went out into business and paid the advertised price for a juice shop. He didn't even try to bargain them down. (later sold it at a massive loss).
It’s strange how people act like that sometimes. I had a client trying who took an entire month to decide on a colour scheme for their website but only spent a day coming up with what they wanted to actually put into it. I guess it’s easy to lose perspective sometimes.