Real Estate Q & A > Making Offers & Related Issues

Is there a percentage a seller will mark up the price of a home? For example, if the asking price is $114,000 is an initial offer of $95,000 too low?


Although you can always offer whatever you want, yes, $95,000 is generally too low too offer for a home priced at $114,000.

It's like buying a car. You want to dicker with the salesman a little, but there is more room to dicker on a more expensive car than if you were going in and buying the least expensive car.

Sellers usually mark up the price a little because they realize most buyers aren't going to make a full price offer (though in different markets you can get offers ABOVE the listing price). In your example above, you were offering almost 15% below the listing price. They don't mark it up that much, just a few percent.

Before you make an offer, get your Realtor to go over the comparable sales of other similar homes in the same neighborhood. That is the same data the seller looked at when he priced his house, too. Make certain allowance for whether houses are selling briskly or slowly, and make an offer based on that data.

Note: When you look at comparable sales, you don't know for sure if the seller paid closing costs for the buyer or provided some other financing incentive, so keep that in mind.

I am looking at putting an offer in on a house listed for $134,900. The house is vacant and I believe it has been on the market for over 6 months. My realtor is saying is should bid 134,00 with the seller paying my closing cost and paying for a 2/1 buy down. I want to try and offer less. What do you think?

Your closing costs should be approximately $4000 or so (depending on what type loan you get, how many points, etc.). The 2/1 buydown (assuming it is an annual buydown) will cost the seller about $4000, too. By paying for these costs, if you offer a price of $134,000, the seller is netting the same as he would on if he accepted an offer of $126,000 and paid no costs.

If you think the house is worth less that $126,000, then make a lower offer. If you think it is worth more than $126,000, then you would be getting a deal with your Realtor's suggestion.

Your Realtor provides advice. You decide what to offer based on that advice.

If you make an offer on a house and the owner comes back with a counter offer and you agree to it can the owner still change his mind and sell to someone else?

A seller is free to withdraw the counter-offer any time prior to your acceptance of it. The communication method for acceptance is usually described in the contract. If your acceptance was communicated to the seller in the method required by the contract (prior to the seller withdrawing the offer), the seller should honor the contract with you and not entertain other offers.

But people don't always do what they should.

The problem then becomes whether you try to enforce your contract or not, which requires legal advice and expenses. For that, you have to consult an attorney.

Although you could probably technically enforce the contract, you have to reach a decision on whether it makes sense to expend the time and money to do so. Or does it make more sense to realize the seller is unethical and just move on to buy something different?

Can you negotiate when making an offer on a new home?

Making an offer on new construction is not the same as making an offer on a resale. Most of the time, the margin for profit is so small on new construction (per unit) that there is basically little or no negotiating. You can try, of course, because "everything in real estate is negotiable," but do not expect too much.

Can you negotiate the price of a bank owned home

Everything in real estate is negotiable. However, banks are more sophisticated about pricing than they were years ago. So those "Get a great deal on a foreclosure!" days aren't what they used to be. Lowball offers generally don't go very far.

Despite Rising Home Prices, a Third of Homeowners Still Underwater

Home prices have been rising on a national level for several months now, but surprisingly the number of homeowners who are underwater on their mortgages has also continued to increase, according to real estate data company Zillow.

During the first quarter of this year, 31.4 percent of all U.S. homeowners owed more on their mortgages than their homes were worth, up from 31.1 percent during the previous quarter. The current rate is down slightly from one year ago though when 32.4 percent of all borrowers were underwater.

Curiously, during the same three months of this year, national home prices rose 0.6 percent, the first gain since 2007, according to a report from the Federal Housing Finance Agency.

The discrepancy seems to lie in the backup of foreclosure processing kicked off by the robo-signing scandal. Many delinquent borrowers have been hanging on the balance sheets, as banks have not yet had time to repossess the homes. Once the banks have taken back those foreclosed homes, those borrowers will no longer count in the negative equity totals.

Having such a large share of the population underwater has been a serious obstacle to the housing recovery. Borrowers who owe more than their homes are worth are unable to sell when new job opportunities arise elsewhere or when personal or medical emergencies strike. If they have a lot of negative equity, they are also much more likely to walk away from their homes, fearing they will never recoup the losses in the future.

However, Zillow said that as this point nine out of 10 borrowers with negative equity are still making their payments and are current on their mortgages. It is just the remaining 10 percent that are seriously behind on payments by 90 days or more.

"Negative equity does not necessarily equal foreclosure," said Stan Humphries, Zillow's chief economist. "Most people are holding in place and paying their mortgages."

That's likely because many borrowers are just barely underwater, with great hopes that they will recover the equity within the next few years. Zillow reported that about 40 percent of underwater borrowers owe between 1 percent and 20 percent more than their homes are worth. Others may not even know they are underwater if they haven't tried to refinance or sell recently.

Still, there are plenty of people who are seriously underwater. Roughly 15 percent—or 2.4 million people—of borrowers with negative equity owe more than twice the current market value of their properties.

The worst hit real estate area is Las Vegas. There, a whopping 71 percent of homeowners are underwater on their loans, with a quarter of them owing double what their homes would sell for. Home prices have fallen 62 percent from their housing bubble peak, according to the S&P/Case-Shiller home price index.

Those at Zillow are confident though, that the problem will soon start to dissipate on a national level.

"[It's] important to note that negative equity remains only a paper loss for the vast majority of underwater homeowners,"Humphries said. "As home values slowly increase and these homeowners continue to pay down their principal, they will surface again."