In a Buyers Market How Much of a Discount Should I Get?

It's human nature, I guess.  In many parts of the country stories abound about the great deals buyers are getting, so when it's your turn to find a home, you expect to get a deal, too, right?  There's no doubt that qualified buyers are gold right now, which, of course, gives them leverage when they're shopping for a home...and they know it!

Let me ask you a question, though:  How do you define "deal"?  When you go to the department store and find an outfit you like...it's on a rack with a big sign over it saying "20% Off", does it make you feel good?  What if you found out that the price of that outfit had been raised by 25% the previous week.  Now how good does that "20% off" feel?

When buyers are looking for houses, of course they begin by looking at a variety of homes in their price range to get an idea of how much their dollar will get them.  But the same thing happens over and over:  when the buyer finds a home they've fallen in love with, they want a "deal".  Frankly, this market is offering up some really nice homes at great prices (even many that are not short sales or foreclosures) so it's likely buyers are finding good deals by default.  The notion persists, though, that "deal" translates into "discount off asking price".  Frankly, that notion is very flawed.

Take a look at this scenario, for example. single_story_house2

Seller "A" has a home to sell, and let's assume it has a current market value of $100,000.  It's a cute little 3 bedroom single story home in nice shape and the seller has decided to put his home on the market at $95,000 in hopes of getting it sold soon.  Seller "A" has decided on a strategy to price his property "below market value" in an effort to secure a quick sale by a ready buyer.

There is no question in real estate that motivation is critical!  The more motivated a seller is, the greater the advantage is for the buyer.  

Seller "B" has a virtually identical home to sell...also a cute little 3 bedroom home in nice shape with a current market value of single_story_house$100,000.  This seller, who figures he has "time on his side" and wants to have "room to negotiate" decides to put his home on the market for $115,000.

Buyers are out looking at properties, and Buyer "A" loves the pricing that Seller "A" is offering, and after some negotiations winds up agreeing to asking price...he's agreed to pay $95,000 for that house.  Shortly thereafter, Buyer "B" comes along and places an offer on Seller "B"s house.  After considerable negotiations, Buyer "B" agrees to pay $102,000...more than 11% discount off asking price!

Let me ask you a simple question:  Which buyer got the best "deal"...the buyer who paid ASKING PRICE for his home, or the buyer who got more than an 11% DISCOUNT off the asking price?

The bottom line here is that the amount of the discount off an asking price (if there even is any discount) is irrelevant!   It may sound better when you talk to your friends and can say "I got the seller down 11%" or "I got him down $10,000", or whatever.  But is that what really matters?  What constitutes a "deal" is how much below an item's value you paid, not how much below it's asking price!

What makes a deal a deal is not the amount a buyer is able to get the seller to discount from their asking price.  What makes it a deal is how the "market value" of a home compares to what a buyer actually pays.  Paying the full price of $95,000 for a home valued at $100,000 sounds like a deal to me!  Tell me what you think?  Have you negotiated a purchase or sale recently?  I'd love to hear your thoughts!!!