In a buyers market like we are experiencing one of the more common buyer comments I receive is “I want a great deal.” Of course what buyer doesn’t want a great deal? There are great deals out there but the problem is how one defines a good deal. How do you know a good deal when you see it?
The most common mistake is when buyers focus on the list price. The list price isn’t the value but simply a marketing tool. This is true regardless if it is a distressed sale such as a foreclosure or short sale or if it is a normal transaction. No matter what the market the list price is designed to attract interest in the home. In todays crazy market some sellers, especially banks, are under pricing their homes and creating competitive bids. In these situations one could offer full list price and still not have a chance of buying the home.
I define a good deal as how far below market value I can negotiate. Not how far below the list price.
Here is an example from a closing I just had. The home was valued three years ago at around $900,000. It was listed in the $800’s then to $699,000. The market value was around $600,000. Anything below that would be a good deal. We made a cash offer and purchased it for $520,000, which is a very good deal. The list price was too high so I defined the success by how far below the $600,000 value we could get not how far below the list price.