An asking price is one of the most important things a seller puts thought into. S/he will gather information on the property market, the prevailing market rates, the comparative prices of properties in the neighborhood, etc. before putting his or her property on the market at a determined price. Homebuyers examine these asking prices before making their offer price to the seller and transacting on property.

There are different types of property values that emerge during a property transaction like base minimum price (fixed by the Government and below which property cannot be sold), listing/asking price, offer price, appraised value, counter-offer price, final sale value, etc. The asking price need not be the price that the parties to the transaction agree on.

If the parties mutually decide upon the asking price or the buyer’s offer price as the final sale value, the property transaction becomes a lot simpler. This is because of the non-requirement of extensive negotiation between the parties. However, if the seller or buyer cannot agree on the asking price or the offer price, it is time for negotiation. This article seeks to explain certain facts about the asking and address questions on the topic.

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Should I offer less than the asking price?

A buyer mainly has two objectives when it comes to engaging a seller in a property transaction. 

  • The primary objective is the purchase of a good house that meets the buyer’s standards.
  • However, the secondary objective is the pursuit to buy such a house at a bargain.
  • Buying a house is a major financial decision and requires an equally great commitment. 
  • Therefore, a buyer will be on the lookout to save money as opposed to the seller’s objective to make more money. 
  • Hence, your question is valid and the answer is slightly more complex.
  • You must be having a certain budget in mind and your finances in order. You need to gather all the required information about the house before making a decision. 
  • For determining the reasonability of the asking price, you need to undertake a comparative analysis of the property value of this house with the estimated prices of similar houses in the neighborhood.
  • Once you have analyzed the data at your disposal and arrived at a certain conclusion, it is time to jump into action.
  • If you find you have the price to be extremely reasonable as compared to the other property values, you may save time and money by accepting the asking price. Negotiations can take up much of your time and also costs money. You could save on that if you find the asking price very reasonable and accept it.
  • However, if you find the property to be overpriced or the asking price to be extortionate, it is a good decision to make an offer price lesser than the asking to give you some leverage and room to negotiate.
  • As the negotiation process progresses, you can hike your offer price accordingly but reasonably. It is of no use making an outrageous offer when your objective is to save money. 

Can you offer 10% below the asking price?

This question is answered by an examination of the other houses in the neighborhood. 

  • If you happen to find that other similar houses in the neighborhood have sold for prices lower than the asking price of the property you have in mind, it is time you take this into consideration.
  • Maybe you may find that the house is in great condition with a new paint job done or it has recently had the flooring changed. But if the similar houses have additional facilities and are still sold for lower prices, this information makes for good negotiation leverage to bargain with the seller. 
  • Also, if the property has been on the market for a long duration, you may find a seller who wants to get the property off his or her hands as soon as possible. Such a seller may be easier to convince when it comes to reducing the asking price.
  • Often, the seller’s asking price is hiked above the normal price because the seller expects the buyer to negotiate on the property value of the house. The buyer also knows this and thus reacts accordingly by attempting to persuade the seller to reduce the price.
  • An offer 10% lesser can save you a considerable sum of money. For instance, if the seller fixes the asking price at Rs 10,00,000 and you seek to off 10% lesser than the value, then you can shave off a substantial Rs 1,00,000 off the asking price!

When does a homebuyer pay above the asking price?

The asking price of a seller need not be the final price at which the property is sold. 

  • You may find buyers who purchase the house at a price over the asking price!
  • Under these circumstances, it is usually seen that the buyer has found his or her dream house and wishes to purchase it.
  • Such a buyer is driven by emotions to a great extent and simply wants to own the house.
  • It is great that you found your dream house and if the house comes with great features, your investment is worth it. 
  • Also, if the property in that area is known to appreciate in value at a decent rate, you have good value for your investment and it may yield good returns.
  • However, it is best not to be carried away in emotions and simply squander away money. Before leaping into the transaction, conduct the required due-diligence and get the house appraised. Compare its value with other properties and assess the real estate value of the area in which this property is located. These are simply estimates, but they enable you to make an informed decision when it comes to investing in lucrative real estate property.

Conclusion

An offer price is the homebuyer’s way of informing the seller of his or her interest in the property. The buyer needs to come up with a budget that reflects his or her financial position when it comes to purchasing a house. If the buyer has a good relationship with a bank, s/he can get a pre-approved home loan from the bank to understand how much the bank is willing to sanction for a residential property.

This provides a good estimate for the buyer to decide on an offer price and offer such a price respectively to the seller. The key to a good offer price is information on the house and the neighborhood of which it is a part. Also, keeping your finances in order helps in the expeditious resolution of the property transaction.