Nov. 02, 2007: How low can they go? Negotiating a real estate bargain in the Phoenix real estate market

Everybody wants a bargain. The question for homebuyers is, how do you get one?

I was in a property last weekend with a buyer. The home was listed for $450,000 and the buyer asked, "Do you think they'd be willing to cut the price by $100,000?"

Stranger things have happened, but I'd bet against it.

Here's why: Let's assume the monthly payment is $2,000. The seller could afford to wait four years for a better offer before slashing the the price by $100,000 would make sense. There are other factors to consider in real life, and this kind of analysis is best done on a spreadsheet. But a lot can change in four years.

You certainly don't want to pay any more than you have to, but you cannot possibly pay less than the seller will agree to.

What can make sellers particularly negotiable? A new job out of state and they can't qualify for two mortgages. A new house under contract with a hefty non-refundable deposit. No one likes to think about profiting on the misfortunes of others, but sellers who are facing foreclosure are likely to be ready to cut to the quick.

In other words, sellers who have a strong motivation to sell now are going to be a lot more willing to negotiate price cuts than people who kinda-sorta want to move, provided they can get their price.

But even if you find a motivated seller, there's a complicating factor: That seller has to have room to negotiate -- equity in the home. If the house is encumbered at or near the list price, there's a limit to how much the sellers can cut the price, no matter what their motivation. To go further would result in a short sale -- the sellers would come to the closing table "short" of the full amount they owe.

Short sales can be great bargains, too, but, since you're negotiating with the lender more than the seller, they're a chancy proposition at best, and they can take a long while to work out.


Greg Swann is the designated broker for BloodhoundRealty.com, a full-service Metropolitan Phoenix real estate brokerage. This article originally appeared in the West Valley regional sections of the Arizona Republic.

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