Every negotiation is different. Does the property fit the buyer’s needs? Does the seller need to sell? Is it an active market or a slow market? Some answers you may know, some you may need to rely on your Realtor’s advice, and some you will have to take a chance on.
I can tell you this. Too low of an offer may irritate the seller and portray you as not being serious and/or someone wanting to “steal” their property. That could turn the negotiations into an abrasive situation. Too high of an offer, and you could be overpaying.
With today’s access to information, buyers may know what the seller originally paid for the property, and because of this, offer a percentage over that. That could be a mistake. If a seller paid $20,000 for a piece of land, as an example, and a buyer believes that $30,000, a 50% return, would give the seller a great return…. well, this may not always apply. For example, in 1997 Amazon stock sold for $18.00 a share. So, if a person selling that stock today is offered $56.00 you would think they would be happy to take it since they are doubling their money. Not necessarily, as of this writing Amazon stock is selling for over $134.00 a share. If you owned that stock, would you sell it for $56.00? Probably not. Here’s another example. Apple went public in 1980 at $22.00 per share. As of this writing it’s selling for more than $189.00 per share. If you owned it, would you sell it at $50.00 a share? Not.
So, what’s the answer? Every property is unique. This is not liking buying a shirt, where there are quite a few more on the rack just like it. Let’s go back to what I said earlier, does this property fit your needs? If so, keep this in mind when you make your offer. And, always, rely on your real estate agent for advice. Hopefully, they know the area you are investing in, and they can provide valuable guidance as to where your offer should come in.
