Blacklisted at 10%: Betting Against the Seller

A wrote a few days ago about the dynamics at work behind negotiating an offer on property. Today I wanted to share some numbers with you just to prove the point and establish some real expectations for what is possible in the market.

Here is today's very interesting looking chart:


This chart represents 851 of the most recent transactions in Davis County. It shows you for each transaction point, how much (%) of a discount or premium related to LIST PRICE the home closed at.

Its important to keep in mind that list prices are arbitrary. They are not necessarily an indication of actual value. They represent what the seller or agent think a home is worth. List prices can also change as the seller and agent change their views about the relative value of a home as market conditions change. So, its important to keep in mind that this chart shows only the difference between what a home sold for and the price it was ADVERTISED at at the time an offer was accepted.

If you are a buyer thinking of low-balling an offer, here is how your chances of success break down:


Most sellers will rebuff an offer lower than 10% of thier list price. Most will pair some expletives with their counteroffer to you as well. If the home is overpriced relative to its true value, the seller will let the home sit for a while until they lower the list price and test the new price point. Eventually, if the seller is motivated enough, the price will come down to a range that is necessary for buyer to move on the home. The ironic part is that the list price in the end may be exactly what the low-ball offer was in the beginning. The only difference is time and the changed perceptions of the seller.

For these reasons, I recommend looking for properties that are listed at a price point that has value in it already. REO, bank owned, short sale, and estate sale property, are the best places to look for these values. Asking $300,000 on a $500,000 list price is just kicking against the bricks.