Huh, the responses here are not what I would have expected. We bought a house in May after watching the market for many months. We looked at 35-45 houses and made five offers between October 2006 and May 2007. All of our offers were between 10% and 20% less than the lowest asking price.
Why? Very simple – we knew what we could afford and we offered that amount over and over on houses we liked until someone said yes. We have a good house in the neighborhood we want to live in with a fixed rate conventional loan and are spending a hair over 25% of take home pay on PITI.
Our agent had no qualms about offering lowballs, though he always reminded us we were likely to be rejected and not to take it personally. All of the sellers’ agents responded civilly, though none were happy with the offers. The last seller was an estate sale with out-of-town heirs who wanted to get out from under the property, which had sat a long time without a single offer. From their perspective, it was all free money, so no need to hold out. A bit of luck on our part, but not an unheard of situation.
Long story short – it’s a declining market, buy only if you really want to, know what you can afford (not what you can leverage), and stick to your offer. I suspect as time goes by, you won’t need the luck of an out-of-town seller, either.
