These days it’s a given that buyers do not want to overpay. Everybody knows the boom years of easy appreciation are over and in our mobile society, many people cannot commit to staying in a property long enough to see considerable profit from the mere passage of time.
I tell my buyers they are not only looking for the right property–they are also looking for the right seller. By that I mean, a price-conscious buyer (which is almost every buyer) wants to find a seller who is ready, willing and able (as we often say about buyers) to sell the house at a price today’s buyer is willing to pay.
Which brings me to this little condo I showed today. The seller is going to lose at least $25,000 on it and probably more. The question for any buyer then becomes, how much can this seller afford to lose? Most people have only a certain amount they can afford to lose. If the loss is too great, they may decide not to sell, to rent the place out instead, or to take a hit to their credit by selling short or allowing the property to fall into foreclosure.
But this is not a unique property, just a one bedroom condo in a large complex with many similar properties available or likely to become available. So there’s another strategy available to buyers besides trying to further squeeze a seller who’s already losing on the deal. My buyer can just move on, and find another seller with a similar condo…but this seller will have bought the place many years ago for, say, $70K…that seller can afford to sell it now for $90-110K and still be making a profit. Not as much as she once hoped, of course, but she’s getting out with something and is simply able to take less than the first seller.
Naturally this doesn’t work as well if you have identified a special property to buy and cannot easily find a similar one. But if you are buying a condo or townhouse, or even a single family house in a development with many similar properties, and you don’t want to overpay, remember you are not just looking for the right property, you’re also looking for the right seller.