For the first time, I’ve started looking into buying a home. This is a pretty grueling process for me, because I tend to take big purchases very slowly (and by “big purchases” I mean anything over $100). It sometimes takes me 6 months to decide on a digital camera, so you can imagine how long it’s going to take me to settle on a house.
Complicating matters is the fact that I happen to be the only person left in the state of Washington who understands anything about how to manage money well (if you have doubts about this, just do a bit of quick research into how many homes are in (or are near) foreclosure in the Pacific Northwest). I also happen to be one of the few people in the world who isn’t afraid to make a “ridiculous” offer.
Forget houses for a minute and just consider how most people are uncomfortable bartering. I find that most people are scared to make an offer that they think the seller will find “insultingly” low. Why? I have no idea. The reality is that, within reason (I, of course, being the person who determines what “within reason” means), there are no insultingly low offers.
Most people disagree of course. They think that any offer lower than what the home “is worth” is silly, a waste of time, insulting. What these people don’t understand however, is that what a home “is worth” (contrary to popular belief) has nothing — absolutely nothing — to do with what other homes in the area are selling for, nothing to do with what the agent says it’s worth, nothing to do with what someone appraises it at, nothing to with what the seller paid for it, etc…
At this point, most of you are probably thinking two things:
1. This guy is a total nut job!
2. What in the world does he think a home’s worth is based on then?
As to Point 1, think what you will (I couldn’t care less). As to Point 2, it’s very very simple:
A HOME IS WORTH WHAT SOMEONE WILL PAY FOR IT! Period. No exceptions. NONE!
Suppose you’re selling a home and your agent encourages your to list your home for $550k. Suppose that seems reasonable because other homes in the area sold at (or near) that amount, not long ago. Further suppose, that you got an offer for $375k within the first month that you had you home listed. You were insulted by that, obviously, because it was “insultingly low.” Now suppose even further that during the time you had your home listed for 6 months, $375k was the only offer you got. Well, I got news for you. Your $550k home is only worth $375k. It’s not what you want to hear, and it doesn’t “feel fair,” but that’s the way is it, because “a home is worth what someone will pay for it.” And in this case, what someone will pay is $375k.
Oh sure, you could make a case that EVENTUALLY, someone will come along and offer $450k (or more) which proves the house’s higher worth, but until that happens, sorry, your home is only worth $375k. Sorry folks, but that’s just the way it is.
And that’s not insulting either. Low offers aren’t insulting. Home sellers need to get that idea out of their heads. There are no insulting offers. Listen up people: everything around us is essentially neutral. We impose the value, either positive or negative. The only question is: which distortion do you wish to choose? (disclaimer: I can’t take credit for that, but I have no idea who actually said it first).
A low offer isn’t negative/insulting. It’s neutral. If you’re insulted by it, you’re imposing that negative value. Understand that a potential buyer isn’t sitting around thinking to himself, “I wonder how I can piss off some people selling homes?” When a buyer make s a low offer, it’s because that is what the house is worth (to him). Yes, the “to him” is key. It’s not irrelevant. When I offer $270k on a $325k home, it’s not because I’m out to make enemies. It’s because that $325k home is worth $270k (to me). Why would I offer more? Why would I offer the amount that the home is worth to SOMEONE ELSE? Why would I do that? For the love of God, why? And why do other people feel compelled to do it?
If you’re in the market for a new home, do yourself a favor and tell everyone who is trying to convince you what a home is worth to “stuff it.” The only person whose opinion matters is yours. Don’t pay more for a home than it’s worth to you. Offer what it’s worth TO YOU and not a dime more. If it’s worth the asking price to you, then by all means, go for it. But if it isn’t, why would you offer more?
What’s that? You disagree with me? You think I’m crazy. Okay, I’m a good sport. Go ahead. Leave some comments. Prove me wrong if you can (but you can’t).
