So you've found the perfect home and now comes the hard part — figuring out how much to offer to close the deal.
As a licensed real estate agent, I'm often asked for my opinion regarding pricing — whether it's as a buyer's agent to submit an offer on a property or as a seller's agent to come up with a fair market value for a listing price.
While most times my advice is heeded, occasionally it is not. In the case of being a buyer's agent, I have represented more than a few clients who have decided to start out negotiating a property with a low-ball offer or something that is more than 20 percent lower than the list price.
In a weak market or one that is more favorable to buyers — most markets across the country up until about six months ago where supply outpaced demand — this concept might have worked. However, as the market has changed considerably to favor sellers, low-ball offers (for the most part) are a thing of the past.
If you look at two-bedroom condominium sales in the past six months for the Back Bay, Beacon Hill and the South End, you'll see that no matter which neighborhood you include, the sale-to-list-price ratio is within 4 percent of the asking price. The sale-to-list-price ratio is the final sale price of a home divided by the last list price expressed as a percentage. If it's above 100 percent, the home sold for more than the list price. If it's less than 100 percent, the home sold for less than the list price.
Beacon Hill has been the tightest market overall in terms of inventory, however a big reason behind the ratios not being as high as the South End, for example, is because of the lack of parking. While available parking is an issue throughout the city, on Beacon Hill it's even more of a problem.
Clearly, the South End neighborhood wins the overall supply and demand award. With tight inventory and very high demand, the pressure on prices has caused almost every price sector to sell for at or above the asking price; good for sellers, not so good for buyers.
If you're looking for a new home, I would first advise you to consult with your real estate agent to get a good understanding of the market you're considering. They will typically have access to this same information and will be able to analyze the data on your behalf to give you their best estimate as to how you should price an offer.
Remember this is their best judgment. The agent can only do so much, but that's why you've hired them, right? So take their advice and listen to what they tell you.
Charlie Abrahams is a licensed real estate agent in Boston who works with buyers and sellers and can be reached at Bostonrealestate@ charlieabrahams.com.
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