You need to decide how much the house is worth to you and make an offer accordingly.

Curious to new poster. Not sure if you are in this country or not, but FSBO does not have MLS listing. If you buy, commission still must be paid, and not sure if seller will get that tax credit. follow up, be carefull.

"You need to decide how much the house is worth to you and make an offer accordingly."

and....

don't get bent out of shape if YOUR number is not what the OWNER thinks it is worth!

@mariend. Yes, we are in Texas. The house was listed on MLS, then off market for a while, now FSBO.

Let's start with what we know. The home was on the market for more than six months with an agent and did not sell. Conclusion: home was overpriced. Seller has put his home up for sale as a FSBO and has reduced the price by 2%. Conclusion: home is still overpriced because 2% is meaningless in the context of an overpriced home.

Here is what you need to do: research what other homes in the neighborhood have sold for. Make necessary adjustments for differences in lot, size, appointments, etc. Do NOT be influenced by asking prices. In today's market, I have seen a few people derive purchase prices from homes on the market. The only information that is useful from homes currently on the market is the price at which they are not selling.

You can research sold homes through your online county tax assessor's/appraiser's office. You can also hire an agent to do the legwork for you. Either way, you need information to make an intelligent buying decision.

Question: how did you go about deciding that now is the time to buy?

It is my understanding that Texas is one of the few states (if not the only state) that does not require the sale price to be disclosed to record the property transfer. I also understand that the practice of withholding the sale price gets more prevalent as the sale price increases.

@john_wc, thanks for your advice. It is really helpful. The interest rate and the buyer market are two main reasons that we think it is the good time to buy, better not wait if the price is acceptable.

@creek_side, you are right. We had problem to find the history information ( purchase price ) for this particular home from county's record.

Go ahead and make a fair offer, but don't hold your breath. The seller had a six month course in overpricing their house and apparently didn't learn much from it. They likely do not have a realistic view of what their home is currently worth, so your idea of a fair offer and their idea of a fair price probably aren't going to match very well.

You probably won't find the purchase price since you don't have to report that in TX. If it was sold using a realtor when purchased, realtors usually have this information though in TX. If you'd be willing to pay a buyers agent you might be able to find one that is willing to give you this info for a flat fee.

County records in TX will have the liens listed though so you can often see what they mortgaged the house for through this. From this you at least would have an idea of what they owe on the house depending on how old the lien is. At least then you can tell if their price is over priced because they owe a lot on the house and tell they won't be coming down from that much most likely.

One of my friends just bought a house recently and she told me the strategy that she learned from a realtor and she used to negotiate price. It is 3% off the asking price, then 6% off if FSBO. How do you think about this?

It depends on if the house is overpriced to begin with and how much. If it is overpriced by 20% and you offer 6% off you will pay too much. You really need to do your research and find out how much similar homes are selling for. The bottom line is what is the house worth to you?

What they paid for it, what thier mortgage balance is, what the neighbors think, what the seller thinks... All of these do not matter. You are wasting energy.
Hire an appraiser or RE agent to figure a market value... then offer what you think the home is worth to you. You are making this way to difficult.

@billl and @terriks, exactly as you said, this house was overpriced before and now also overpriced about 3% by FSBO. It is really a small world. We met their ex-lingting realtor at the church event last night. A friend knew that we are thinking to buy and sell house and this realtor was introduced to us. She suggested us to mark down 6% from current FSBO becasue of no agent. It would be the price that we pay lesser and seller would get more than they could with paying agent's. But apparently this price is lower than the market value, we concern if seller feel insult.

What they paid for it, what thier mortgage balance is, what the neighbors think, what the seller thinks... All of these do not matter. You are wasting energy.
Hire an appraiser or RE agent to figure a market value... then offer what you think the home is worth to you. You are making this way to difficult.

Exactly.

A property's value is not based upon the type of listing attached to it. Get over thinking FSBO warrants an automatic xx% off. It does not.

I'm sorry but pricing with percentages like your friend said isn't true. T There is not certain percentage to go by of a nice formula to choose. Figure out what the market value is and then go from that in figuring out how much you are willing to pay. Make an offer based on that. If you're lucky they will negotiate and hopefully ya'll can come to terms on the price.

texas-garden - seriously, don't listen to anyone who says mark 6% down for FSBO. The house is worth what it is worth. If you have your eye on a house that is worth 200k, expect to pay around 200k. You might make an offer that is slightly below that to see if the seller is "motivated" enough to sell at a discount, but don't be surprised when they balk.

BTW - 6% below asking is not an insult, so toss that idea too. Any offer within a couple percent of what the house will appraise for is a "fair" offer. That doesn't mean the offer will be accepted, but it isn't insulting.

Of course, all of that is moot if the seller doesn't have a realistic idea of what their house is worth. If they think it is worth 300k and an appraiser thinks it is worth 200k, there is no negotiating tactic you could use to make that sale happen for a fair price to you.

as said before, percentages mean nothing to what a house is worth...

However, they do mean something to what the seller will accept.

If you think a fair price is 20% off list, even if you're right on fair value... then you probably aren't going to get the house.

I just went to contract on a house. purchased at 4% off last list. I don't think I paid too much, I got a good deal, not a screaming deal. that price is 16% off origional list. I saw the house at the origional price, but didn't give it much of a thought as I didn't think the seller would come down $60K-75K. It took them months to set a more realistic asking price and I came in close to that amount.

T-G,
After getting a Market Analysis, or an Appraisal, include that, along with a letter of explanation, with your offer. Sometimes Sellers and even agents need to be educated as to why your offer is the best price that they will ever do.

@ncrealestateguy, how to educate seller? We started to negotiate price with seller. The seller stay with a price and do not want to reduce further. We do not have agent this time and expect at least 3% lower. With 3% down, they still get more net amount money than selling on MSL. When negotiating price, is it better to email, phone call, or sit down to talk?

The owner of that property is under no obligation whatsoever to sell it to you at any price. If the seller doesn't want to sell it for what you are willing to pay, he doesn't need to be "educated." He has made up his mind. You need to move on.

Why do you expect at least 3% lower? It doesn't matter that you don't have an agent if that is why you think you should get 3% off.

What is the market value? I suggest you read this post

How do you think the housing market in next year? Better or worse? With buying a new house, we need to sell our house too. We are planning to sell it after buying.

Sounds like you need to let this one pass you by....

texas-garden - I think you could really benefit from the services of an agent at this point. You don't seem to have a good grasp on the pertinent concepts right now and it doesn't seem like looking on the internet is helping you understand them. You also sound like you might need some help on the tax side for the $6,500 credit. It is only valid for purchasing a primary residence, so you will need to careful if you aren't planning on selling your current home immediately. You also will likely have some financing issues if you want to buy a second home before you sell the first. It isn't impossible, but you are going to have to bring considerable cash/equity to the party and be able to afford 2 mortgage payments, 2 tax payments, 2 insurance payments etc.

"How do you think the housing market in next year?"

TG, my personal opinion is that the housing market will continue to suffer. Most properties are overpriced. Sellers are stuck to 2005/2006 prices and most seem to think their house is the exception. We have seen increased sales activity but it has come at lower prices and much of the activity generated by the government's tax credit.

What you need to do BEFORE you make an offer is to determine what a fair market value for the home is. You may want to engage a real estate agent at this time. Your agent will furnish comps for your neighborhood of interest. Do not be swayed by asking prices of homes on the market. Those prices only tell you what homes are not selling for. If there are no comps for the neighborhood, your agent will need to find nearby neighborhoods as similar as possible to your targeted neighborhood and make adjustments as needed.

Finally, it will likely continue to be a buyer's market for at least two more years. Treat homebuying like it is a business. Use logic and do not let your emotions sway you too much. You do not want to catch a falling knife.

@john_wc, your comments are really helpful. We were pretty frustrated on the price negotiation. Seller stayed with a firm price and also kept telling us that "they probably sell the house in the wrong time and would like to wait when the market trun around". We have decided to move on buying another property for investment.It is a small house (2000 sq), built in 2007, pre-forclosure. We think that it would be good for rental.

TG - do you have experience with investment property?
What tells you it is a good investment?
What is your long term plan for the property?
What is the rental market in your area?
What is your financial budget for the property? 1 year? 5 year? 10 year?