We made a market-price offer on a house overpriced by about $20k, and the buyers got offended. We moved up very slightly, but they were unable to move down enough to make it reasonable. They ended up renting.

It was a pretty unpleasant experience since they were taking it personally and thinking we were being unreasonable, but I would do it again. Best case scenario, you get a house you like for a good price... worst case scenario, it falls through and you keep shopping.

Sellers are not mispricing in a vacuum - real estate agents are pumping up the price point, on the seller's side. As for the buyer's agents, very few are advocating market price offers from buyers.

The problem I have is the process is too cumbersome by virtue of Realtor interference. I see houses all the time that are listed at 500k+ that i would have a hard time even spending the high 300's on. If it were like Craigslist, i could send a quick email that simply states, " The most i could offer without even seeing the property would be 400k, should i bother?" I could get a quick answer within days about whether I should just move on. I also see houses that languish on the market for months and then sell for less than I would have paid- that’s right, LESS. Looking at the initial price request, i often feel like it’s a waste of time.

The current system requires i call a Realtor, schedule a visit, spend 3 hours going over paperwork with said Realtor and then submitting an offer. I don’t feel like going thru all that hassle for an offer that has a high probability of "offending" someone and thus being declined.

I've been looking over a year for a reasonably priced home. I have been on many home walk throughs and open houses. Asking prices are still way OVER the real value of these homes - and I agree with elweedz on the tedious nature of having to deal with realtors.

I put in a contract on one home based on real market price (-$20,000). Owners counter offered by reducing their price by $3,000. No thank you. 4 months later I saw that they sold the house for $18,000 less than their asking price.

Come on people (including you realtors) - set the expectation early on with the sellers that the prices they saw in the early to mid 2000 are LONG gone and not to be seen again. It was smoke and mirrors, a mirage, and some bandits took the cash and ran with it.

Elweedz, I'm not sure what Realtors you deal with, but I've never spent 3 hours on paperwork with anyone. If it's not the client's first rodeo, I have them signed and done in 20 minutes. If it's a first-timer, I'll walk through each paragraph of the contract to explain what it's saying since it's a pretty important document and can be complicated.

Wouldn't you have to schedule a visit regardless of whether there was a Realtor involved?

This blog is a home of Realtor-bashing... a lot of it deserved, some of it not. Realtors recommend prices, but in the end it's the sellers who make the final decision. I walked into a listing presentation a year ago, told them the comps indicated their home's market value was around $450k, and they pretty much threw me out of their house. They listed it at $500k, it sat on the market for 8 months, and they withdrew it and haven't listed it again. And it's not anecdotal. It's common. Any experienced Realtor who tells a seller that their $300k home can fetch $400k is a moron and a bad business person. I potentially pay into the thousands of dollars to market a property, not to mention the "cost" of my time for meetings and open houses and such, so I don't waste my time and money with people who think their rowhome in Belair-Edison is somehow worth $175,000. I made that mistake enough when I was first starting out to not make it anymore.

Just felt like that needed to be said. We're not all Northrops.

Oh, and if you sent me that "should I bother" email, I would pass it on to the sellers and get a response, but that's just me. But you know full well that even if it's a FSBO, home selling/buying is a negotiation, not buying someone's 1983 Ford Escort on Craigslist. From your other posts, I have a hard time believing you would throw out your "best offer" at the first random email. You're too shrewd for that, so why offer a unrealistic example? :)

John- I appreciate the insight. The example I gave was telling the borrower the ceiling of my offer. Just as i don’t want to waste an exorbitant amount of time, I want to be fair to the seller. Once, i actually see the property, i may offer 360k, 380k or 400k but, no more. One thing i would point out to both sellers and buyers is that if you use a site like redfin.com, it shows what the average selling price is for the area per square foot. That is primarily what appraisers use when using comparable-sale price/sqft. I can’t tell you how many listing are still over $200/sq ft when the avg is $165-175. What on earth is the point of listing your home in the stratosphere? I also see way too many listings using the basement in the square footage calculation. Realtors should be fined when they do this. Most buyers don’t have the industry knowledge that I do and won’t recognize when this is occurring.

Let me further clarify. I have bought a couple atv's on CL the last couple years. I tell them before i ever come to see it what the most i would be willing to pay would be (after having done my research). If they are open to that amount, then i will come and evaluate the condition of the ATV and either pay them what i said or negotiate down. Same thing on a house. Let say i tell them max of 400k but then i discover the roof and windows need replacing. My offer would go to 370 and so on. I just dont want to go out there with them having any hope that they have the next greater fool coming to pay them 500k for a house.

Jaime- this is off topic but, how about a post relating to the what the local builders build in this area. Is anyone else sick and tired of seeing the same old HOA PUD mccrapshaks being built in every community. All the houses look the same. Does anyone really even want a formal dining room anymore? Just make it one gigantic kitchen, entertainment area. I wouldnt even be proud to show it off if i bought one. Who hasnt seen t

Using averages is both useless and disingenuous in buying homes in Baltimore City. Similar homes right next door to each other often vary substantially is now well they have been maintained, whether bath or kitchen updates have been done, not to mention window replacements, installation of CAC, etc. With much of the housing stock on Baltimore nearing 100 years old, this makes a huge difference in value for money and is NOT reflected in broad averages per sq ft. Owners who have let renters trash places over the years and done nothing deserve bottom dollar. Even in this market, buyers shouldn't expect to get a gem for the price of a dump.

To off topic: I, for one, prefer a separate dining room and a closed kitchen. So sick of the "open" space plans touted by builders that just mean they have saved $$ on building walls.

OK, so how does one go about determining a fair price for a house? The only thing i have to rely on are comps, past sales, and scaling it to 2002 prices. And taking into account upgrades.

My rent is jumping +$200 in January, after jumping +125 last January. I'm sick of dealing with it. Need to find a house (in Baltimore Co.). So I'm paying extra attention than usual to this blog. :)

@Shireen -- You seem pretty sincere, so I figured I'd attempt an answer.

First off, it's easy to assume your landlord is ripping you off. In fact, your landlord is probably just passing along some costs resulting from increased taxes and insurance. These costs will be yours when you are a home owner, you really won't be saving money. At least not as much as you think.

There are plenty of people who are just breaking even by renting out their place. Additionally, there are people who use rent to cover the mortgage but pay taxes or insurance out of their own pocket (especially true when a landlord has a paid-off house and the mortgage isn't collecting everything for escrow).

I don't think you should look at owning a house as saving money. The "savings" aspect of owning a house really only works out if you are very frugal AND own the house for 15+ years. Break-even point is probably aorund 8-10 yrs. And another big deal is getting the right price, which brings me to your original question.

I'd say you should shoot for 1998 prices, adjusted for inflation. That might bring you to 2000-2001 prices. From there, you need to take into account the condition of the property--how much work would you need to bring it up to average condition. I really think it's as simple as that.

I bought a house last year, but only after looking at 60-70 houses and turning down 5 counter offers that were too far off from my original offer. It took us a year from the time we started looking until we closed on a house. We saved up a ton of money while looking, got a better idea about prices, and got near perfect credit by paying things off and cleaning up discrepancies on credit reports. I would suggest you do the same--start looking casually and then try to figure out how much money the repairs would take--kitchen 15k, bathroom 4-5k, basement 10k, etc etc.

As a bonus, prices were also dropping while we looked. And sellers were getting desperate. A few sellers came back to us after we walked away from their counter offer... offering to sell for much less. However, we ended up getting a single family house in a better neighborhood bc prices kept dropping. If I were you, I'd enjoy the fact that renters don't need to worry about property repairs... and save money aggressively/improve your credit. There is a huge inventory out there, sellers will be desperate by mid winter. Start looking then... and don't rush it.

"Many would-be buyers have complained here over the post-bubble years that homeowners trying to sell are often completely unrealistic about what their properties are worth."

The problem with this sometimes are the real estate agents. Andrea is right, agents are the ones that make the price higher than it should be. Agents should make just appropriate price which is favorable to the seller and not so much higher to the buyer.