I get asked this questions by buyers many times.   Most of the time it is the owners.  Because of the hot real estate market in metro Detroit we are seeing some homes listed at prices from $20,000 to over $100,000 over the last sale of comparable homes in the neighborhood.  I know it is crazy but it is happening.  It is not only Oakland County waterfront homes that this is happening to, but also homes in subdivsions all across metro Detroit.  I have seen a home just recently in Northville that was priced $50,000 over the last sale.  My buyers liked the house, but it is almost impossible to bid on it.  In many cases you will find that most buyers and sellers meet about halfway between the list price and the offer price.  

So for example if a home is listed at $699,000 and it is $50,000 over priced.   The price that you want to buy it at is $650,000.  Otherwise you are going to be upside down in the house from day one. Let's go over all the scenarios.

1.)  If you over paid and bought the house at $675,000 you will have set a new high for the neighborhood.  First of all when you offer that much and the seller accepts the home has to appraise for that.  Other wise you would have to bring the extra money to the table over the appraised value.  So you may have appraisal issues coming into it right from the beginning.  If you do not have the extra money to bring to the table and the seller is not going to lower the price then the whole deal is going to fall apart.  It happens often when the appraisal comes in low.  You have to remember the appraiser has to find something to give the house more value than the other homes that sold in the $650,000 range.  It has to be in better condition, more square footage, more bedrooms, or more baths, or have a finished basement when the others don't.  An appraiser just does not make the house appraise to the sales price.  They look at many different factors.  You, the buyer have to remember that you are basically upside down if you bought it at $675,000.  So if the real estate market turns you could be in trouble if you had to sell because of divorce, job transfer, or loss of job.  That's why you should be a smart buyer and try to buy about the same prices or lower that other homes have sold for in the area.

2.)  If the home is listed at $699,000 and you want it for $650,000 then basically you can either offer $650,000 as a one time price or offer a much lower price to meet halfway.  If you offer $650,000 you would have to tell the seller that is your highest offer.  Either they take it or leave it.  Or you would basically have to offer $601,000 and hope that you meet in the middle at $650,000.  Most likely in this case the seller will out right reject your offer because it is a "low ball offer".  So I coach my clients to do the one time highest offer.  At least you cut to the chase right away.  You know right away whether they reject your offer without going back and forth.  Though some sellers will still counter even though you tell them right up front that this offer is your highest and best.   

So why do sellers price their homes so high?  It is simply they believe that their home is worth more.  They do not look at the comparables.  They do not take into account what has sold.  They do not take the time to see the black and white truth.  There is nothing we can do as agents to convince them otherwise or we would lose the listing.  Believe it or not there are sometimes where the house will sell at the extremely high price.  Other times the sellers have to lower the price.  I have seen some homes on the market for over a year at the high price.  Sometimes the seller over paid themselves years ago.  Sometimes the seller has in their mind what they need to net out of it.    

For more buyers and sellers tips go to http://www.oaklandcountylakesmi.com      Russ Ravary your metro Detroit realtor