Q: My fiance and I are first-time home buyers. We have finally found a place that we both agree on but are now concerned with the current state of the market.
The condo we are interested in is in the Gold Coast area of Chicago. It’s a beautiful vintage condo. We know the seller purchased the property 3 years ago for $370,000, and she is now listing it for $587,000.
We had made her an offer last week for $500,000. She rejected that offer but has since called us again and said that we could “make a deal” if we would come up “just a hair.” We also know that a comparable unit sold in the building in February of 2000 for $460,000 but that unit included parking (ours does not).
The unit is 1,700 square feet which means that if we paid $500,000 for it that would be $294 per square foot. At one point I would have thought this was a good deal. But with the stock market dropping and the economy slowing, I am not so sure.
Do you think we would be better off waiting to purchase for a few months — allowing the stock market to play out its current ride? Or do you think that the real estate market will stay relatively stable and prices won’t fluctuate that much in that area?
Thanks so much. This is such a tough decision and having someone’s opinion who is not emotionally involved would be a great help.
A: A year is a very long time in the life of this real estate market. Properties in your neighborhood have appreciated at double-digit rates for each of the past five years. Some properties have soared as much as 25 to 45 percent in a single year.
One question to ask yourself is how long do you plan to stay in this home? If you’re going to be there for the next 7 to 10 years, you’ll probably be fine even if prices dip in the short-term. However, if the market drops significantly over the next two to three years, you could lose money on this unit.
That said, the first rule of successful negotiating is don’t make any offer with which you’re uncomfortable.
Look at how long the property has been on the market. Any other units sell in the building? For how much? What about comparables in the neighborhood? What does your buyer’s agent think? If that unit were well-priced it would have sold in minutes. The fact that it hasn’t says something.
I’d wait and look around. If you don’t find anything else that’s worthwhile, consider going back at the same price. At that time, you may find either the property will have sold or the buyer has a better attitude about your offer.
Published: Mar 1, 2001