Are You Anchored to List Price? What Really is a Good Deal?


We just walked from a deal we had under contract for $30,000 under it’s listing price. We walked because a few issues arose in the inspection that we didn’t want to deal with unless the sellers dropped the price further. They refused – so we walked.

good real estate deal below list priceWhen we told that story to a couple of our friends they thought we were insane.

Actually when I made my initial offer at $37,000 below the list price my husband Dave thought I was insane, or just really mean. He was sure I would offend the sellers. And, sometimes when I make offers that low compared to their list price I do offend people. I’ve actually had people pull their home off the market the day after I submit an offer and put it back on the market a week later at a higher price. I don’t actually understand their logic but it’s happened twice this year!

The thing I want to share with you today is the same thing I reminded my husband of and told our friends that didn’t understand how I could walk from such a “deal”, and that is this:

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It’s not a good deal just because you bought it for less than it’s list price.

It’s also not a good deal just because it was previously listed for $430,000 and now you’re buying it for $303,000. It’s ONLY a good deal if it’s actually WORTH more than you’re paying for it.

Don’t confuse list price with property value. In many cases, list price is just the wish price of the seller or some lofty value a realtor gave the property in order to convince the sellers to list with them in the first place.

You’ll get a better indicator of value by answering the following questions:

  1. What is the cash flow from the property? This isn’t how you calculate value as a residential investor however it’s how you figure out what a property is worth to YOU.
  2. What are other properties in the area selling for? (Look at properties that are comparable in overall size, number of bedrooms and bathrooms, as well as lot size.)
  3. What would it cost to build that property right now? In other words, what’s the replacement cost? The easiest way to figure this out quickly is to ask a builder or a general contractor what the average house in that area costs to build on a per square foot basis. Then take that number and multiply it by the size of that home.

In residential real estate, the best indicator of value is typically based on comparable properties in the area — what they SOLD for, not what they are listed at. But you should also consider cash flow and replacement cost.

At no time should you even consider what it’s listed for. Which is why I can comfortably put in an offer for $37,000 below list price. It makes my husband squirm and my realtor gets hate filled voicemails from her colleagues about our crummy offers but I am not anchored to the list price. I am anchored to what that home is worth and more importantly, what that home is worth to me.

List price shouldn’t factor into your calculations. Neither should the property’s assessed value. Neither of those numbers will consistently be a true reflection of what a property is worth.

Do your own analysis. Then you can be certain you’re getting a good deal… whether you are buying a property for less than list price or not.

If you are uncomfortable making low ball offers, it’s ok. Overpriced homes either go off the market or drop their price. All you have to do is wait awhile. When the list price gets closer to the offer you’re willing to make then you can put the offer in. Just don’t let yourself get fooled into thinking the list price has any relevance to it’s value.

Image: Julie Broad

About Author

Buy and hold real estate investing in Canada since 2001, Julie Broad is now a full time real estate investor and investing educator.


  1. And let the people say…. AMEN!

    Julie, this is sooo true. I’ve actually had a realtor not want to work with me anymore because he couldn’t deal with the hate email and nasty voicemails from the listing agents when I put the offers in. These weren’t random offers….but they always under list, sometimes by as much as $15K-$20K under list.

    Dealing directly with sellers can be interesting because they will hang up on you, yell at you, and potentially curse you out.

    Nevertheless, the numbers are the numbers and like you said, if you don’t want to deal with that you can always wait for price drops when it comes to making the offers on the MLS. If someone ends up purchasing it, good for them…move on to the next one.

    Great post Jules…I was going to say Happy Thanksgiving…I almost forgot that you already celebrated it in Canada last month! LOL!

    • I would happily celebrate Thanksgiving again Shae – love the pumpkin pie. 🙂

      You bring up a good point about dealing with sellers directly. One of the most difficult things for us is when a seller tells you what they want for their house and it’s WAAAAAYYYYY more than they will get from anyone and we have an uncontrollable urge to laugh or blurt out “you’ll never get that!!”

      Now we politely ask how they came to that number. Then we let them know that we’re just not able to purchase the home for anywhere near what they want to sell it for. We make it sound like it’s our fault we can’t pay more … and let them know their home is great and we’re happy to do a deal if they find they can accept a lower price. We find that is much better than saying “You’re home is only worth x” which makes them mad. And several times the seller calls us back a month later and says “What if I said I would take x??” and the price dropping begins without us offending anyone.

      Thanks for your comment Shae!!! I really appreciate it.

      • That’s a great additional point, Julie! How you talk to the sellers is important. While we don’t say “Your house is worth only X” (did that in our beginning stages and it didn’t work out so hot), I will share with them a range of prices to let them now what ballpark we’ll be in. That way if they are like NO WAY we won’t waste our time going to see the house but if they don’t flinch, we’ll take time to visit and then give a specific offer.

  2. Hi Julie,

    It took a while for me to ‘train’ or shall I say ‘convince’ my first realtor I brought to my team to go in with lower offers. She was not used to this idea and today, three years later she has no issues with doing what you are talking about here. We all know the real money is made on the buy so if we can get it for the best price possible while ensuring it carries with cash flow, we are one more step ahead.

    • Hey Joey-
      We worked with six or seven real estate agents in the market we’re currently focused on before we found someone who would put in whatever offer we wanted to make. She takes calls from other agents like a super star … even though many of them are grumpy or rude to her. But quite frankly for the month of November in this market she is probably one of the top performers because she is putting in offers no matter what they are … and many of the deals are sticking!! Other agents who won’t play that way are wondering when their next commission is coming. Glad you were able to get your first one on board with you!!
      Thanks for your comment,

  3. Jeff Brown

    Hey Julie — As a listing biased guy, my strategy is to transform the property into bikini Barbie, then price it better than its competition. Generally speaking, we sell very close to listing price.

    One time, not long ago, we received an offer from a turn ‘n burn buyer, for about 10% under listing price, which amounted to a drop of over $40,000. I’d warned the seller not to ever take anything personally, which he didn’t, as he was a seasoned investor. Anywho, we countered at a figure barely lower than the original price. The buyer then called me personally.

    “Our offer was only 10% below asking. What’s the problem?”

    Whereupon I asked, “So, if I’d listed it for $100,000 more, you’d have offered my seller roughly $60,000 over our current listing price?”

    Crickets. Pause. Me laughing out loud. Click.

    The property sold in 48 hours for 2% below our starting point. The original offeror wouldn’t return my calls. 🙂

    I tell that story to underline what you’ve so eloquently pointed out. That it’s about value, not how much the seller’s original asking price. Value is value, and neither side will change that, with rare exception.

    Have another Thanksgiving, Julie. Calories are only worth half.

  4. Julie,
    Gotta say I love two phrases in there.
    “It’s ONLY a good deal if it’s actually WORTH more than you’re paying for it.”
    “list price is just the wish price”
    Plain and simple, the numbers have to work. Good post.


  5. Great article Julie! You’ve touch on the 2 most important things that I good agent does for his or her clients:

    1: Establish market value. I agree 100% that the sellers asking price is virtually irrelevant. Lets figure out what the property is actually worth and structure an offer around that.

    2: Skillful negotiation: A good negotiator knows how to tactfully present an offer that is considerably below list price without offending the seller. After all, the buyer and seller both have the same goal: the seller wants to sell and the buyer wants to buy. If we can come to a meeting of the minds, fantastic. If not, we move on to the next property.

  6. Great article Julie. I certainly understand the emotion and lack of objectivity an owner occupant might have about the worth of his or her home. But RE professionals? Come on. As an investor, I will pay what it’s worth to me. If that doesn’t work for your seller, fine. However, it’s your job to work the deal to see if you can get it to consummation. Without insults and personal attacks. With patience and professionalism.

    Now I suppose there are “investors” out there who make a practice of throwing out lots of ridiculously low offers in homes of willing the lottery. It’s not too hard to check them out. Find out if they are actually buying or not.

    Keep offering numbers that work for you. Sellers take what works for you. Agents, work the offers. That’s what makes a market.

  7. Julie,

    Great article, and I can’t add much to whats already been said in the previous comments, there’s a lot of good stuff here. It never ceases to amaze me the lack of objective criteria that both sellers and buyers uses to support both listing price and offers submitted. My job isn’t to make a seller feel one way or the other about an offer. They can be insulted or they can be elated, I can’t control either. I can however, try to show them the logic behind it so they can decide whether it makes sense to accept it or not. If there is no logic behind it, then I can’t advise them to accept it. I smart seller can feel good about accepting a low ball offer if its supported with logical numbers, comparable, cash flow etc. The same logic applies to buyers, after all, we are investors, we make a living making wise investments.
    I had someone call me the other day on one of my listings and say “Well, there’s no way I’m going to offer list price, I know what he bought it for two years ago” my response was, “Yea, and what exactly does that have to do with anything?” Another one of my favorite responses that works in almost 90% of responses to offers, counter offers, and listing prices is very simply “Oh? Compared to what?” Think about it, if someone says’s your offer is low, “Oh? compared to what? your previous offers?” or “That listing price is too high” “Oh? compared to what property?” The responses I get show me whether they are using objective criteria or not.

    I would also add that on SOME cases, current listings do play a role in value, in addition to recently solds. To an investor who wants to put their money to work a specific type of real estate, they are comparing all their options at a given time. If they can use their money to buy a similar property down the street because the numbers work out better, well then the seller needs to consider that when they are considering the offer in front of them.

    • Hey Rob – for someone that didn’t have much to add you sure put in some major gold nuggets!! 🙂 Thank you!

      I think this is fabulous advice: “Think about it, if someone says your offer is low, “Oh? compared to what? your previous offers?” or “That listing price is too high” “Oh? compared to what property?” The responses I get show me whether they are using objective criteria or not. ”

      We usually ask why they think that but I like asking them compared to what??? It’s another way we just might get some information we didn’t have before!! GREAT stuff. Thank you.

  8. As an investor and agent here in Mass, I couldn’t agree with you more. With the increasing number of REO’s and other corporate owned and distressed properties coming to the market, now is the time more than ever where list price means nothing to me. The property must first cash-flow and hold some potential for growth. In addition, I also factor in what work will most likely be needed to the property in the near-future (up to 5 years) and factor that in as well. There are times certaintly however that properties may very well be worth more than list to me or a buyer and we have been seeing this more and more with REO’s that are more relaistically pricing their listings and especially when a property is in a great area and we see multiple offer notifications. I tell my clients to not worry about others feelings, this is an investmnet for them and it must be an investment that makes sense to them. You could very well miss out on a potential bargain due to the fear of not “lowballing” to the next that guy comes along and gets his “lowball” offer accepted before the seller decides to lower their price.


  9. Yes there is another perspective from a list brokers side or a buyers broker. Working with an investor will depend on their price point.

    If they are buying 30k properties where the agent might make a few hundred bucks each transaction then shotgunning a bunch of low ball offers is a waste of time.

    If the transaction averages are higher it might be worth the brokers time to work with the investor.The broker would need to research the investor upfront to make sure they can perform once a low ball offer is accepted.

    It doesn’t make sense to use reams of paper on contracts if you can’t get agreement on price.So a letter of interest to to see if you can come together on price saves time and then go full contract afterwords.

    So just as an investor is a low-ball buyer the broker has to make sure that inventory exists in that price point so that a transaction can eventually happen.

    Example one buyer here was looking for an 80k house in an upscale area.One came on the market in 12 months and was under contract in 24hrs.

    The buyer was ready,willing,and able but were not REALISTIC for the property they wanted.Dealing with a buyer to purchase a property that is not available or comes up once or twice a year is a waste of time. I get calls all the time in commercial for CAP rates that aren’t out there.

    For the investor if they throw out hundreds of offers and hit a grand slam eventually it is worth their time.For a broker the time value of money doesn’t work. I am an investor as well so look at this from both angles.

    On the residential side more so than the commercial everyone gets emotional.We had someone selling their house on commercial land.An offer was made and they said to “go to hell!”.

    3 months later they reduced the price and got it cheaper than the original offer.

    The seller whether they are a bank,regular seller,estate whatever has to go through a maturation process to learn what they HAVE TO sell for.Some will price right to begin with but most always want to go high.

    We see this on the commercial real estate side.First they will list regular,then they will reduce a little,then they try to bring in CONSULTANTS to fix the property,then they try to do a workout with the bank,then they finally will try a short sale.At that point is when the numbers get close.

    • Hi Joel –
      There is ALWAYS another side to a story and I know there is definitely a list broker side to this story too!! Quite the story you have to share!! Wow.

      “On the residential side more so than the commercial everyone gets emotional.We had someone selling their house on commercial land.An offer was made and they said to “go to hell!”.”

      We have definitely seen such emotions come up in residential that is for sure. I’ve seen it on the development side too … builders can be quite emotional too. 🙂

      There are so many great stories out there … sometimes when things happen to us we think that there should be cameras following us and other investors/agents just capturing the crazy/interesting/frustrating/wild side of this business. There probably is a show out there doing that and I just don’t watch enough tv to find it but I know with stories like yours and ours and so many other people it would be a pretty wild show. At least it would be wild and interesting for us real estate people!! 🙂

  10. Julie, I agree with your philosophy of making offers–an offer based on the “asking price” is merely based on what the sellers want to get out of the property and may not be based on the true value of the property. Thanks for spelling that out so clearly. In a house raffle, I teach my clients that the asking price must be based on comparable sold properties. I’ve always wondered why someone would put any value on the list price when many times, if the property doesn’t sell at that price, the seller will drop that list price considerably.

    Diane Giraudo-McDermott, author of I SOLD MY HOUSE IN A RAFFLE

    • Thanks for your comment Diane! You really grabbed my attention with your comment about selling your house in a raffle. I read about that in the newspaper a little while ago and meant to read up on it more but never did. Would you be interested in writing about that for my personal blog??? I think that would make a great story!!! If you’re interested please email my general inbox and I’ll make sure I get it and get back to you info

      Very cool …

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