This is a question that I'm asked time and time again. Buyers come in, reading the news about how it's such a buyer's market out there now, and ask me how much they can negotiate off the price of a condo. My answer (at least in the Downtown Boston condo market) usually comes as a surprise to buyers. Not much, I say - about 3 or 4% from the final asking price (on average, obviously ever property is evaluated independently when negotiating an offer). That also isn't to say the price hasn't already been reduced from it's original price, so the average discount rate from the original price of a condo in Boston is obviously higher. See for yourself:
The chart above displays data for the Average Discount Rate from Final Price (green bars), the Average Discount Rate from Original Price (red bars), and the Average Days on Market (blue line) for condos in Boston since 2000 (in the downtown area only, which includes Back Bay, Beacon Hill, West End, South End, North End, Waterfront, and Fenway/Kenmore).
As you can see, the average discount rate from the final asking price for downtown Boston condos has fluctuated in a range between 1.75% and 3.75% over the past 9 years or so. In 2005, at the peak of the Boston real estate market (in terms of activity), the discount rate was at its lowest as was days on market. There was not much negotiating room at the time, and I distinctly remember many properties selling for above asking in bidding wars at the time.
Obviously, some properties have price drops prior to reaching the final asking price, and that is indicated by the red bars. This is a comparison of the original asking price to the final sales price, and condos have been selling from between 3.5% to about 7% off the original price since 2000. Note: the 2009 data is only for the first quarter, which showed considerable weakness in January and February, but has shown more strength recently so I expect that number (and the D.O.M. number) to come back down slightly for the year overall.
The trend has been increasingly more negotiating room for buyers over the past 4 years, hence the "buyer's market", but it has not been an overwhelming difference - a couple of additional percentage points on the discount rate is equal to about $10,000 on a $500,000 asking price. As I stated, each condo is different and it is important to consider all the factors when preparing to make an offer. Some properties are still selling for over asking (not many), while others at sitting on the market forever and selling for 20% off asking (not many). But if you're entering the Boston market to buy, and expecting 10% off asking for any property you look at, that's probably not a realistic expectation. Having your expectations aligned with what the market is truly dictating is an important step in the buying process.
That being said, there is more room now for buyers to get a better deal than there has been in the past few years as more sellers have accepted the fact that the market is a lot weaker now, so there is probably a better chance to score a "bargain" in Boston(relatively speaking) than in the past.
What are your thoughts? Comment below!