A Bidding Lesson from Madonna

If there's one "Ask the Agent" question I get all the time, it's this: "I like a home that's listed for sale at the price of $X. What should I bid on it? Should it be 90% of $X, or 80% of $X?"

And I say, over and over, don't think like that. The listing price is a price that the seller made up to try and get you ensnared on your way to his/her secret bottom line. You start at a disadvantage if you start with the other guy's number. Don't play on his field. Instead, you have to start with what the house is worth. Run some comps, and then you'll know how to start.

Madonna's recent townhouse purchase is a perfect example of that. The New York Times' Josh Barbanel reported that Madonna ended up paying $32.5 million, 28 percent off the house's highest listed price of $45 million, and 19 percent off the house's last listed price of $40 million. But it's a good bet that's not how she made her bid. The article points out that Madonna paid the same price per square foot as comparable, but smaller, houses in the area.

Now the comps were pre-crash, and she bought post-crash. In the Manhattan market, where I work, the fall of Lehman Brothers and the credit crisis hit us hard, dropping values around 20 percent, and you'd expect an adjustment for that.

But on the other hand, the massive size of Madge's place (it's really the size of three townhouses side by side) and her zoning rights (she can build bigger) are worth something, too. So she did well, our Material Girl, by knowing what the home was worth, and not starting off the seller's price.

• More, with a garden photo: A peek inside Madonna's $40 million townhouse