One of the most challenging points in the home-buying process is the decision of how much to offer for the home you want to buy. If you offer “too much,” you might experience buyer’s remorse or feel the house was “overpriced.” Yet if you offer “too little,” you might infuriate the seller and lose your opportunity to purchase the property.
The amount you offer on a property should consider several factors.
1. What have comparable properties sold for in the last 3 months? Your real estate agent should provide you a list of all comparable sales. A “comp” as a property that is comparable in size, bed/bath count, amenities, neighborhood, condition, and view. Be sure and note if these were regular sales, bank owned, or short sales.
2. What is the condition of the property? Is it the nicest house/condo in the neighborhood or does it look the same as when it was built in 1970? What types of upgrades and/or improvements are needed to make it acceptable to you?
3. How long has the property been on the market? The days on market can provide insight to what is going on with the property. If it has just been listed, the seller likely has had no offers and is optimistic of selling for the asking price. If it has been on the market 6 months or longer, the property either is over-priced and has had no offers or has not received any acceptable offers. Does the seller really want to sell? Your agent can provide insight by speaking with the listing agent. It is not realistic to expect a seller to go below 5 percent of the list price unless the property has been on the market for a long time and the buyer has set very few contingencies.
4. Do you have any contingencies in your offer? Offers that are contingent upon an appraisal, financing, and the sale of your current home or other conditions are less attractive to the seller than are offers that do not include such requirements. If your offer contains contingencies, you may wish to offer a higher price as an inducement to the seller to accept those conditions on the sale.
Once you have the answers to all of the above, you are ready to determine how much to offer. Start with the lowest price from all comparables (Question 1). Add or subtract based on the condition of the property (Question 2). Based on the seller’s motivation (Question 3) you can either add or subtract as appropriate. Finally, if you have contingencies consider increasing your offer.
Equally important is identifying your budget ahead of time. Be honest with your agent about how much you are willing to spend and stick to the budget.
For previous articles, visit http://www.SonjaBush.com