Deciding what to offer on a home is a really difficult task. You don’t want to offer too low, because you don’t want to insult the seller, or have them think you aren’t serious, and go with another buyer. On the other hand, you don’t want to get robbed, or feel like a fool by over-paying. Deciding what to offer is definitely tricky. Here are a few strategies you can use to decide what you should offer on the home. See: What Percentage of Income Can You Afford For a Mortgage?
The first step is to decide what you can actually afford. You can’t figure out what to offer without first knowing what your highest offer is. It’s a must to make sure that your offer price for any given home falls within the range of what is affordable for you. This includes offering a price within the range for which your mortgage was pre-approved, but also includes making sure that the monthly payment and cash you’ll need to close the deal. Read: Buying a House: How Much Can You Afford?
When it comes to pricing a home, or making an offer to buy one, the first thing to look at is the home’s fair market value. Both buyers and sellers should work with an experienced, local agent to understand what the home’s value is. Most agents will do this by offering you a look back at similar properties that have recently sold in the neighborhood; these are called comparable sales, or, “comps.” You should be looking at recent sales (3 months or less), very similar properties (such as the same number of bedrooms, bathrooms, or square footage). It is critical that you look at the current home values.
You’ve also got to figure out what your competition looks like. If you’ve got a lot of competition, you’re going to need to up your anti on the offer. As a seller, you can find this out by looking at things like how many comparable homes are listed in your town or your neighborhood in your general price range. The more competition you have, as a seller, the lower you should tweak your list price to attract buyers to come see your home.
Buyers should also be aware of the competition level they will face for homes. Believe it or not, even on today’s market there are properties and neighborhoods in which multiple offers are the name of the game. Your agent will be able to brief you on how many offers have been presented on the property you are looking at, the number of days it has been on the market. These are both very important things. You want to see how desperate the seller is before you begin negotiating.
Buyers should see if the home they are interested in has been reduced at all and how much. If the seller is eager to sell, you are at a large advantage. Sellers should be aware that many buyers are not in a high state of urgency to buy these days, given the long-term, high affordability of homes and interest rates. For another great read, see: How Much House Can I Afford?