One of the hardest, most important decisions homebuyers face is how much to offer on a house. There is a pretty short list of steps you need to take to make a smart offer that gets you a great value, but is also likely to be successful at getting the property.
Look at the “comps”
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.
What can you afford? This step is much more critical for buyers than for sellers. 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.
What’s your competition? This is another step at which it’s critical to check in with your agent. You need to know what level of competition you’ll face. 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 cognizant 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.
How much do they need to sell
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. Of course, all of real estate is hyperlocal, so it’s important to understand how motivated buyers are in your local market before you set your list price. The higher these numbers are, the stronger of a buyer’s market it is, and the more bargaining power buyers likely have.
How much do you want to buy, or sell, the place?
‘What’s your level of motivation? But within the range of the home’s fair market value, it may make sense to move higher within that range if you are highly motivated to get that particular property. Sellers should think of the list price as the most powerful marketing tool at your disposal. if you really want or need to sell, get aggressive about setting your price as low as makes sense for your your home’s value and local market dynamics to attract qualified buyers and help your home stand out against all the competition.