Once a buyer finds their perfect home, only a small portion of the home buying process has been completed.
One of the most important steps in the home buying process is successfully negotiating with the home owner. Determining your best offer on a house.
How to determine the offer on a house?
Every home buyer wants to score a deal, after all. But set your offer too low, and you could risk offending the sellers and having them write you off completely. As such, it’s all about striking the right balance.
One of the top frequently asked questions from home buyers relates to price. What should we offer on a house? Ultimately the buyer is the person in charge of making the final decision on what amount they should offer the home owner.
There are many ways to help home buyers determine how much to offer on a house. Here are some of the the best tips, when determining how much to offer on a house!
What have similar homes sold for?
That’s right! Researching recent sales in the area is a great place to start when considering what to offer on a home. Comps are a collection of recent, similar and nearby home sales. When generating comps for the property you want to buy, consider the following criteria:
- Location Construction type
- Bedroom/bathroom count
- Square footage
- Condition (i.e. new construction, updated or “fixer”)
Pulling comps for the area in which you’re shopping can help you begin to formulate a range of acceptable sale prices that your offer should probably fall within. Your buying agent will be able to help you access comps information.
Find out How Much the Seller Paid
While it is true that in many cases the price the seller originally paid for the home has little bearing on today’s market, if the seller purchased a few years ago in a depressed market with little appreciation since, the asking price should be closer to the seller’s purchase price.
Although you may not be able to figure out the condition of the home when the seller bought it, nor whether the circumstances were extenuating, you can adjust for increases due to appreciation and remodeling improvements.
How long has the listing been active?
By paying attention to the property history, you can get a better idea of the demand for that house. Two days on the market? Probably not a good idea to go in with a lowball offer $50,000 below asking price. A whole year on the market, with price reductions? Go ahead and roll the dice. The longer a house has been on the market, the less of an upper hand the seller has in negotiation.”
Fortunately, info on how long a house has been on the market can be easily found on most listings—or if not, any good real estate agent will have access to this information through the multiple listing service. Ask them to pull it up for you, and use it as a reference as you draw up your offer.
What’s the condition of the home?
This should come as no real surprise, but a property’s condition is another very important factor in how much money you should offer for it.
A turn-key home, or home that is move-in ready, will typically receive higher offer amounts than a rehab/fixer home that’s in need of a lot of repairs. While fixers and rehab properties can be great opportunities to save money on the purchase of a home, it’s important to consider how much work you’re willing to put into a home to make it livable.
When evaluating the condition of a home, you’ll want to pay attention to structural/functional issues. Structural issues you’ll want to check for include:
- A sagging or damaged roof
- Cracks in the foundation
- Rusty plumbing
- Water stains on walls
- Warped or uneven floors
- Damage from pest infestations
Given that some of these issues can be hard to identify simply by viewing the home, your buying agent can request disclosures from the seller’s agent to check for inspections and reports that might indicate any potential issues that aren’t visible to the eye. Please note, that disclosure packages won’t always include an itemized list of every issue; rather they will only document issues that are known to the seller.
Determine What The Highest Price You Will Pay Is And Stick To It
One of the biggest mistakes that buyers make when buying a home is not sticking to their budget. Once a buyer finds their “perfect home,” it’s important they set what the highest price they are willing to pay for that specific property is.
Buying a home can be an emotional decision. Without setting a maximum price, it’s possible that a buyer will pay more for a home than they can afford. By setting a maximum price, a buyer knows that if the negotiations push the price above that maximum number, it’s time to walk away. While it’s easier said than done to walk away from a “perfect home,” determining a maximum price can be a helpful tip to help determine what to offer for a home.
Don’t Be Fooled By Tax Assessments
It’s important to understand when buying a home, there is a difference between market value, assessed value, and appraised value. One of the biggest thing to avoid when determining how much to offer for a home is using a homes assessed value as an offer price.
The assessed value of a home is used for one thing, to determine how much the property taxes will be. Assessed value has no correlation to a homes market value. There are many real estate markets where the assessed value of homes will be significantly lower or higher than what homes are selling for.
Final Thoughts
This last piece of advice may be the most subjective of all, but it’s true. Remember, submitting a low offer is always a risk. Ultimately, it’s up to you to determine how much of a gamble you’re willing to take on the house.
Graves Development Resources | Land Developer in Omaha, Nebraska
Graves Development Resources (GDR) has been designing and building the market’s finest neighborhoods since 2000, with over 5,000 home sites and important commercial development projects throughout Douglas and Sarpy Counties.
Our pages showcase current neighborhoods where new home buyers may select from hundreds of home sites. We are definitely “phone friendly” and welcome the opportunity to provide you all the information you need before making one of the most important decisions of your family’s future. Contact us for any questions.