So you were on a house hunt for weeks and you finally found the perfect home for you and your family. But how much is your first offer? Should your offer start at above, below, or at prices? Understanding how much offering you will provide at home is one of the most challenging parts of the home-being process, but this Redfin guide will destroy it.
Of course, you want to have a competitive offer, but you don’t want to overpay either. Before deciding on the amount, consider these six factors and work with your real estate agent to help you dial in to the perfect offer price.
Factors to consider:
1. Are you in the buyer or seller’s market?
2. How much is the equivalent in this region?
3. What is the condition of the house listed for sale?
4. What is the seller’s intention?
5. Why buy a house?
6. What is your budget?
Make an offer:
When it makes sense to offer less than the listing price of a home
When it makes sense to provide a listing price for a home
When it makes sense to offer more than the listed price of a home
Conclusion
FAQ
1. Are you in the buyer or seller’s market?
Before you put your mind to real estate, it is very important to understand whether the market in your desired region is currently the market for buyers or sellers. The seller’s market can be difficult and cost more for buyers, especially when allowing emotions instead of logic.
The buyer’s market is an area where more homes are sold than active buyers ready to buy. This brings benefits to buyers, especially for motivated sellers, and is definitely the perfect market to find a deal. The seller’s market has enthusiastic buyers who compete for the house as soon as they are listed for sale. This brings the benefit of sellers as homes often sell quickly and beyond the price.
2. How much is the equivalent in this region?
“Comps” stands for Comparables, but is a home that was sold similar to the one we have recently offered to buy. Home sellers can use Comp to determine the asking price, but they can use Comp to understand how much they will offer at home.
You can find a comp by looking at the online real estate listings, but we recommend you rely on a real estate agent for more accurate and detailed information. This is because the list usually states the asking price of the house, but it shows more of the market value, not the final selling price.
Fortunately, real estate agents have access to a variety of databases, including multiple listing services (MLS), which provide comp details. Your agent will interpret the information and write offers that will be useful to you and the current housing market. Having this information is especially important once negotiations begin.
3. What is the condition of the house listed for sale?
You’ll want to compare the state of your favorite house and what is known about the comp. Let’s say that all comparable homes have new appliances and are selling at the same price as the home you are considering. The property doesn’t compare apples to apples, so there’s less to offer and you might need to create an upgrade in the not too distant future.
This comparison applies to repairs and updates that you need to do at home. Looking at the condition of a home that has recently been sold in the same listing range, there are good ideas about the value that repairs bring to your home.
4. What is the seller’s intention?
Understanding the seller’s intentions to sell your home can be an ace in your pocket. Maybe the seller has moved to work and will take a lower offer to sell the house quickly. Or maybe an older couple is moving to Dallas, Texas to retire, but they have plenty of time to sell their home and are hoping for the best offers.
Check with your real estate agent to see if there is more information about the seller’s intentions. There may not be any information to share, but it is always worth checking out. Knowing a little about the seller’s motivation for selling can give you important insight into how much money you offer and what other conditions are appealing, such as quick closures and more time to move your belongings.
5. Why buy a house?
Understand your motives for purchasing before understanding how much you will provide in your home, especially if you are a first-time home buyer. Are you planning to stay in the area for 5-10 years? Want to take root? Or do you think it’s likely to sell a few years after the market gets better?
When you are clear about where you stand, you can make logical offers based on your realistic desires and needs, rather than letting your emotions dominate the day.
6. What is your budget?
All buyers must seek a pre-approved loan before the home hunt begins. This pre-approval creates leverage to create solid offers based on current finances and ambitious lenders. A pre-approved status is a signal to the seller that you can close on the home if you make the offer.
Once you pass the loan approval process, you will receive great information to help you understand your budget requirements. To be clear, just because your lender agrees to lend you a certain amount doesn’t mean you need to provide the home with a full asking price.
Place all the numbers on the table. Determine the amounts that have been pre-approved and use a mortgage payment calculator to know what your monthly payments will be. In addition to other expenses, make sure to also explain Private Mortgage Insurance (PMI) if applicable. Look at how everything is combined and decide on a reasonable budget that suits the lifestyle you want to have while living in the house.
Now that you understand the market, the motivation behind buying and selling, the state of the home, and the budget, you are ready to learn how much to offer in your home based on different scenarios.
When it makes sense to offer less than the listing price of a home
Now that we have done all our research, we can see that the offer can be lower than the list price if:
The home requires minor or major repairs. You are in the buyer’s market and there are many homes to choose from. Sellers need quick sales.
If any of these three key elements are playing, you can feel comfortable making an offer that is lower than the list price. Your real estate agent will help you determine whether your offer is reasonable or not.
When it makes sense to provide a listing price for a home
Make an offer at a listing price should be reserved for a “dream” home. This house needs to be ready to appear and rarely repaired except by adding a personal touch. Offers at listing prices may eliminate options to negotiate if they are at the top of your budget. Your real estate agent will help you determine if this home is worthy of being strong or if negotiations are better for you.
When it makes sense to offer more than the listed price of a home
If you absolutely love your home and want it, it makes sense to offer more than a price. If your home is in a competitive market and you love the region, school, amenities, layout, and it’s introduced and it makes sense to offer more than the price.
However, you can take risks beyond the listing price, especially if you are in the seller’s market. Based on your budget, you will need some wiggle rooms. Additionally, lenders may require valuation contingency to assess the value of your offer. Pay close attention to the inventory and biggest offers on the market home. You don’t want to be bid wars and overpay for a much lower rated home.
Buying a home can be exciting, but it’s important to keep your emotions under control. When you take your time to understand your market and learn as much as you can about both the home and the seller, you can dial the right offers to make at home and protect yourself from the risk of overpayment. If you have covered all the bases above and have that perfect home in mind, feel comfortable and calm for negotiation.
Conclusion
When deciding how much you want to offer at home, it is important to consider the market situation, the condition of the home, and your budget. Researching comparable sales and working with real estate professionals can help you create competitive, informed offers. Understanding how much you offer at home gives you the advantage of today’s fast housing market.
FAQ
Can I get 20% below the asking price?
If it’s a buyer’s market, if the property doesn’t maintain the code, or if the home needs serious renovations, it can be below 20% below the asking price. By offering it to purchase all-cash property, you are more likely to be accepted.
What is considered a reasonable offer for the home?
A reasonable offer is a factor in all market conditions, so there is no one-word answer. Research the property and be clear about the budget and the state of the home for sale. In the buyer’s market, we can offer 5% to 10% less than the asking price while still remaining competitive. In the seller’s market, you may need to offer 1% to 3% more than the asking price to stay competitive.
What is the best price you can offer at home?
The best prices you offer at home will depend on many factors, including the buyer’s market, the condition of the home, the value of the comp in the surrounding area, and the budget. If you offer the following, we recommend that you go down to 5% to 10% below the market price. If you offer the above asking price, aim for 1-3%.
