โข Finding the Sweet Spot: When to Offer Above, Below & At List Price โข
When you have found the home that is right for you, the first step toward calling it your own is putting in an offer. However, knowing how to make an offer on a house can be a daunting task.
Especially in a hot sellerโs market. Many find it hard to balance offering enough to get their offer accepted while not overpaying and leaving money on the table unnecessarily.
So how do you know whether to come in high or low โ or just offer the list price from the start? By preparing your finances, researching your local real estate market, and enlisting the help of aย local real estate agent, you can make an offer that is just right.
Sellerโs Market vs. Buyerโs Market
The type of market youโre in makes a difference when decidingย what to offer on a house. In a sellerโs market, there are more buyers than available homes. Sellers here usually have the upper hand in negotiating since they will often receive multiple offers. In this type of market, buyers compete with each other and sometimes enter into bidding wars, with sellers holding the power to select the offer that works best for their goals.
Conversely, in a buyerโs market, there is more inventory available than there are home buyers. In this type of market, buyers have plenty of options to choose from โ and, therefore, they hold more leverage when it comes to negotiating. Because sellers arenโt receiving as much interest in their homes, they are often more willing to compromise. This could mean accepting a lower offer or simply being more flexible on other parts of the deal.
How to Make an Offer in a Sellerโs Market
Putting an offer on a house in a sellerโs market can be a fast-paced, stressful process. Here are some tips to help you determine how much to bid on a house:
- Get your finances in order.ย Before you even begin looking at homes, itโs advisable to speak with a lender and getย pre-approved for a mortgage. Not only will this give you a better idea of how much home you can afford, it also helps establish you as a serious buyer โ which makes all the difference when time is of the essence.
- Know your boundaries.ย Once you are pre-approved, use this number as the maximum you are willing to spend for a home โ and donโt go over. Itโs easy to get caught up in the adrenaline and excitement of a bidding war, but itโs essential to stick to your budget.
- Research comps.ย Your real estate agent will provide comps or similar homes that have recently sold in the area. This will give you a good idea of what the home you are eyeing is worth. Quality comps will allow you to compare final sales prices to the listing price and establish a reasonable offer for your future home.
- Have your agent talk to the sellerโs agent.ย This will give you a sense of whether there are many other offers on the table, how motivated the seller is, and a number of additional insights. You can use this information to help make an informed decision on your offer amount.
How to Make an Offer in a Buyerโs Market
Making an offer in a buyerโs market can be quite different. In a buyerโs market, the power dynamic is different in that you have the upper hand negotiating the home you want. Of course, youโll still want to get your finances andย credit score in shapeย before searching for a home, but once youโre ready to move forward, these tips will help with a smooth transaction:
- Donโt be afraid to shop around.ย Because there is more inventory available and less pressure, you have some time to do some window shopping. Figure out what you really like andย what you can comfortably afford.
- Look at both recent comps and current listings.ย This is an important step because it can give you a clearer picture of the current market. For instance, if a home recently sold for $900,000, but similar homes are now being listed for $850,000, you can see that prices are trending down. Take this into consideration when making an offer.
- Consider aspects of your offer other than the price.ย It doesnโt hurt to ask for other concessions in a buyerโs market. These could be a closing timeline that works for you, getting the seller to cover the cost of certain repairs, or a number of other conditions that make the deal more favorable to you.
Consider the Sellerโs Point of View When Making an Offer
No matter what type of market you are in, you should consider the sellerโs priorities when making an offer. Of course, theyโll want a great price for their home, but maybe due to the sentimental value, theyโll want to choose a buyer who loves it as much as they did? Or perhaps theyโre motivated to sell quickly and would be willing to take a lowerย cash offerย with a faster closing.
The Bottom Line
Working with the right agent can make this decision easier, yourย Reali Agent is here to help. Just what sets our agents apart? Our commitment to an honest, transparent experienceโฆ and access to the most innovative buyer and seller solutions.
Call us at 858.880.0195 or email portia.green@compass.com to get started with Reali today.
About The Author
Portia Green, REALTORยฎ
Portia's clients all have a similar story. She feels like a friend and most likely you met her at the kitchen table or huddled up in the living room. Her personable nature and easy going approach attract sellers and buyers alike, in what can be a stressful and emotionally charged experience. An experienced REALTORยฎ with 15 years experience, she is just as excited about real estate today as she was with her first transaction. Portia remains ever-committed to helping her clients find their place in the world and helping busy people navigate this crazy real estate market like a pro.
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