It’s crunch time. You’ve found that perfect home but how do you know where to begin?
You see the listing price, but is it fair? How in the world do you know what a reasonable offer would be?
Well your answer lies with your agent. My second tip to you was the importance of choosing a knowledgeable and experienced local agent. This critical step could result in thousands of dollars. Go in too low and you upset the sellers and will struggle with the next negotiation.
Go in too high and your giving away money to the seller.
So how does one know?
The major real estate sites offered a valuation when I look at the listing, can’t I use that? The important answer to that question is no. The major sites pull public information from past sales, that part is great, but only if all homes were identical.
So then there are calculations based on square footage, two 1700 sq ft, 3 bedroom, 2 bath homes should be equal in value right? Well in a perfect world they would be. But the major estimates can’t see inside the homes.
If we compared those two homes and home 1 has an updated kitchen and bath, and newer roof it would obviously have more value than home 2 that has no upgrades. Your agent should provide you with a detailed price analysis on the home, very similar to the one the listing agent would have provided the seller.
He/she should advise you on where a reasonable offer would be, but keep in mind YOU are in control and YOU choose what you want to offer.
Keep in mind your own financial needs when determining your offer. Will you need closing costs? See Step 1 of this series. Remember the amount you request in closing costs will change the sellers bottom line and will affect what a seller may take.
If you are putting in an offer on a $250,000 and you need 6% in closing costs, you must understand that you are really asking the seller to sell you the home for $235,000. Assuming the listing agent and seller priced the house to sell at the $250,000 an offer of $240,000 with the seller contributing 6% ($14,000) may not sit well with the sellers as this is almost a $25,000 below the asking price.
Understanding the opposite sides reaction to your offer may be the key to getting a first time offer accepted. Think about being in their shoes, would the offer make sense to you, assuming the house was priced right. If you answer no to that question, then you probably know what their answer may be.