How much should I offer?
Your agent should do a market analysis of comparable homes that have sold over the past six months in that immediate neighborhood and go over that data with you. The price you offer will depend on a number of factors, such as:
• Is it a slow buyer’s market or a hot seller’s market?
• How long has the home been on the market?
• Is the home listed at a fair price?
• How bad do you want that home?
• What condition is the property in?
When making an offer, don’t forget to check off items that you want to be included in the offer such as the washer and dryer, the fridge or the hot tub. The seller may not want to include these items but they could be used in negotiating the sales price.
Obviously, you will be looking to pay as little as possible for the home while the seller will be looking for the opposite. Unless you are buying in a hot seller’s market, you should make an offer below the listing price, but not too low. A low-ball offer will just insult the seller and you will probably be ignored. One strategy would be to make an offer that is say 5% below the listing price. This might lead to a couple of rounds of back and forth negotiations and you may end up paying say, 98% of the listing price.
What happens when the seller receives my offer?
Once the sellers receive your offer to purchase their home, they have three options open to them:
1. Accept your as-is.
2. Ignore your offer.
3. Make a counter-offer.
Unless you have sweetened the offer and made it irresistibly good, the seller is unlikely to accept your offer as-is. If you come in with a low-ball offer, your offer will probably hit the shredder. Note that your real estate agent and the seller’s agent must legally submit any offers to the seller, no matter how low or likely to annoy the seller.
Assuming you have submitted a realistic offer, the seller will want to further review your offer. The seller naturally will focus on the amount of money you are offering to pay, but they will also want to look at other aspects of the deal.
The seller may attempt to “qualify the buyer”, particularly if they have multiple offers on the home:
• Are you pre-approved for a mortgage or still need to secure financing?
• What type of loan are you applying for? If it’s a high risk mortgage, you might be denied by the lender.
• How much down payment and earnest money have you submitted?
• Do you need to sell your own home in a stagnant neighborhood to come up with a down payment for the property?
• The seller wants to close in a month and you are looking for two months.
