One of the hardest, most important decisions homebuyers face is how much to offer on a house. Supply, demand, foreclosure rates, mortgage rates are many factors in determining the monetary worth of a house. There is a pretty short list of steps you need to take to make a smart offer that gets you a great value, but is also likely to be successful at getting the property.
When it comes to pricing a home, or making an offer to buy one, the first thing to look at is the home’s fair market value. Read: How to Make an Offer on a House – HGTV. Both buyers and sellers should work with an experienced, local agent to understand what the home’s value is. Most agents will do this by offering you a look back at similar properties that have recently sold in the neighborhood; these are called comparable sales, or, “comps.” You can also find comps for a home listed on Trulia.
You should be looking at recent sales of similar properties. It is critical that you look at the current home values. If you do get into contract, these may be the same comparables which will be considered by the appraiser, so looking at them before making an offer can do two things. The first, is that it can provide concrete reasons for a lower-than-asking offer or for the asking price, in a negotiation. See: Ten Tips for Getting a Fair Price on a Home. The second is that it can result in a sale price at which the property will actually appraise
Find out what you can actually afford. This step is much more critical for buyers than for sellers. It’s a must to make sure that your offer price for any given home falls within the range of what is affordable for you. This includes offering a price within the range for which your mortgage was pre-approved, but also includes making sure that the monthly payment and cash you’ll need to close the deal.
Find out what your competition is. This is another step at which it’s critical to check in with your agent. You need to know what level of competition you’ll face. As a seller, you can find this out by looking at things like how many comparable homes are listed in your town or your neighborhood in your general price range.
The more competition you have, as a seller, the lower you should alter your list price to attract buyers to come see your home. Buyers should also be aware of the competition level they will face for homes. Believe it or not, even on today’s market there are properties and neighborhoods in which multiple offers are the name of the game.
Your agent can also brief you on:
(1) The number of offers that have been presented. If there are other offers, you’ll want to make a higher offer in order to be more likely to win the house
(2) The number of days the home has been on the market (DOM), relative to how long an average home stays on the market before it sells
How much do they need to sell (or buy) it? Buyers should see if the home they are interested in has been reduced at all and how much. If the seller is eager to sell, you are at a large advantage. Sellers should be aware that many buyers are not in a high state of urgency to buy these days, given the long-term, high affordability of homes and interest rates. It’s important to understand how motivated buyers are in your local market before you set your list price.
How much do you want to buy, or sell, the place? What’s your level of motivation? But within the range of the home’s fair market value, it may make sense to move higher within that range if you are highly motivated to get that particular property. For more information: Advice for Making an Offer on a House. Sellers should think of the list price as the most powerful marketing tool at your disposal. if you really want or need to sell, get aggressive about setting your price as low as makes sense for your home’s value and the market value at said time.