Now that you have found a home you are interested in, it is time to put in an offer. But how do you determine what an appropriate offer is? Having a real estate agent run a Comparable Market Analysis on similar homes that have sold in the area in the past year is the best way to determine a reasonable market price for the home.
By comparing the condition, location and features of similar homes that have recently sold, and the current market competition from other homes for sale in the neighborhood, your real estate agent will help you arrive at a reasonable offer price.
But that’s only one part of the equation. You also have to determine what you are willing to pay for the home. The Palumbo’s will try to negotiate a price below market value to get you the best price possible. It’s important to let us know right away if you want the home so much that you are willing to pay market value or more for it.
You will be in a stronger position if you can find out why the seller is selling. If it’s a divorce sale, sometimes you can get a good deal, but often one party will hold out for a higher sales price, or arguments between the sellers could make the deal a headache. If it is a foreclosure and you can get the lender to agree to a short sale, you can sometimes get a good deal, but the deal may fall through or take a long time to close. If the seller has taken a lot of equity out of the home and is highly leveraged, you may have a highly motivated seller, increasing the likelihood of a lower price.
If it is a job relocation, you can often get a good deal, as the seller often wants a quick close and doesn’t want to haggle. If the seller is buying another home, this can be good or bad, depending on the circumstances. If the sale is related to an illness, the seller may be motivated, in which case you may be able to get a good deal. If the seller is getting married, sometimes he or she is in such a good mood they will cut you a deal. If the seller is retiring, they may hold out for a high price.
The seller may have needs beyond the price, such as a fast or later closing date. If you can meet the seller’s non-price needs, you may have a better chance at getting a lower price. If you are friendly and the seller likes you, you may also get a better deal. Sometimes writing a letter to the seller introducing yourself, describing your job and your clean credit history, as well as complimenting them on their home can personalize you in the seller’s mind.
When negotiating the price, it is important to follow some basic rules. Firstly, don’t show your emotions. Use your best poker face and don’t let them know if you have a strong desire to own the home. Get pre-qualified and pre-approved. If you know you can get the necessary financing, you should consider removing all financing contingencies except appraisal. This will demonstrate to a seller that you are serious.
If you can be flexible with moving dates, you may get a discounted price. If you hide your closing costs in the sales price, sometimes a seller will be willing to pay some of your closing costs in the deal. Ask for seller extras, such as appliances or an allowance for painting or other upgrades.
The last step in the process is to try to figure out what the seller was hoping to sell for. If your offer is too low, you may insult the seller and you will get a less generous counter offer. You want to offer an amount slightly less than what you think the seller expects, usually about 5 to 10 percent lower.