Whether you’ve looked at a hundred houses or just three, when you’ve found just the house that fits your lifestyle and your price range, what do you need to do to make an offer?
“How much should I offer” is often the first question that pops to mind. But first you need the answer to two more important questions: 1) what have comparable homes in the area been selling for? and 2) what is this specific home’s value in relation to these? In real estate terms, you need to look at the comps.
Getting the comps—recent sales data on similar properties.
A good buyer’s agent can easily provide comps and a market analysis for your target property from services available to the agency. In addition, because the agent works for you, he or she can discuss with you what all the data means in relationship to the property you wish to buy.
If you don’t have a buyer’s agent, you can request the basic information from the dual or seller’s agent. The seller’s agent is required by law to provide information you need to make an informed decision. Discussing what that data means for you as the buyer may be less useful or wise because the seller’s agent, after all, first represents the seller’s interests.
You can also look up recent sales yourself at the appropriate county assessor’s or recorder’s office, either on site or sometimes online. To look for the local assessor’s office online, choose a state at State and Local Government on the Net, then choose the appropriate county or town. Even if the data isn’t online, office hours and contact information are usually available.
Analyzing the comps and the market to determine your initial offer.
After you have the market data, look carefully at how your property and the seller’s asking price (listing price) compare to similar properties. In the comparison, be sure that you look at properties that are similar in size (bedrooms, baths, square footage, for example), location, and condition.
- Is the listing price in line with the recent market, right on the average or just a little above or below?
- Or is the listing price much higher or much lower than the comps? If the listing price is higher, are there any amenities or features that might justify the difference or has the seller simply overpriced his home (perhaps trying to recoup all the cost of that kitchen remodel or added bath)?
If the listing price is significantly lower than other properties, the lack of what features or presence of what problems (for instance, elderly mechanicals or a roof in need of replacement) might account for this? Or does the seller have reason to want a quick sale?
- How does the condition of the house you want compare to the comparable properties? In similar shape? In terrific shape with, for example, a new roof and furnace? Needing work (cosmetic or more extensive, such as updating kitchens, baths, or mechanicals)?
Use the checklist you prepared during your visit to the house to help you think about these factors. There are also some other factors to consider as you think about price:
- Is the housing market hot or cold? In a seller’s market, where houses are selling quickly, the seller may be unwilling to discount the price much, if at all. In a buyer’s market where many houses are for sale and are staying on the market for a long time, sellers are often more willing to go lower in price.
- What’s the seller’s motivation? Find out what you can about the seller’s motivation for selling. If the family is moving to a new community in order for the seller to take up a new job or a couple is divorcing, for instance, the sellers may need to sell quickly. But if the family is simply thinking about moving to a newer or larger home and simply testing the sales waters, they may be less receptive to your lower offer.
Next in Chapter 3: What is a Good Initial Offer for the House?
Prepared for Corning Credit Union by Remar Sutton & Associates, July 2004. Reviewed and updated May 2007. All rights reserved.