Determining Offer Price for a Home
You know which house you want to buy and the seller's asking price. What you don't know is how much you should offer. Use the following suggestions to get a jump-start on coming up with that figure.
Research to Do
Do your homework before making a purchase offer even if you think you know market values in the area.
Get a feel for the average asking prices of comparable houses by looking at advertisements.
Check on Realtor.com, a comprehensive real estate sites not associated with a specific brokerage.
Find out if the local Multiple Listing Service (MLS) allows some level of consumer access.
Focus on properties with physical characteristics that most closely match those of the home you are buying, and remember that you are looking at asking price, not sales price. As a consumer, you have more of a challenge finding detailed information about properties that have recently sold than real estate professionals do. One possible approach that involves a bit of legwork is to watch for "Sold" signs in the area and then access public records for those properties. An issue with this is timing. Public record updates may not be completed in a manner that is timely enough to be useful in determining your price.
Online information may be more timely, but not necessarily more comprehensive depending on level of access. For example, the web site domania.com has a free resource called Home Price Check. It provides limited information without registration. Additional features are available if you register, but in doing so you agree to have your information forwarded to a network of real estate professionals. Now, if you are already working with a real estate professional, he/she will handle pricing research for you. Agents analyze listing and sales data for similar properties and provide you with a Comparative Market Analysis (CMA) that includes a price range.
Factors to Consider
A number of factors can impact a home's fair market value -- the price it will bring in an open competitive market. You should consider such factors when deciding how much you will pay. Examples include:
Property condition. Homes are either in excellent, average, or poor condition. Think about that condition when you are calculating how much you are willing to pay.
Time on market. Look at how long the home has been for sale. If the time on the market is short, sellers may be more reluctant to entertain low offers.
Market type. In a sellers' market, homes typically sell quickly and often attract multiple offers. Sellers tend to look for offers near or even above the asking price. On the contrary, if market conditions favor buyers, a seller may not immediately dismiss a lower offer.
Seller motivation. If a seller is in a distressed situation, such as quick relocation or financial difficulty, you might have more flexibility in price offered.
Updates and upgrades. Certain improvements actually increase the value of a home. If the owners have made substantial value-enhancing updates or upgrades, take that into consideration when forming your offer price.
Your Bottom Line
When it is all said and done, you need to be comfortable with your offer price, financially and intellectually. That comfort level is increased when you have done your research and made adjustments to the asking price based on influencing factors. So do your homework, make your offer, be ready to negotiate, and decide ahead of time just how high or low you will go on price.
Information is for educational and informational purposes only and is not be interpreted as financial or legal advice. This does not represent a recommendation to buy, sell, or hold any security. Please consult your financial advisor.