4. Neighborhood market data
In addition to a comparative market analysis, looking at how fast homes in the neighborhood are selling can help you determine how much to offer on a house. “If homes have competing offers and are selling within a few days, then be prepared to offer full price or slightly better (assuming the home is not overpriced based on the research you’ve done on the neighborhood,” says Glenn of Lake Homes Realty. “If homes for sale are sitting for months, then be more aggressive, but not so low-ball that you’re not taken seriously.” Glenn recommends calculating a price based on similar homes that have sold and coming in 4%–7% below to begin negotiations.
Glenn also advises to not be fooled by what other nearby homes for sale have as their sale price. “These homes have not yet sold, and their listed price is rarely what they sell for eventually. Either through public records (visit your court house) or through a real estate agent, evaluate what similar nearby homes have sold for and how recently.”
5. Financial profile
According to Brenda, “The more solid your financial profile is as a buyer, the stronger you are as a candidate to have your offer accepted. Cash is king true enough, but a person getting a mortgage can still be strong, especially if they are able to waive the financing contingency (meaning they will close on the property even if they are unable to obtain the financing they want).”
Presenting yourself as prepared and able to close on a deal is important to a seller. “Having your competent real estate broker, real estate attorney, mortgage broker, and perhaps home inspector in place and [being] ready to move quickly will make your offer very appealing to a seller and their broker. Preparing a letter of presentation of yourself and your interest in the seller’s property will also put your offer in a favorable position,” says Brenda.
6. Physical condition of the home
Before making an offer, you want to evaluate the physical condition of the home. Is it in excellent condition, average condition, or poor condition? Carmen Palma, a licensed real estate salesperson at Regal Real Estate Professionals, says, “If the house has structural or mechanical issues or substantial cosmetic problems, you may have the opportunity to submit a less-than-full-price offer. Depending on facts and circumstances, you may want to use a 10% reduction in price as a starting point for negotiations.”
If the home is in great condition, has desired upgrades, and is located in a hot market with multiple offers on the table, the offer should be at list price or above.
You can best determine the condition of the home by hiring your own home inspector. The seller’s willingness to repair any problems uncovered by the inspector will determine whether you should seek additional price adjustments.
7. Seller motivation
Every so often, a seller has already bought his or her next home or is relocating to a new area. They will typically be forced to sell their home quickly or face the prospect of making two mortgage payments at the same time. Most sellers want to avoid this situation and may be willing to lower the home’s price by a few thousand dollars. According to Brenda at Halstead Property, “This may not be information you can know, but sometimes asking the listing agent yields surprising results.”
8. How long the listing has been on the market
How long a house has been listed on the market can help you determine how much to offer on a house. The longer a house has been on the market, the less of an advantage the seller has on a negotiation and the more flexibility you have to make a lower offer. However, you should never go more than 25% below the listing price—you don’t want to insult the seller or not be taken seriously.
According to Brenda, “A seller is less likely to consider offers that come in below their asking price if they have just come to market. However, as time passes and offers don’t come in, or are below what a seller hopes to sell for, they will usually be more receptive to lower prices or riskier conditions (such as financing contingencies or buyers with less assets).”
Carmen at Regal Real Estate Professionals has a similar take. “If you’ve found your dream home in pristine condition and it has only been on the market for a few days, then you may want to consider placing a full price offer or risk losing it to another potential buyer.”
9. How badly you want the home
If you are going to regret missing out on the home, consider offering the exact listing price—or a bit more—to seal the deal. However, Glenn from Lake Homes Realty emphasizes that you shouldn’t let emotions take over when considering price. “This is a business transaction for a property you will want to enjoy. If you emotionally ‘have to have this house,’ you will lose bargaining strength and overpay,” says Glenn.
Remember: Submitting a low offer is always a risk. Be prepared to negotiate if your initial offer is rejected.