You found a home you love and want to make an offer. The amount you offer is up to you. Your agent will suggest an offer price that factors in the current home-buying climate. If inventory is low and the home is in a popular price range, expect to pay close to the asking price. Your agent will show you recent area sales that inform you of the offer price. In some neighborhoods, the homes are similar, built by the same builder with just a few models. In this case, it is easier to decide on a price. Look at what the same model sold for over the past few months and adjust for condition, upgrades, and location.
In other areas, the home is unique, and your agent will choose comparable properties that require more adjustments. For example, take a single-story home built in 1990 on five acres with a swimming pool and tennis court. Your agent will search for recent sales that are in the same area and within the past three to six months. Factors may vary, such as lot size and whether there is a tennis court. Modifications to the offer price will be made in accordance with how closely the comparable homes are to the one you want, and The existence of available comparable will drive how large the search area is and how closely the property features match those of the property you want. Your offer will be based on the area sales and condition, upgrades, and location.
Keep in mind that you do not get to profit on 100% of your seller’s steal of a deal. Your seller may have purchased the home at a very low price due to timing and circumstances. The market may have been vastly different, or the seller he purchased from had to get out of the home fast. That does not mean that the seller is not due a fair market value for the house. Too many buyers look at what the seller paid for the house and base the offer price on what the seller paid. That is stepping on another’s wise investment. Do not expect someone else’s windfall.
A good agent will nose around to see why the seller is selling. If the seller wants to get out fast, a lower price might be accepted. If the seller has been trying to sell the property for a long time, a lower price might be seen as better than nothing.
You are relying on your agent a lot here. Although you chose a trusted, experienced, top-notch agent, reviewing the comparable properties and understanding why the offer price makes sense is the buyer’s responsibility. Before making a huge financial commitment, understand why you are making it.
