Buying

What to Offer on a House

In this post, we take a look at some things to consider when making an offer to purchase a home.

One of the most difficult parts of the house-buying process is knowing how much to offer for a house that you’re interested in. In most cases, your agent may be hesitant about coming up with a price for you. In the same breath, you can take advantage of your agent’s skills and experience to determine what you should offer when it comes to purchasing a home you like. In this post, we take a look at some things to consider when making an offer to purchase a home.

Analyze the Market

One of the most effective things you can do is check the market to determine if the current status is a “buyer’s market” or “seller’s market.” Buyers’ market can be best described as a situation where there are more homes available than buyers who can purchase them. On the other hand, a seller’s market is a situation where there are more buyers than available houses. During a sellers’ market, prospective homebuyers can expect to pay more than the initial listing price as a result of competing offers. However, during a buyers’ market, as a result of a lack of competition, sellers are often more willing to take an offer slightly less than their listing offer.

Look at the Price of Other Similar Homes

Another thing you can do to get a rough estimate on how much you should offer is to compare the sales of other homes within the area. Be sure to focus on properties that are similar in style, age, square footage, and location. Additionally, be sure to focus on data that spans back no further than six months. You can check other real estate agents, newspapers, and the local assessor’s office to get information on recently sold homes. You can also use multiple websites to get information, though some of them may be less accurate than others.

Figure Out the List Price to Sale Price Ratio

List price to sale price can be best described as the relation between how sellers list houses and how much they actually sold them for. To get a rough estimate of the list price to sale price ratio of your location, you can ask your real estate agent to provide a trend report that covers the last six months. You can use this report to look at the listed price of homes and compare them to the prices they eventually sold for. The key thing to remember is that you should determine what the percentage is. For example, if you noticed that homes were being sold for 3% less than their listing price, on average, this could serve as a great indicator of how much you should offer for a home you’re interested in.

Check the House’s Number of Days on the Market

In some situations, real estate agents will take down a listing for a home and resubmit it as a brand-new listing. Therefore, check to see if the home you’re interested in buying was an expired listing that got relisted. The number of days a house has spent on a market is important because research shows that when a home has been on the market for more than 30 days, sellers become much more willing to take reasonable offers that don’t stray too far from the listing price.

Make a List Price Offer

As mentioned before, the best time to purchase a home is during a buyer’s market. In the event that you find yourself in a seller’s market, you should consider making a list price offer if you really love the property and believe that the list price is fair. In addition to that, if you find yourself in a very strong seller’s market and are convinced you’ve found your dream home, you may want to offer something higher than the listing price. While this may seem counterproductive, it’s important to note that competition is especially fierce in a seller’s market. This means other potential buyers will more than likely make offers higher than the list price, simply because there is a lack of other suitable homes.

Bottom Line

In the end, the offer you make should be based both on what similar homes sold for and your personal needs. Your end goal should be to provide an offer that is beneficial to both you and the seller. Getting the right price for a home that you adore can be tricky, but it doesn’t need to be difficult. Just remember to analyze the market to determine its current state and ask the seller the right questions.

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