Making an Offer 101
The first step to closing is making a smart offer. Your agent will certainly guide and advise you through this process, but ultimately you set the price. You can do that with confidence by asking yourself five simple questions.
Five Questions to Ask Before Making an Offer
What kind of market am I in?
The seller has the advantage, as more buyers are homehunting than there are homes to buy. Prices often rise as more buyers compete for fewer homes, and many homes sell within a couple days.
Neither the buyer nor seller has an advantage, as the number of buyers looking for homes balances the number of homes for sale. Buyer and seller are on equal footing in negotiations, and most homes sell within a couple days or weeks.
The buyer has the advantage, as there are more people needing to sell than looking to buy. Since homes can stay on the market for months, sellers may be more willing to consider below-asking-price offers and make concessions like helping you pay closing costs or making repairs.
How much have others paid?
If she/he hasn’t already, your agent will send you a list of “comps,” or comparables. This will help you get a sense of how much others have paid for similar homes in your area — in other words, how your home compares to others like it.
What do we know about the seller?
Why is the seller moving?
In other words, how motivated are they? If they are starting a job in a new city shortly, or going through a big personal change (like, unfortunately, a divorce), or if they’ve already bought their next home, they may need to sell quickly. Otherwise, they may have more time to wait for their perfect offer.
What did they pay? How long have they lived there?
This question matters most if the seller hasn’t lived there a long time. If they bought the home within the past 5 years, it’s not unreasonable to assume the home’s current price should be fairly close to what the seller paid, especially if no improvements were made and the market didn’t go crazily up or down in the meantime.
How long have they been trying to sell it?
Find out how long this particular home has been on the market. And remember — there’s a chance it has been re-listed, meaning it’s been on even longer than an online database may show. Be sure to ask. If it’s been on the market for a while, you may have a better argument to bring the price down.
What does the Sellers’ Disclosure Statement say?
A Seller’s Disclosure Statement spells out all the home’s known defects and problems, but only about 2/3 of states require them. But that doesn’t matter, because you should ask your agent to request one no matter where you live. If there are major known problems (like a leaky roof), your Purchase Offer should take into account the cost of repairing it.
Are there changes planned for the area?
Ask your agent (or contact City Hall) to find out whether there are any proposed changes to the area (like a new school, which might add value, or plans to build a nearby highway, which might reduce it). Sometimes people move because of planned construction in or near their neighborhood that they suspect will lower their property value (or quality of life), so make sure you’re aware of any possible plans.