Congratulations! You have found a great Windsor home that you are eager to buy. But how much should you offer? If you offer too much, you may overpay and risk an appraisal being way off. If you underbid, then you risk insulting the seller and they may cut off all negotiations.
It’s time like this where your real estate agent can be worth their weight in gold. While no agent can tell you what you should offer, they can provide direction, information on the market, price ranges and if the seller is motivated. But the final price is yours and yours alone. Here is why agents shouldn’t give you a set price.
1. Too Low:
If the agent strongly encouraged their client to make a lowball offer, you may lose that home all together. If a higher offer comes in, or if the seller even refuses to respond, you would have every right to be angry with your agent.
2. Too High:
On the other spectrum, if your offer is immediately accepted, you may wonder if you offered too much. If an agent is very insistent on a certain price, and the sellers give an immediate yes to you, chances are, you may have paid too much. This can really be a problem because if you overpay, and the appraisal confirms this, then you need to come up with the difference in cash or see if the seller will lower the price. And again, you would have every right to be angry with an agent that insists you offer a too high price because you are the one paying the price.
3. Agent Isn’t Paying The Mortgage:
Agents shouldn’t give you a set price because they aren’t making the house payments. They aren’t paying the utilities, taxes, upkeep, insurance or anything else. They really don’t know what you can truly afford unless you tell them or have a pre-approval letter. But they don’t know your other expenses, or your financial goals. This is another reason agents need to back off of insisting on a home price.
Once you are ready to make an offer, a real estate agent will immediately get comps from similar properties in the area and see what they sold for. If, on average, the “sold” price is three percent less than the list price, you may want to come in with an offer under 3 percent. But keep in mind, every property is different with it’s own background. That is why you need to seek a price range from an agent, but not a final price.
Some other suggestions when trying to figure out what to offer:
1. What is the housing market like in your area?
If you are in a seller’s market where properties are going quickly, an offer close or at the listing price might be necessary. If homes are selling slowly, a buyer’s market, then you have a greater opportunity at getting a better deal by offering a lower price since there is less competition.
2. How much did the seller pay?
If the seller bought a few years ago in our depressed market, then he or she have not made much money, so they listed price should be near what they paid for the home. Yes, they may have done lots of remodeling, but not all updates are worth a huge increase in price.
3. What’s the home’s history?
Has the property you are interested in been sitting on the market for a long period of time? Did the buyers take it off then relist it? The reason this is important is that the longer a home sits, the less appealing it is and the fewer buyers they have walking through the property. At this point, the sellers may be very anxious to accept an offer. Homes that sit for a while are usually because they are overpriced, or it needs a lot of work.
When making an offer, here is one piece of advice that we give often, but is rarely followed. Try hard not to become emotionally attached to a property before your offer is accepted. I know, easier said than done. If you didn’t love a property, then why would you make an offer? The goal is to have back-up plans in case your offer doesn’t go through. Have several homes in your mind that you can make an offer on so in case a property owner doesn’t budge, you can walk away. A seller is more inclined to negotiate if they know you have alternatives.