After several weeks, you have finally found a home that you can picture yourself living in for the next several years. Now, here comes the part where you sit down with your real estate agent and craft a purchase offer. Before you sign your name on the dotted line, take a deep breath and understand a few truths about the real estate purchase offer.
1. Homes sell at market value. They don’t sell at what the seller thinks the home is worth, but rather, what the buyer is willing to pay.
2. There is no set or rigid price when determining market value. It’s a price range. You, the buyer, determine what the market range is.
In today’s real estate market, we are seeing two categories of buyers. There is the “traditional” buyer who is shopping for a home with a good value and looking to purchase now. The other type of buyer is not so concerned with timing, but rather what the anticipated value of a home is and will be. In a buyer’s market, we see a mix of both clients.
When sitting down with your agent to discuss your purchase price, think of these tips when formulating your offer.
If you very much want a particular home, then the last thing you want to do is offend the seller. By stating in your purchase offer that your offer is based on the fact that you will need to work on the house day and night to make it presentable, then chances are, your offer will not only be entertained, but you will be shown the door in a big way. Don’t trash talk in your offer. It doesn’t get anyone anywhere.
Make a Connection
Some buyers feel such a connection to a home that they feel a need to let the sellers know. Many clients write letters to the current owners saying, for example, that they are eager to give their children a wonderful life in a home that has been cared for and lovingly created by the owners. If you can imagine wonderful holidays in the home, then mention it! If a buyer can create a heart tug with the sellers, then it can’t hurt.
Understand the Seller’s Circumstance
If possible, your real estate agent may know why the sellers are selling. Has the owner been transferred? Are there financial difficulties? Has the home been on the market for a long time with zero offers? Understanding the seller’s situation may allow you to play around with the initial offer.
Be Prepared To Negotiate
Be ready to receive a counter offer. Buyers usually expect a round two because they will often think if an offer is accepted outright, that they paid too much. Avoid a “take it or leave it” approach. Chances are, they will “leave it.”
While our job is to get you the best price for your home, don’t be difficult when making your offer. Don’t ask for a huge price discount if the home is correctly priced AND then ask for the bedroom furniture and closing costs. Sellers don’t respond well to this.
With today’s buyer’s market, there are still great values and opportunities for the buyer. However, the great “deals” that we saw a bit more in the past few years and desperate sellers, are fewer. As I mentioned, the buyer determines what a home is worth as it will only sell at what you are willing to pay for it. But if you are unrealistic or careless with your offer, there is a good chance the home that you want, will go to someone else.
When To Make A Lowball Offer
Having said all of this, now is the time to review when to make a lowball offer. Think about these questions before you make an offer that is far below the asking price:
1. Have You Reviewed The Neighbourhood Comps?
Your real estate agent will provide you with what other similar homes in the neighbourhood recently sold for. These are NOT prices at what the homes were LISTED at, but rather, what they ultimately sold for. Review with your agent to come up with a price that is based on your budget and comps. If home prices have fallen in the neighbourhood since the homes have sold, this information can be helpful when drafting a lower bid.
2. Dealing With Homeowners:
If the seller has lived at the property (rather than a rental), then he will accept your bid with some emotion perhaps. In other words, the seller can review your bid with nostalgia and chances are, will not entertain an insulting offer. If your offer is too low, then the seller may think you don’t appreciate the home and are taking advantage of his situation. If a seller respects you and hears good things you have said about the property, then it’s not uncommon for the seller to accept a lower offer in a bidding war as opposed to a higher offer from a buyer they can’t stand.
3. Trust Your Agent:
If you have a professional real estate agent that knows the area, the prices, the homes and has an excellent reputation in the industry, then chances are, they will know if the situation is right to make a low ball offer. If a seller is desperate, if they have not received any offers, or if the Windsor house for sale is overpriced, then this is something to consider. But keep in mind, there is no right answer. No one will ever really know what will happen until the seller responds. This is why making offers can be such a nerve racking experience.