Once you've found the house you want to pursue, the next step is to make the seller an offer to purchase the home. Although there are many terms to consider and negotiate within your offer, the purchase price is perhaps the most notable. Your real estate agent will help guide you in your decision of where to start price negotiations. Here are some items to consider when determining what to offer.
Comparables: Your agent should provide you with information on the comparable properties that have sold within the past 6 months that are similar in size, location, and overall condition. Having access to this information will play a big role in determining what the market value of the home may be, and more importantly helping you determine what you think the property is worth.
Property Condition: The overall condition of the property can greatly affect its perceived value. If a home is in great shape and shows beautifully, it will likely sell for a price near the higher end of the comparable sold listings. If the property is in poor condition, it will likely sell on the lower end. Homes needing new paint, flooring, or appliances may justify a lower offer, whereas homes that have recently been upgraded or include newer appliances may be well worth the price they are asking.
Concessions: If you are going to ask the seller to make certain concessions, such as pay for your closing costs or throw in appliances, you may find they will be less willing to negotiate on the overall purchase price. Concessions ultimately reduce the seller's net proceeds from the sale. In turn, such requests directly affect price negotiating power.
Multiple Offers: If there are no other offers on the table, you may be able to start your offer out on the lower end. This will allow you to see if the seller has any wiggle room to negotiate a lower price with more favorable terms. On the opposite side of the spectrum, if you decide on a home that has other offers, you are essentially in competition with other buyers. In this case, you should make your first offer your highest and best offer. When trying to decide on a price to offer in a multiple offer situation, we usually encourage buyers to find a price that they would be happy paying should their offer be accepted and that would they would not regret should their offer be rejected.
Determining the right price to offer can be tricky. But, with a little bit of research, assistance from a real estate professional, and an understanding of the seller's motivations, you can hopefully make an fair offer that the owner is unlikely to refuse.
Information courtesy of Intermountain Multiple Listing Service. Information provided by IMLS is deemed reliable but not guaranteed. IDX information is provided exclusively for consumers' personal, non‐commercial use, it may not be used for any purpose other than to identify prospective properties consumers may be interested in purchasing. IMLS does not assume any liability for missing or inaccurate data.