How Much Should I Offer?

How Much Should I Offer?

We have covered the process for evaluating the physical condition of the house in the Inspections and Disclosures section. Looking at recent sales will give you a reality check for what current pricing is for similar houses. Explaining the intricacies of analyzing the comparable data is beyond the scope of this section, but at the common sense level, what needs to be done is pretty obvious. Recent sales of similar houses are compared with the subject property, and the strong and weak points of both are compared. If the subject property is better in one attribute (e.g., it has a large yard and the comparables do not) then add value to the estimate. If it is worse in some way (the roof is worn out or the house is on a busy street, for example), reduce the value. This is essentially what appraisers do.

Unfortunately, when you buy a house, you are forced to look at historical data for comparables. This means that the sold data is necessarily out-of-date. When the market is moving rapidly either up or down, the data will be misleading. Experienced agents working in hot real estate markets, though they do not disregard comparable-based value estimates, are often more concerned with the market as of the date that the offer is being made. This makes more sense than may appear obvious. When you are bidding against other prospective buyers, you have to know what it will take to get the property. In general, the more bidders there are, the more the property will be bid up over the asking price. How much weight to give to the number of offers is a judgment call based on market conditions as of that time. You should know what your limit is for a given property, but what you actually bid often needs to be gauged on the offer date by how many offers are being presented who is presenting them. You will necessarily be somewhat dependent upon your GLOABL REALTY agent in this regard, since familiarity with the outcomes of recent bidding wars is needed to know what to expect.

When making an offer, it is important to understand the seller's objectives. Though most sellers would prefer to have a clean offer with few or no contingencies, unless there are multiple offers, the seller may not expect such an offer. Everyone, whether buyer and seller, trades off price against uncertainty, so when making an offer, you will need to consider how much more you will need to pay for the property if you allow yourself contingencies that allow you to walk away from the contract if, for example, problems surface in the course of your investigations, or if the property doesn't appraise for the offer price. Some of the typical tradeoffs are considered in the Contract Terms section.