It’s perfect! After lots of home shopping you’ve found the house you want. Now it’s time to make an offer. But how do you come up with a number that is affordable, yet competitive? In other words, how do you know when your price is right?
Get the facts. As a buyer, your calculations should be very similar to those that a seller uses to arrive at a listing price, comparing home sales of similar houses in the neighborhood over the last few months. These comparable prices are known as “comps” in the real estate business. Your agent may also include a list of pending home sales, though you won’t know the final sales price on these homes. By analyzing the comps, It will become clear fairly quickly whether the house is listed for a realistic price.
The comparative analysis offers other valuable insights, including how many days the property has been on the market, the original list price, and any price reductions. All of these can be used in negotiations.
The number of days on the market figure is also helpful in getting a handle on the real estate market in your area. Homes selling in less than a month indicate a seller’s market. Although you can make an offer below the list price, you could easily lose out to better offers. Conversely, if homes in your area are taking 60 days or more to sell, then it’s considered a buyer’s market, which means you could score a good deal.
Scout the competition. Visit open houses in the area, especially homes of similar size. Look at the features, any remodeling done, and nearby amenities. Weigh their pricing against the house you are considering.
Assess the seller. How many houses in the area are for sale? If sellers have a lot of competition, they have more incentive to deal. What is the seller’s personal situation, as best you can determine? If a new job is involved or if the seller has already purchased a new home and needs to sell quickly, buyers will likely have the upper hand in negotiating.
Seasonal sales. Spring to mid-summer, the market is typically busier, and wheeling and dealing may not work as well. If it is winter, especially near the holidays, the seller may be in some sort of distress and therefore, open to negotiating.
Price isn’t everything. If a seller won’t budge on price, consider negotiating for other items of value. In exchange for paying the asking price, you may want to ask for a shorter (or longer) time till closing, which could save you money in your current housing. Closing costs and appliances, such as refrigerators and washers and dryers, can also be negotiated.
