Buying a home means figuring out many variables, including the fair price for the home. How do you know just what is the right price to offer though? If you go with a price well below the asking price, you run the risk of insulting the seller. But if you go with a price above what the home’s worth, you run the risk of not securing financing. So what’s the happy medium?
Find Out the Comparable Sales Prices
The best way to come up with a fair offer for a home is to know what the home is worth. Outside of hiring a professional appraiser and waiting to see what the report says, you can find out the value of recent sales in the area. This information is usually public, so you can get your hands on it pretty easily. It’s important to make sure you consider homes that are similar to the home you want to buy, though.
When considering comparable sales, look for homes that are the same size and age at a minimum. From there, you should consider homes that have similar features and that have sold within the last 6 months. This will give you the best idea of a fair offer for the home.
Compare it to Other Homes on the Market
Another good consideration is the homes already on the market. If a seller knows you can buy a home for a certain price somewhere else nearby, they are not going to expect to get a lot more for their own home. Taking a walk through the various homes for sale in the area can help you know the ‘going price’ for the homes in the area.
Look at the Market
The timing of your offer will also help you determine which amount is the right bid. Try to determine if it’s a buyer’s or seller’s market at the time you shop for a home. This will make a big difference in how little or how much you have to bid.
In a buyer’s market, sellers are often willing to accept a lower price for their home. They know there is less competition in this type of market and may sellers get desperate to sell their home. This isn’t to say you should take advantage of a seller, but it’s an opportunity to save some money on the home.
In a seller’s market, the opposite happens. The seller has the upper hand, as they know they will likely get multiple bids on their home. With fewer homes on the market (thus the seller’s market), the seller can charge what they want (up to the actual value of the home) and buyers will be more willing to pay it.
Talk to Your Real EstateAgent
If you are willing to use a real estate agent and potentially pay slightly more for a house, you can use his expertise to help you determine a fair price for the home. The real estate agent can help keep you level-headed, even when you think you see an opportunity to low-ball a seller and potentially insult them. Your agent should be able to tell you how fair he thinks the price the seller is asking is, giving you a basis to work with as you decide what is right.
Consider Your Negotiations
Lastly, consider any offers you have at hand. Do you have any value to add to your offer? For example, are you flexible with the closing/move-in date? Do you have an extra-large down payment to put down on the home, making getting financing simple? Maybe you have other benefits that you can offer the seller given his particular circumstances, such as being able to close within 2 weeks or something similar.
If you have bargaining power, you may be able to offer a lower price on the home because of the value that your other factors provide.
While there is no magic formula to figuring out a fair offer for the home you want to buy, you can use the above factors to help you get there. Each home will have its own price that is ‘right or fair.’ Talking to real estate professionals, whether a real estate agent, banker, or appraiser will help you further determine the right price to bid on a home.