Television’s longest-running game show, “The Price is Right” has been challenging contestants to win a turn on its stage by coming as close as possible to the perfect price without going over since its debut in September 1972. In that time, numerous strategies have emerged, but the show endures because the task remains challenging. For homebuyers, there are certain similarities when trying to decide how much to offer on a house. There are lots of factors to think about, some challenging decisions to be made, a bit of luck involved, and a fair amount of hope as you wait to find out the results of your efforts.
How Much to Offer on a House
Like a game show contestant, a homebuyer will have limited control of the situation when they put in an offer on a house. However, strategic thinking and smart moves definitely increase your chance of success. For a homebuyer, that means estimating the home’s market value, weighing how much you’re willing to spend, evaluating the impact of your real estate market, and knowing a bit about the seller. Armed with that information, you can put together a winning offer with a price that’s right.
Determine the Property’s Market Value
When it comes to buying a home, the list price is just a starting price. The home could sell for that amount. It could sell for less, or it could sell for more. You’ll want to weigh that against other factors, including the home’s market value. How do you determine a home’s market value? HomeLight suggests reviewing comps, or recently sold comparable homes, to see what a fair price for the home would be. Because no two houses are exactly alike, this isn’t an exact science, but you can generally get an idea of what a house is worth. That value should set the foundation as you decide how much to offer on a house.
Think About How Much You’re Willing to Spend
How much is the house worth to you? Can you afford the asking price? Would you be willing to go higher if needed in order to secure the home? Decide how much higher. Setting limits while your emotions are cooler, before you get caught up in negotiating, can help you make better decisions, so it’s wise to think ahead. What if you truly love the home? According to Realtor.com, if you really want the house and are in a competitive market, it might be smart to start with a strong offer so that you can avoid a bidding war.
Know Your Real Estate Market
Are you in a seller’s market or a buyer’s market? As The Balance explains, the current real estate market in your area matters greatly.
In a seller’s market, conditions typically favor the seller. There are lots of buyers hunting for a limited number of homes, so sellers don’t have much incentive to bargain. If you’re hoping to buy in a seller’s market, you’ll need to be ready to move quickly and make an especially attractive offer. In a seller’s market, your offer should probably be for the asking price or more. Making an offer for less is likely to be rejected unless the property has been on the market for an unusually long time.
However, a buyer’s market is a different situation. You’ll have a bit more breathing room. There are generally more sellers than buyers, so you’ll have time to weigh your options. Plus, homes often linger on the market for longer, so sellers tend to be more willing to negotiate. While you don’t want to go too low and be insulting, making an offer for less than the asking price is generally an acceptable strategy in a buyer’s market.
Consider the Seller
A property sale may be a business deal, but the human factor is still vital. As Zillow notes, knowing a bit about the seller can help you close the deal. Are they eager to sell? Offering a quick close can make your offer more attractive. Have they been burned by offers from unserious buyers in the past? Putting down a chunk of earnest money could offset their concerns. Are they leaving behind a well-loved family home? A short, personable note sharing your delight in the property might be enough to convince them to leave it in your stewardship. As a bonus, adding features like these to your offer may help it outshine offers for equal or greater amounts.
How will you reach your housing goals? If you’re not sure, reach out to the loan experts at PrimeLending West Texas. We would be delighted to work with you to find the financing solutions that fit your situation. Contact us today to get started.