How Much Do You Offer?....Too High, Too Low, or Just Right?


That's the big question everytime we sit down with a buyer to write an offer.

Ultimately, since it's your money, it's also your decision.  But a great real estate agent will povide valuable information and counsel so you'll feel confident with that decision.  They are your advocate in the negotiation process and will use their years of experience and knowledge of the neighborhood to help you gauge what is in your best interests.  This may be your first offer -- but they've been through this many times before.

What factors are important to the price?  Well, here are a few examples.

  • Uniqueness of the property - Is this a one of a kind piece of real estate?  Does it have features that aren't readily available elsewhere?  For instance, the Central Indiana area doesn't have many lakes, so lakefront property is sold at a premium.
  • Location - Is it on a cul de sac? Wooded lot?  Popular school district? Busy road?  
  • Comparables  - Is this home in an area where other homes compare nicely with it?  If so, your agent will look at the history of what has been sold over the past year or so, and with that information they can give you insight into what the seller is probably expecting.
  • Motivation - The motivation of the buyer is critical.  Will you be heartsick if you make an offer and someone else's offer is accepted or do you have a back up which is equally attractive? 
  • Condition - What is the condition of the home?  Does it need a lot of work?  New appliances?  New countertops?  Wallpaper removal?  Are you a handyman, or will you need contractors to help?  Your agent can help position this specific property against others.
  • Status - There are a lot of circumstances that affect price drastically.  Bank owned, HUD-owned, and short sales are examples of properties where the sellers are in some degree of financial distress.  While these homes might have an attractive list price they are often in need of repair and are generally sold "as is".  In some cases these are attractive for buyers.  In other cases they can be unpredictable, primarily in receiving a  
  • Occupied vs. Vacant - What do you think when you walk into a vacant home?  Generally we hear buyers say "they must really need to sell".  The first instinct is that a low offer might gain the attention of the sellers.  In some cases that is true.  Your agent can help you with this.  Generally sellers are determined to receive a fair market price, and are often willing to wait until that offer comes along.

Other than price, is there anything else the buyer can negotiate?  Great question!  Yes -- here are a few examples.

  • Closing date - Are you flexible or is your lease expiring...etc?  Does your closing timeframe work for the sellers?  Are they building a new home?  If so, they may not be anxious to accept a lower price offer if it requires them to make a double move.  However, if it helps them prevent a double move, and you have the flexibility to help them meet their unique timeframes, you may have an opportunity to more strongly negotiate price.
  • Possession - Similar to setting a specific closing date that works for the sellers, the date that you actually take possession of the property is also a negotiation point.  You may want to move into your new home the day of closing.  The seller may need a few days, weeks, or months to vacate the home gracefully.  Those are days you own the home!  This is certainly an area where the sellers might agree to a lower price in order to receive favorable terms on possession.
  • Pro-rated property tax - Property taxes are generally pro-rated through the day of closing.  Depending upon the circumstances you may be able to negotiate different terms.   
  • Closing costs - Many buyers don't want to spend "cash" to acquire property.  In some cases buyers can negotiate with the sellers to pay for some or all of the buyer closing costs.  If so, the purchase price will probably be higher, but it will mean less cash out of hand at closing.  That might be cash you expect to use to buy new appliances, updated fixtures, or for repairs.
  • Cash vs. financing - Cash offers really catch the attention of sellers!  Why?  Because they can close more quickly!  A cash offer can be accepted and closed in days.  Financing is a variable that takes time - we usually tell clients to expect 30 to 45 days.  If a seller is anxious to sell (for instance they are moving out-of-state) they may accept a lower offer if it is for cash.
  • Appliances, hot tubs, personal property - Lenders usually discourage intermixing personal property with "real" property on offers, with the exception of appliances which are generally acceptable.  If there are pieces of personal property Sellers want to include, the lender may request them to be on a separate bill of sale, and not included in the mortgage.
  • Warranty - Unless you are acquiring a brand new home you may have concerns about unexpected repairs after you move in.  How old is the furnace?  Air conditioner?  Water heater?  Roof?  We frequently advise our clients to ask the sellers to provide a one-year warranty.  This is a nominal fee for the sellers, and can often be negotiated into the deal.

There is much more that your agent can share with you, but this should get you thinking in the right direction and give you some ideas to consider.

Was this helpful?  If so, please post a comment!  Don't be afraid to ask the nagging question that is bothering you.  We'll be happy to post a response.  Chances are there are others out there with the same question.

by Steve Hoagland, The Hoagland Team


Unless otherwise noted, blogs are authored by Tonda or Steve Hoagland



Comment balloon 0 commentsTonda & Steve Hoagland • January 22 2009 02:04PM


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