|Making An Offer
Now that you narrowed your selection of homes to hopefully one or two. Review your notes and compare the different features of each home to help you evaluate which home to make an offer on. Your agent should be able to provide you with information to assist you as well, with whatever research is needed to help you make your decision.
The seller's asking price should be viewed as an estimate of the value of the home, Sometimes the asking price is the amount of money that they wish to receive, not its actual value. Different people price their houses at different levels for different reasons. Knowing the seller's reasons, or likely reasons for choosing their asking price will affect your offer on the home. Sometimes homes are overpriced with the intention of lowering the price during negotiations until they reach the price they actually wanted. Sometimes the selling price is deliberately low with the intention of having the asking price raised by competing buyers until they reach or exceed desired price level.
Making an informed decision on which home to purchase becomes easier by obtaining as much information about the property as possible. The local municipality through the Engineering Department can provide you information about future roads in the area, and the Planning Department can tell you about planned future development in the area. The local Chamber of Commerce can often provide you with some statistics in which you might be interested.
Before you make an offer on a home, your agent should do a comparative market analysis on that property, to help determine a fair market value for the home you are looking to purchase. This is done by comparing prices other buyers paid recently for similar properties to yours in the same area. Tax assessments could also be used in conjunction with the market analysis, to further assist in determining a fair market value
What you offer for a home will be influenced by the local economy, the number of available homes for sale, the growth and demographics of the population, desirability of the area, but most important usually is determining current market conditions.
If employment in a specific area has improved, or new economic development is occurring in a specific area, the local market conditions are likely going to improve, creating a seller's market. Higher paying jobs created in an area can affect the market conditions and create a seller's market.
Understanding what the current market conditions are, will determine what bargaining position you may have, if any. Your real state agent should be able tell you what the current market conditions are. You have to keep in mind that market conditions can change seasonally or even monthly.
The buyer's market is when there are more homes for sale than buyers. In the buyer's market, homes usually do not sell as quickly and the prices are usually lower. This type of market favours the purchaser of the home and usually allows for more bargaining to the purchaser's benefit and a larger selection of homes to chose from.
In the seller's market there are less homes for sale than buyers. In the seller's market, homes usually sells more quickly and the prices are often inflated. This type of market favours the seller of the home and usually less subjects or conditions. The purchaser usually will have fewer homes to look at and will have to make a decision more quickly. As other purchaser's may be interested in the property, you sometimes have to bid against them for the home.
A balanced market is when there are equal number of homes for sale for buyers. Prices in a balanced market are usually more stable. This is a good opportunity to have a good selection of homes to choose from and to make fair offers on homes with reasonable subjects or conditions.
The market trend or median home price gives you the average of sale price of homes over a specific period of time, usually monthly or over a period of a year. You can compare over several years to determine if homes are going up or down in price.
The number of homes for sale over a period of time (usually a month) can be compared with the number of homes sold in the last several years to help indicate a market trend. The more homes for sale, the more likely it is a buyer's market.
Before making an offer it is helpful to know the reasons why the home is being sold or other factors that are motivating the sellers. If the seller has just bought a new home, he/she may be more willing to accept a lower offer. Other factors that may make a seller more receptive to a lower offer include being transferred to another city, divorce situations, or similar situations.
Before making the offer decide what is negotiable and what is not negotiable to you, and be willing to give a little on the things that are negotiable. Your agent should be able to give you advice about how to structure your offer.
Unless it is truly a buyers market, or you believe the home is way over priced, avoid low-ball offers which are usually substantially below the asking price of the home. If your offer is to low, the seller likely won't even bother negotiating with you if they think it is a waste of their time. Keep in mind, if your offer is one of several that the seller is choosing from, they could disregard your low offer and concentrate on the other, more reasonable offers.
When you do make an offer on a home, negotiate honestly. A sense of trust between the buyer and seller is usually best for everyone involved in the real estate transaction. If either party is giving false information or otherwise being unfair, it is likely the offended party will refuse to negotiate further or will likely just walk away from the negotiations.
You can make an offer on the home for a lower price than the listed price. Once your offer has been presented to the seller, they will either accept your offer, reject your offer, or make you a counter offer. This counter offer process can go back and forth many times.