How much should you offer on a house? This is a question that Forte Properties gets several times each week. It varies in form a little each time, but I am surprised how often it’s asked without reference to any particular house.
So whenever I hear someone ask… “How much should I offer on a house?”… my first thought is… which house?
This question can really only be answered on a case by case basis. But before we dig into how that works, let me give you the best possible general answer that I can, to the general question, “how much should I offer on a house?”
According to the Austin Multiple Listing Service records, the average discount off list price for all homes sold in the Austin area during the last six months is around 3%. So if your question is, “how much should I offer on a house?”, should you take this fact I just shared with you and offer 97% of the listing price? Absolutely not.
The right way to determine how much to offer on a house is to research the neighborhood for recent sales and then compare the house you are considering to the those recent sales. As your Buyers Agent, we can do this for you by completing a FREE Comparative Market Analysis on the home you are looking to purchase. This means that all houses listed for sale will fall into one of three categories with regards to how much to offer.
Category #1: The home is overpriced. Unfortunately we run into this all too often. The seller paid a certain price, financed 100% of the purchase, got a home equity loan for another 10%, and has only paid on a 30 year loan for about 3 years. This could be a hard negotiation… Especially if the sellers don’t have, or aren’t willing to bring any cash to the closing table.
Our prices in the best of neighborhoods are down from where they were 3 years ago. In my previous example, this seller needs well over 10% above the market value of their house just to break even. If their real estate agent has not been honest with them regarding the market, they could even have visions of a profit above that. I know you’re probably thinking that could never happen. Trust me, it does happen.
The only thing to do here is to make an offer, based on recent sales in the neighborhood, and hope we are not the first ones to introduce the seller to the reality that their property is significantly overpriced. The success rate on these is about 50-50. I’m a very good negotiator and will fight hard for my buyers. Especially when I know we are right and that our offer is justified. But sometimes you run into a seller who either cannot, or will not, sell their home for the current market value. In this category we will need to offer much less than the listing price just to get to market value.
Category #2: The home is priced at market value. This is actually what occurs most of the time. Now it becomes a matter of how much you want the home and how much the seller wants it sold at this moment. This is where negotiating skills play such an important role. We must engage the seller and their agent to get some indication of their motivation.
If the home is in great condition and a great location, we will have to be aware that competition may show up at any time. Speed is important. The proper course of action in this category is to offer less than market value and negotiate from there based on the seller’s reaction.
Category #3: The home is priced below market value. This is a best case scenario. This seller wants a quick sale and is making that clear, but be very careful. Many times we end up with multiple bids on homes priced in this category. Multiple bids means the price goes up. Speed really matters here.
Now you have a decision to make as a buyer. If this is the home of your dreams, and you have been looking for a long time and nothing else comes close, you have to decide if you are willing to risk loosing the home by making a low ball offer.
If the home is in above average condition and in a great neighborhood, other buyers will recognize this too. I have had the unfortunate experience of researching recent sales for a buyer on “the one” they have been searching for, showing them that the sellers did their homework and priced it right, only to have my buyers insist on a low ball offer that lost them the home. Then the search begins all over again and they have to settle for their second choice.
The good news is that much of the negotiating has in a sense already been done by virtue of the seller pricing their home for less than other buyers are paying for a similar home. We may have to look at several dozen homes to find one that is priced below market value. In this category you should make a reasonable offer, perhaps a little less than full price, and keep the negotiations moving along.
How much should you offer on an Austin area house? I hope this idea that the answer to that question depends on which house you’re asking about makes more sense now. There are some great deals out there these days for conventional and Owner Financed home buyers… And interest rates are low! These conditions will not last forever. Contact Forte Properties today! We can help you understand the values in different Austin neighborhoods, for different houses, and make the right offer to win you the house of your dreams!