Determining What to Offer

In this market, no one is willing to offer list price - not that they should be expected to. The sellers know this, and almost always have some padding in their list price to allow for the inevitable "lowball" which will take place in an offer situation.

If you are an investor and have no emotional connection to the property you wish to purchase, perhaps throwing lowball offers at the wall to see what sticks is a valid strategy. A friend of mine once told me that if he gets 1 offer out of 10 accepted, he is doing well.

But most of us in this market are looking for a place to call home. The property we choose, we searched for diligently. We walked in the front door and knew "this is it". We went home mentally firguring out where the furniture would go.

To those folks, making an offer that accomplishes not only getting a good price, but actually GETTING the home, is of paramount importance. How do we go about structuring an offer that is a good deal for us, but still gets us the home we want?

List price can be very deceiving. There are as many strategies for setting list price as there are people selling their home. List price is a guide, a parameter. But there are other factors to look at:

1) Recent comparable sales - Not only do we not want to pay more than the market says the home is worth, but if you are getting financing, the home must appraise at the sales price. The bank determines value by looking at similar homes, within proximity, and what they sold for. We must do the same in determining the properties market value today - not 6 months ago, or a year ago, but today.

2) Assessed value - to a lesser extent, we look at assessed value. This number is generated by the tax authority, and is the number on which property taxes are based. Assessed value is almost always less than market value...so if we see a home selling for less than assessed value, it is probably a steal.

3) What did the seller pay for them home? Do they have equity? How much of a mortgage do they have to cover? - All of these questions speak to not only the Sellers desire to sell the home, but their ability to do so at a lower price. Many people are willing to deal, but are going to have to cover their mortgage, and have a little left over for their next place. Folks with lots of equity are prime candidates for being able to negotiate.

4) Is the home a rental, second home, or already vacated? Vacant properties are often easier to get down on price than an owner occupied home - the owner has generally already moved on and ready to be done with the property.

The more information we have on the property, the situation and the seller, the better we can ascertain what a likely sales price will be - and it is sometimes very different than the list price.

And although people often believe that means ammunition to offer lower than list - it can work in reverse as well. Those numbers often tell us that the property is very undervalued - and we should move - quickly! Those dont last long.