FAQ'S: Step 5 to Buying Your New Home - What's a Fair Price?

By
Real Estate Agent with Evers & Company Real Estate, Inc. AB95346

Question:  Now that we've found the perfect place, how can I figure out how much to offer the sellers to buy it?

Answer:  There is no magic formula for coming up with the perfect price to go with your perfect home. There will be two important factors.  First, how does the asking price stack up to the actual "market value" of the property?  And second, are you the only offer on the table, or is there competition from other buyers who share your good taste?

Once you decide on a house, I will start by putting together the history of sales for similar homes in the neighborhood or even the same street.  I will give you information about the differences in each one - was the kitchen renovated?  Was there a first floor powder room?  Was the lower level finished?  In short, what did these homes have that your new home lacks, and vice versa.  This will help you determine whether or not the sellers' asking price is reasonable or just way optimistic.

If you are the only offer on the table, it may be difficult to resist the urge to negotiate for a lower number, even if their price is at or below the recent comparable sales. Here are some important considerations:

  • If the home was just listed, the sellers might be less willing to negotiate than they will be after it's been on the market for a few weeks or months.
  • If you go in too low, they may not take your offer seriously and reject it outright. 
  • If they do decide to enter into negotiations with a counter offer, competition could show up while you are going back and forth.  You could become the warm up act for what could become the main feature - the new buyers' offer!

In competitive situations, especially if you really, really want the place, you could be tempted to offer more than the asking price, even throwing caution to the winds and pay more than the research shows the house is worth.  Or, as frequently happens these days, you could decide not to participate in a nasty bidding war and move on to find another new home. 

There are some listing agents who deliberately price below market in the hopes that the property will get bid up.  So the focus really needs to be on the market value rather than the list price.

Of course, price is not the only factor.  The terms of the offer you make will also influence how attractive it could be for the sellers, whether or not there are other offers on the table.  And that will be the topic of Step 6!  So stay tuned!

 

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Topic:
Home Buying
Location:
District of Columbia District of Columbia County Washington
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Ambassador
741,521
Hannah Williams
Re/Max Eastern inc.

Pat.. Very good advise for a buyer !

June 02, 2012 10:07 AM
Rainmaker
391,388
Kristine Ginsberg
Morris County, NJ Stager
Morris County, NJ: Elite Staging and Redesign, LLC

Pat - what a great post on how to decide on what you're going to offer on the home you love. So many people buy homes on emotion, this is a great outline of factors buyers need to consider before they make an offer!

June 02, 2012 10:09 AM
Rainmaker
484,580
Curtis Van Carter
Napa Valley's Broker Extraordinaire in Yountville
Coldwell Banker Brokers ofthe Valley, Yountville Napa Valley

Patricia

Hopefully you still have a few homes where a buyer can still negotiate in this almost insane market. Don't we all pine for the good old days when this was the norm?? cheers cvc

June 02, 2012 10:20 AM
Rainmaker
1,517,486
Dorie Dillard
Realtor-Canyon Creek- NW, Austin TX Homes For Sale
Coldwell Banker United Realtors

Good afternoon Patricia,

I like your approach to helping buyers consider and weigh in what their offer should be. There are many factors to consider and you have outlined them well!!

June 02, 2012 11:11 AM
Rainmaker
582,697
Susan Neal
Fair Oaks CA & Sacramento Area Real Estate Broker
RE/MAX Gold, Fair Oaks

Hi Pat - What a wonderfully clear way to explain the process of pricing for offers!  In our area, we have found ourselves in a very tight inventory situation.  Very simply - there just isn't much available, and what there is gets multiple offers.  So those folks who think they will underbid to pick up a bargain are having trouble being taken seriously.  Checking comps and truly comparing them is more important than ever right now.

June 02, 2012 11:32 AM
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Patricia Kennedy

For Your Home in the Capital
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Additional Information

Pat Kennedy -- author of The Irreverent Guide to Real Estate -- gives you a look at life on the streets as a real estate broker in our nation's capital. And her blog is peppered with great advice combined with humor!