How Much Should you offer on a House in Today’s market?

July 27, 2011 by Mikel DeFrancesco · Leave a Comment

How Much Should You Offer on a Home??
Is by far and away, the #1 question we receive. It seems like every buyer has a friend, family member or co-worker with some advice, often contradictory. We’ll investigate several very common but incorrect ways to find the right offer price, as well as the best way to ensure the right offer to get the home you want, at the most advantageous terms and price possible! Let’s start with the Wrong ways to determine your offer:
Blanket Discount: Many buyers are advised to offer a blanket discount off asking price, whether it be 5%, 10% or any set amount using the asking price as the starting point. Why is this such a bad strategy? It has no method for taking into account the asking price of the Real Estate you’re examining vs the fair market price! So let’s say you’re advised to offer 10% under asking on a $500K house, so you come in at $450K. What’s the harm? Well, what if the house is only worth $400K? You have now overpaid by $50K. On the flip side, what if the house fits all your criteria and is more than fairly priced, in fact you’ve seen many similar properties asking $550K and selling in the $520K-$525Krange? Well you would still have found a great deal on a home that fits your search, and is a great deal to boot!
National Site Estimates: Buyers love to view these national sites that offer estimates on a particular property. The reason is that it offers a “ Number “ for the Real Estate, it’s a figure that you can point to, work off of or agree or disagree with. What is the problem with that? Well, horrible inaccuracy is the issue. The fact is that even though you may see that “ Magic Number “ of $520,000 … in the small print it discloses that not only is that number just the midway point between $410,000 and $630,000, but that the actual selling price is within that range slightly over 50% of the time!! If a broker or appraiser were off 20% of the value 50% of the time… we’d be out of a job immediately. In fact, even a casual home buyer can come within a $200,000 range easily. The fact is that just by looking at a listing, or a property description you, yourself can be far more accurate than the Estimation engines used today. In years to come they may become more accurate but for now they are useless.
Town Asessments: The town assessments have the same issues as the National Estimate sites ( in fact, the national estimates are all based on % of town assessments for recent sales in that town!! ). Why doesn’t this work? For starters, town records are often off drastically. Additions, basements, house size and more are often incorrect. This results in a domino effect where bad data from sales, results in bad estimates when trying to estimate a different house that may also have incorrect data. Put it this way.. if you never overestimate how poorly the information that some towns have on their housing inventory… you will not be disappointed. Also, town info does not take into consideration some of the most important things in MA real estate; Location, Curb Appeal, Layout, Condition etc…
How to get a proper Real Estate value that you can use to base an offer on? Have a qualified Realtor, familiar with Local Real Estate provide you with a comparable market analysis for the home. Most of the time people assume a proper market analysis or CMA ( Comparative Market Analysis ) is only done for a home seller… why not have it done for a purchase as well? A proper CMA on a Real Estate opportunity will examine “ Actives “ which are other homes currently on the market in the same price range or with the same amenities and appeal. Keep in mind, the subject home may/should look better than these homes, because they are on the market, but still have not found a buyer. “ Pendings “ which are homes that in that approximately 2 month period between having an accepted offer, and the actual closing. These are useful because they are very recent, but the final price is not known until it is recorded. The final way to find the proper price for your Real Estate is to compare it to the very best comparables: Recent Solds. By looking at other Sold homes in the Real Estate Market, you can compare the home, what it was priced at, what it sold for, and how long it took to get there. Obviously you will put your own value on the home after seeing such a report… but it is important to know what it is truly worth.
So the answer to finding what to Offer on a House: Get a Free Market Analysis from a local Realtor familiar with the home… and do your best to get it for less than that!!
We offer free advice on how to hone your MA real estate property search, maximize your offer and your chances of getting a home for the best price, as well as suggestions on comparing communities and amenities. You can visit us at www.SuccessInMass.com or call 617.755.8272 for instant and direct access to the MLS or for a price opinion of any home currently on the market.
If you want a custom list of Local MA Real Estate for sale, A Free MLS Search set up to email you matching properties as they come on the market, please contact me. I can always be reached directly for advice or guidance – mike@successinmass.com or at our webpage www.SuccessInMass.com, which contains direct access to the MLS and enhanced search that will make your Real Estate Search more efficient and guaranteed to provide better results.