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Finding just the right home for some buyers is a difficult task and can be emotionally and physically draining. Once a buyer finds their “perfect home,” only a small portion of the home buying process has been completed.
One of the most important steps in the home buying process is successfully negotiating with the home owner. There are many things that a buyer must decide on when negotiating with the seller. What contingencies do they want to include? When do they want to close on the home? Do they want to have a home inspection?
One of the top frequently asked questions from home buyers relates to price. What should we offer the sellers? Ultimately the buyer is the person in charge of making the final decision on what amount they should offer the home owner.
There are many ways to help home buyers determine how much to offer for a home. Here are some of the the best tips, and also things to avoid, when determining how much to offer for a home!
What Should You Avoid When Determining How Much To Offer For A Home?
Unfortunately there are many home buyers in the market place who have no idea when it comes to determining how much to offer for a home. There are several things that home buyers need to avoid when figuring out how much to offer for a home, otherwise, the probability their offer is accepted is slim to none!
Using Online Home Value Estimates
One of the most popular misconceptions when it comes to home buying is that online home value estimates are accurate. Home buyers who believe this “BS” fact about home buying will be extremely disappointed when offer after offer is rejected.
When determining how much to offer for a home, make sure you avoid at all costs, online home value estimates. Online home value estimates, such as Zillow’s “Zestimate,” are in many cases very inaccurate. In a recent study of Rochester, NY homes that recently closed, almost 40% of the homes that closed on a specific date had “Zestimates” which were $15,000-$20,000 lower or higher than the actual sale prices.
A buyer who believes any online home value estimates will put themselves at a huge disadvantage when it comes to buying a home. It’s important to remember when determining how much to offer for a home, these online home value estimates are often generated by a computer formula and can be very inaccurate.
Don’t Be Fooled By Tax Assessments
It’s important to understand when buying a home, there is a difference between market value, assessed value, and appraised value. One of the biggest thing to avoid when determining how much to offer for a home is using a homes assessed value as an offer price.
The assessed value of a home is used for one thing, to determine how much the property taxes will be. Assessed value has no correlation to a homes market value. There are many real estate markets where the assessed value of homes will be significantly lower or higher than what homes are selling for.
For example, a significant percentage of recently sold Webster, NY homes have sold for much higher than their assessed values. This is great for the local residents as it helps keep the property taxes lower.
What Are The Top Tips To Help Buyers Determine How Much To Offer For A Home?
There is no absolute way to determine how much to offer for a home. Due to the fact that every seller has different reasons and different expectations, as well as the fact that homes are rarely identical, knowing how much to offer for a home can sometimes be tricky. Here are several top tips to help buyers determine how much to offer for a home.
Review The Current State Of The Local Real Estate Market
It’s important that buyers keep in mind what the current state of their local real estate market is when deciding how much to offer for a home. Every real estate market is different. Some real estate markets are neutral, some markets are buyers markets, and some markets are sellers market.
If the local real estate market is a buyers market, it’s possible that many of the homes for sale have been listed for quite some time. It’s fairly common that the longer a home is for sale, the lower the home can be bought for, but this isn’t always the case. In a buyers market, the chance that multiple offers will be received is greatly reduced as there are more homes available.
If the local real estate market is a sellers market, it’s likely that the homes for sale are sold fairly quickly, within the first week of being listed. Buying a home in a sellers market can be more difficult for many reasons. A few factors that contribute to the difficulty level of buying a home in a sellers market include low housing inventory, multiple offers, and a greater number of pre-approved buyers.
Remember when determining how much to offer for a home that the condition of the local real estate market is vital. A sellers market will generally demand an asking price or over asking price offer while a buyers market may warrant a significantly lower offer.
Find Out How Much The Home Owner Paid
Knowing how much the current owner paid previously for their home sometimes has no relation to how much to offer for a home, but, it certainly can. Once a buyer finds the home they want to make an offer on, they should attempt to find out how much the current owners paid for the home.
In some cases, the homeowners could be an original owner that built the house 40 years ago and obviously with inflation and other factors will make the amount they paid an irrelevant number. The same can be said with newly built homes. The cost of new construction is generally much higher than the homes value will be in a handful of years, due to the costs of building. For example, a home that cost $300,000 to build a handful of years ago may only have a market value of $275,000.
The opposite can be true for a homeowner who purchased a home in the past 5 or 6 years. Finding out how much the current owner paid should be relatively easy as the information is still very likely to be in the local multiple listing service (MLS). If a homeowner purchased a home for $150,000 a few years ago and they are trying to sell if for $200,000 now, it would be helpful to know what improvements they made to warrant a $50,000 increase in the value.
Knowing the history of past transactions of a home can be a very helpful piece of information when determining how much to offer for a home.
Ask The Professionals
Buying a home is an experience that many people are not familiar with. When buying a home, it’s critical that buyers have a top Realtor representing their best interests. A top Realtor can help a buyer determine how much to offer for a home, which is a quality tip when it comes to determining the amount to offer for a home!
One of the most important interview question to consider asking potential buyers agent’s is whether they have experience selling homes in the desired neighborhoods. An experienced Realtor who has sold homes in a specific neighborhood should be able to have a good idea whether a home is priced accurately or not simply by walking through the property.
A top Realtor should be honest with their client and inform them if they feel a home is overpriced, priced well, or possibly under priced. Unfortunately, there are some Realtors who will try and up-sell buyers, in order to make a few additional bucks and not advise the buyer the home maybe overpriced.
Ultimately the decision of how much to offer for a home is the buyers and not the Realtors. Even though it ultimately is the buyers decision on how much to offer for a home, taking the advice of a top Realtor is high suggested. Buyers who completely ignore what a Realtor suggests for an offer price is one of the top things home buyers do that real estate agents hate.
Request A Comparative Market Analysis Be Completed
Another excellent tip to help home buyers determine how much to offer for a home is by requesting a comparative market analysis be completed by their Realtor. A comparative market analysis, also known as a CMA, is a very popular method Realtors use to determine market values.
Having a comparative market analysis completed can be very helpful for a buyer when determining how much to offer for a home for several reasons. First and foremost, a comparative market analysis is likely the method a listing agent utilized to determine the list price. If the listing agent has experience selling homes in the area and is one of the top Realtors in the area, the price they listed the home for sale is likely close to the homes true market value.
Another benefit to having a comparative market analysis completed prior to making an offer is it can eliminate possible low appraisal problems. Just because a home is listed at a specific price, does not mean the home is worth that price, even if a buyer agrees to pay the full list price. A comparative market analysis can help reduce the chances that a buyer overpays for a home and that the bank cannot justify the agreed sale price.
A professionally completed comparative market analysis is a tool that can be a huge help when it comes to determining how much to offer for a home. The value range that a comparative market analysis suggests, if done properly, should be relatively close to what a home sells for.
Determine What The Highest Price You Will Pay Is And Stick To It
One of the biggest mistakes that buyers make when buying a home is not sticking to their budget. Once a buyer finds their “perfect home,” it’s important they set what the highest price they are willing to pay for that specific property is.
Buying a home can be an emotional decision. Without setting a maximum price, it’s possible that a buyer will pay more for a home than they can afford. By setting a maximum price, a buyer knows that if the negotiations push the price above that maximum number, it’s time to walk away. While it’s easier said than done to walk away from a “perfect home,” determining a maximum price can be a helpful tip to help determine what to offer for a home.
Determining how much to offer for a home is a big decision and can be tricky. There is no absolute formula or method to help buyers determine what the purchase offer price should be. The above tips should make deciding what to offer for a home much easier and less stressful. Ultimately it is the buyers decision, however, by choosing a top Realtor and having the proper tools and information, buyers will be more comfortable with their decision.
Other Top Home Buying Resources
If you’re buying a home in Rochester, NY, these tips to help determine how much to offer for a home will give you a huge advantage over your competition. A buyer who has the “know-how” when it comes to determining how much to offer for a home will greatly increase their chances of successfully getting their “perfect home!” If you haven’t selected a top Rochester, NY realtor yet, please contact me, and I’d love to share my experience and expertise about buying a home in the local Rochester real estate market!
About the authors: The above article “Tips To Help Determine How Much To Offer For A Home” was provided by the Keith Hiscock Sold Team (Keith & Kyle Hiscock). With over 30 years combined experience, if you’re thinking of selling or buying, we’d love to share our knowledge and expertise.
We service the following Greater Rochester NY areas: Irondequoit, Webster, Penfield, Pittsford, Fairport, Brighton, Greece, Gates, Hilton, Brockport, Mendon, Henrietta, Perinton, Churchville, Scottsville, East Rochester, Rush, Honeoye Falls, Chili, and Victor NY.
Visit our website at www.HiscockHomes.com.
© 2015 – 2016, Kyle Hiscock. All rights reserved.
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