How To Make A Good Offer On A House
A visitor to the Tallahassee Real Estate Website this morning asked "what is considered a good offer on a house."
While this is a simple question, it is one that I wish more buyers would ask. Too many buyers do not think about the process of buying a home, and it leads to them either spending too much money, buying the wrong house, or losing out on the house that was most right for their needs.
So follow along and I will share my 23 years of real estate experience and explain to you how to make the smartest offer possible when buying a home.
What Is A Good Offer On A House
There are many things a buyer (and his real estate agent) must know before entering into negotiations to buy a home. To understand this, let's first make two assumptions:
- The buyer really wants the home in question
- The buyer really wants to get a good deal
It is important that we really internalize these two assumptions, because they will impact our methodology for determining the best approach to the homeowner. If we do not absolutely love the home, then we will be a little less concerned about it losing it to another buyer, thus we'll be more inclined to focus on the good deal.
The contrary is true as well. If we "must have" the home, then a good deal starts with making sure we have the winning bid. Make sense?
So the first point in negotiating to buy a home is to understand that we define "good offer" differently for every house that we decide to buy, and our desire to own it will ultimately be our guide when it comes time to initiate a real estate contract.
Making A Compelling Offer
The most often used tactic for amateur home buyers (and those working with a weak real estate agent) is to make a low-ball offer on a home. Their thinking makes sense (to the uninitiated), they "want to see what the seller is willing to do" and they "don't want to leave any money on the table."
Unfortunately, this approach seldom works for (and often works against) the goals of the buyer.
The key to winning a real estate negotiation is to start by writing a compelling offer.
For a seller, that means make sure your asking price is so competitive that you will have people competing to buy your home.
For a buyer, that means make an offer that is so strong the seller is scared to lose you as a buyer.
Whether you are a buyer or a seller, a compelling offer "compels" the other party to soften on their stance out of fear of letting a good one get away.
Why Homes Sell Near Their Asking Price
When we study the average sales prices versus average asking price in the Tallahassee MLS over time, we find that it does not vary much, regardless of market conditions.
When the market was on fire and sellers ruled, homes sold for 97% (on average) of their asking price.
When the housing bubble burst and buyers were few and far between, homes sold for 96% (on average) of their asking price.
So how exactly does that work?
Only Properly Priced Homes Actually Sell
Sellers who are asking a higher price than the market will bear face two insurmountable obstacles:
- Buyers who view their homes do not like them. They are being compared with homes that are nicer and belong in the higher price range. Thus the number of people who would like the home are viewing lower priced properties and do not even know that it is for sale.
- The sellers themselves are not yet motivated to sell their homes at true market values; this means that if a buyer were somehow able to discover this over-priced wonder and make a market-value offer, the seller would counter the offer with something the buyer would not want or be able to pay.
It is a very rare occasion when a home sells above its appraised value.
The Value Of Using The Right Home Buying Process
At Joe Manausa Real Estate, we have created a process that saves our buyers money because it helps them avoid the circumstances that cause many buyers to get into trouble.
It is this process that ensures our homebuyers will know how to write a compelling offer when they discover the right home, which they are very likely to do.
We show them how to avoid even looking at overpriced properties to ensure they do not try to negotiate with an unmotivated seller.
Regardless of where you are, take the time to find the right real estate company and the right real estate agent before you start the process of buying a home. If you do, you will likely get a better home and end up saving tens of thousands of dollars.
And if you are in the Tallahassee real estate market and would like our help so that you make a good offer on a house, please drop me a note and we can schedule a time to start you on a successful home buying process.