So, you’ve made the decision to buy a home, and after countless hours of searching, you have found the home that suits your needs beautifully. Everything in the house is great, it has the number of bedrooms and baths you desire, the kitchen is nice and spacious, and the location simply couldn’t be any better. Now you have to make an offer. But, how does one make an educated offer on a home?
Generally, buyers will make an initial offer that is 5 to 10% below the asking price. While this is rarely accepted right off the bat (although it has been known to happen), it serves as a starting point for negotiations as the seller will often come back with a counteroffer. At this point, you will have the option to accept the counter, make a counteroffer of your own, or simply walk away and continue your search. There are, however, some factors that you should take into consideration when making the initial offer.
In a depressed real estate market where there’s a high inventory of homes for sale, buyers can choose to make an even lower initial offer. In such a market, sellers don’t get many bids for their property and are more inclined to accept less for their house – especially sellers who, driven by circumstance, need to sell and sell fast.
A depressed real estate market is a buyer’s market and provides an opportunity for buyers to acquire real estate at relatively deep discounts. So make a low-ball offer, as much as 20 to 25% below the asking price, and see how the seller responds. Who knows? He or she may just accept it – putting you in your new home with equity right off the bat!
In a hot market, however, the inventory of homes for sale is low. Sellers often get multiple bids on their property forcing buyers into having to match the asking price, and sometimes even offer a premium to snatch the property away from other candidates.
In such a market, it’s important not to fall too deeply in love with the home. Doing so may cause you to settle for a price that is beyond what your monthly budget can muster which, in turn, may result in financial woes on down the road.
You may also want to consider enlisting the services of a real estate agent. They offer valuable information on the current market as well as provide comparable home sales. By virtue of the MLS (Multiple Listing Service) system, only accessible to licensed real estate brokers, an agent can look up prices of homes that recently sold in the area and by comparison, determine property value for homes nearby. Real estate agents will also provide valuable help with other aspects of the home buying process, all at no cost to you. In most instances, buyer agents split the sales commission with the sellers.
Making an offer on a house doesn’t have to add to the overwhelming stress of buying a home. Just put in some legwork in order to be armed with market knowledge and information that will ensure you get the right home for the right price. Using the services of a real estate agent is a good idea. The realtors’ experience in buying and selling real estate has often proven to be a substantial benefit for the buyer.
This guest blog was provided by Jolenta Averill a Madison real estate agent servicing home buyer and sellers in the Madison WI area. You can learn more about Jolenta by visiting her Madison homes website or read her Madison homes blog.