Home sellers use comps to help them determine their asking price, while you can use comps to figure out how much to offer on a house. You can find comps by looking at online real estate listings, but for more accurate and detailed information, you’ll want to rely on your real estate agent.
How do you determine your offer price on a house?
Here are 10 questions to ask as you determine your offer price on a house. What is the market value? In short, market value is what someone is willing to pay for a home. After looking at all the recent comparable sales and factoring in current market conditions, this is the price both the seller and buyer can agree on.
How much should you offer on a house below the asking price?
Use that as your guide to home buying. “The comparables should be your go-to on a first offer,” says Shane Lee on behalf of Realtyhop. “If, for instance, a similar property in the same neighborhood is quoted $10K less, then it makes sense for you to go $10K below the asking price.”
What to ask when making an offer on a house?
As long as the homework is done right and the ducks are lined up, you will feel confident in your initial offer. Here are 10 questions to ask as you determine your offer price on a house. What is the market value? In short, market value is what someone is willing to pay for a home.
What should I look for when buying a house?
First, determine whether the house’s current asking price is fair just as it stands right now. To assess this, get your agent’s help. Your agent can find recently sold comparable homes, known as comps for short, to help you assess this home’s true value.
How much should I offer on a house?
Some real estate professionals suggest offering 1% – 3% more than the asking price to make the offer competitive, while others suggest simply offering a few thousand dollars more than the current highest bid.
How do I know how much to offer?
Figure out how much you can afford. ... Understand how the market looks. ... Research how much comparable homes have sold for. ... Get a sense of the property's condition. ... Check how long the listing has been up. ... Decide where your offer should fall.
What is considered a lowball offer?
A lowball offer is a slang term for an offer that is significantly below the seller's asking price, or a quote that is deliberately lower than the price the seller intends to charge. To lowball also means to deliberately give a false estimate for something.
What is a respectable offer on a home?
There's no reliable formula here. Typically, a low-ball offer is at least 15% to 20% lower than the asking price: offering $240,000 on a home valued at $300,000, for example. But sometimes a seller may be asking too much. If you can back up your offer with market data, you're making a serious offer.
Can I offer below asking price?
Offering 5% to 10% below the asking price Do ample research so you can argue what the home's true market value is. Many agents will recommend slightly higher listing prices with the assumption buyers will want to negotiate down, so don't be afraid to try to snag a deal — especially if the home didn't sell quickly.
How do you know what to offer?
Below are 4 questions you can ask yourself (and maybe your agent) to help you determine the best price for your offer.What have similar homes sold for?How long has the home been on the market?What's the condition of the home?How flexible are you on price?Final Thoughts.
Can I offer 20k less on a house?
However, there are exceptions, so as long as you are not absolutely in love with the property and can afford to let it go, it's usually worth it to try for the lowest justifiable offer you can make, even 10 or 20% under asking.
Can you offer 10 below asking price?
Start low Around 5% to 10% below the asking price is a good place to begin. Make your offer in writing as there's less chance for confusion and only offer more than the asking price if you know that someone else has already offered that much.
How do you get a seller to accept a low offer?
How To Get A Seller To Accept Your Lower OfferConnect with a local Realtor. ... Learn the seller's motivation. ... Make your offer attractive financially. ... Fine-tune your contingencies. ... Be prepared to negotiate.
Can I offer 15 below asking price?
Can you offer 15% below asking price? Yes of course you can. The truth is you can offer whatever you choose on a property, but you have to be careful to not give too cheeky of an offer or the seller may think you're rude and disregard you completely.
Can I outbid an accepted offer?
You may have heard the saying "buyer's remorse," but did you know that there is actually a legal way to back out of an accepted offer? If your Offer Acceptance Clause includes contingencies and earnest money, then it's perfectly legal for buyers who want their deposit refunded.
Who pays for closing costs?
Closing costs are paid according to the terms of the purchase contract made between the buyer and seller. Usually the buyer pays for most of the closing costs, but there are instances when the seller may have to pay some fees at closing too.
What to know before drafting up a house offer?
Before you start drafting up offers, understand your motivation for buying a house – especially if you’re a first-time homebuyer. Do you plan to stay in the area for 5-10 years? Are you looking to put down roots? Or are you thinking more short-term, with a likely plan to sell in a few years when the market turns around?
How to find comps for a home?
You can find comps by looking at online real estate listings, but for more accurate and detailed information, you’ll want to rely on your real estate agent. This is because listings typically state the asking price of a home, but not the final sale price, which is more indicative of the market value.
Why do you need a pre-approval for a house?
This pre-approval creates leverage for making a firm offer based on current finances and a willing lender. Your pre-approved status is a signal to the seller that you can close on the house if you make an offer.
Why is it important to go through the loan approval process?
Going through the loan approval process provides good information to help you understand the demands on your budget. And to be clear, just because the lender agrees to lend you a specific amount does not mean you should offer the full asking price on a house. Put all the numbers on the table.
What is a buyer's market?
A buyer’s market is an area where more houses are listed for sale than active buyers ready to purchase them. This gives buyers the advantage, especially with a motivated seller, and is undoubtedly the best market to find deals. A seller’s market has eager buyers competing for houses as soon as they are listed for sale.
Can you make an offer lower than the listing price?
If any one of those three key factors is in play, you can feel comfortable making an offer lower than the listing price. Your realtor can help you determine if your offer is reasonable.
Why do you make a high offer on a house?
Of course, another perfectly valid reason to make a high offer is when you just really love the house. Or, if for whatever reason — maybe it’s next door to your mom or best friend — you really care about buying this specific home, and you don’t expect a replacement to come along any time soon… or ever.
What goes into a home’s value or price?
Before determining how much to offer on a house, it’s helpful to have an understanding of what actually goes into a home’s value. Lots of factors are involved — and different housing markets will have their own unique quirks — but consideration will always be given to the following:
Why do you come in low on a house?
You might also come in low if the house has been on the market for a long time. Or you might try a low offer if the sellers have already reduced the price at least once. That said, bidder beware: This approach could backfire. Many sellers have a floor they’re willing to accept, and an offer below that number simply won’t get you anywhere.
What to do if you are in a balanced market?
If you’re in a balanced market or a seller’s market, you might make a list-price offer. Consider offering list price if you really like the house, and think — based on those comps — that the asking price is fair.
Why is a house priced lower than its true value?
Consider that a house priced lower than its true worth could be a tactic to get attention from more buyers — thus creating a competitive, multiple-offer situation that can drive bidders to get emotional and can sometimes lead to an ultimate sale price much, much higher than that tempting-looking list price.
What is the importance of having good information on the current market value of a home?
Bottom line? Having good information on the current market value of a home is essential in determining how much you should offer.
What are the basics of a home?
The basics of the home itself, including its age, construction materials, square footage, amenities, and so on
How to figure out how much to offer?
To figure out how much your initial offer should be, you have to work backwards from how much you're willing to pay when all is said and done. Analyze comparable sales, market conditions, property conditions and financial considerations along the way. Sound difficult? Not really. As long as the homework is done right and the ducks are lined up, you will feel confident in your initial offer.
What to do if there are multiple offers?
If there are multiple offers, don't expect to negotiate the price. Once again, have your buyer’s agent ask plenty of questions: Will the sellers entertain an escalation clause, or do they simply want your highest and best offer? Are they mostly motivated by price or are there other aspects of the contract that mean more to them? For example, would they like a leaseback? Would they prefer an as-is offer?
What is multiple offer real estate?
Multiple-offer situations are the pressure cookers of residential real estate. If you aren’t careful, you may feel obligated to do whatever necessary to win the bidding war and ultimately end up with buyer’s remorse. Trust in your research from reviewing the comps and determine the price you're willing to go up to without losing sleep regardless of whether you win.
What is market value?
In short, market value is what someone is willing to pay for a home. After looking at all the recent comparable sales and factoring in current market conditions, this is the price both the seller and buyer can agree on. Market value is not a specific number, but a range. At the low end, you're getting a great deal, ...
Can you sell a house if it's overpriced?
But never assume. Even if a house has only been on the market a week and you feel it's overpriced, there’s no harm in offering what you feel is reasonable. The only way to really find out how bad the owner wants to sell it is to put an offer on the table.
Can you ask for replacement after inspection?
While some buyers will assume any of these items can be negotiated after the home inspection, in many areas it's common practice that you won’t be able to ask for replacement or a credit to do so simply based on the age of a unit. Factor these expenses into the initial offer price, or plan for budgeting monthly.
Is market value a number?
Market value is not a specific number, but a range. At the low end, you're getting a great deal, and at the high end you're paying top dollar. Where you end up on the market value spectrum is determined by a combination of market conditions, motivation and financial comfort.
What to do if your offer differs substantially from the asking price?
If your offer differs substantially from the asking price, you should consider including a letter summarizing the market conditions or comparative market analyses that led to your offer. The seller’s agent is legally bound to provide anything you present in writing to the seller.
How long does it take to get a home under contract?
— the contract is updated accordingly and the home is officially “under contract” and the listing will typically show the sale as “pending.” Assuming all goes well with contingencies and financing, and depending on your close date, you’ll be a homeowner in about 30-45 days.
What does a real estate offer contain?
While some elements of your offer will vary based on your location and market conditions, a few basic items can be found in all property purchase offers:
What does comps mean on Zillow?
Have your real estate agent run “comps” or comparisons, which will show you what similar homes in the area are selling for and/or have sold for in the recent past. The comps will give you a feel for whether the seller is asking a reasonable price for the home. If you’re searching on Zillow, each home listing includes a section showing comparable homes for sale. The information could help you shape your offer if the price of the home you’re making an offer on is considerably higher than the comps.
What does it mean to back out of a contract?
Backing out of a contract that has no contingencies or when the deadline for a contingency has passed may mean that you lose the earnest money you put down when you made the offer.
What happens if a seller accepts an offer?
If the seller accepts your offer, they will sign the purchase and sale contract. If they decline your offer, negotiations end.
How to level up your search on Zillow?
If you’re serious about shopping, you can level up your search by using technology to alert you to new listings that fit the home characteristics you’re looking for in the neighborhood (s) of your choice.
How to make an offer on a house?
Making an Offer on a House: A General Overview. After you’ve found your dream home, you’ll craft a competitive offer as soon as possible and submit to the seller. The seller can then negotiate with one or multiple buyers, or accept an offer.
What is an initial offer on a home?
Your initial offer on a new home is one of the most important factors affecting whether you’ll be moving in over the next month, or re-starting your search. You may be tempted to offer below asking price, but before you do, consider the market and the home’s condition. Updated July 18th, 2019. Making an offer on a home can be fast-paced ...
What happens after a seller accepts an offer?
After a seller accepts an offer, both parties sign a purchase agreement and enter the contingency period where you complete an inspection and negotiate specifics like closing costs, repairs needed, and exact closing date.
How to make an offer without an agent?
To make an offer without an agent, complete a home purchase offer form available at your state’s realtor’s association and submit it to the listing agent or the seller themselves if it’s for sale by owner (FSBO). This form lays out specifics of your offer and paves the way for negotiations with the seller.
How does an offer work?
An offer is legal after both parties have signed. It is common for some negotiation to occur prior to the seller signing off on your purchase offer. Once signed by the seller, the offer becomes a legally binding purchase agreement. However, contingencies are typically built into the contract by the buyer, allowing them to back out of the sale. These may be reasons like poor results of a home inspection with the seller unwilling to fix the defects, being unable to sell their own home prior to closing, or other “outs.”
How long does it take for a seller to back out of an offer?
A seller can back out of an accepted offer during the usual five-day attorney review period, or if they have added a contingency or addendum to the contract that allows them to do. This may allow them to void the contract if they cannot find a new home to purchase before closing, etc. without consequence.
What does it mean when a home is lowballed?
In general, lowballing is when the proposer has no justification for a lower priced proposal.
What to examine when buying a home?
Overall, examine if the price you’d need to pay to get the home exceeds its desirability and functionality.
How much should you offer over the asking price?
While every listing and situation is different, paying above asking price is very common. So buyers should be ready to consider it if they’re making an offer.
How to convince a seller to sell your home?
You might also try giving the seller a personalized letter along with your offer explaining why you love the home, Forte adds. In some cases, knowing the home will be going to a person or family who will cherish it can be enough to sway a sentimental seller.
What happens when mortgage rates are low?
When rates are low, it reduces the amount you have to pay in mortgage interest each month. This means you can afford a larger mortgage payment and thus, a more expensive home price.
What does Hollander say about low interest rates?
Hollander agrees, saying, “Low interest rates combined with increased working from home have dramatically driven demand upward for single–family homes in many areas and reduced inventory.”
How to improve your credit score?
“First, save up for as big of a down payment as you can afford so that you don’t have to borrow as much money and you can avoid having to pay private mortgage insurance ,” Singer recommends. Also, aim to improve your credit score and lower your debt-to-income ratio.
What does low appraisal mean?
Low appraisal: the danger of offering too much for a house. Making too high of an offer can come back to haunt you. “You may not qualify for your mortgage loan, because the loan won’t appraise for the amount you offer,” warns Hollander. If the home doesn’t appraise for the full purchase price, you have to come up with the difference in cash.
How to get the best offer for a home?
Knowing the local housing market, the seller’s situation, and the home’s history can all help you craft the best offer possible. Do your research and work closely with your real estate agent to get all the info you can. Your agent can also consult with the seller’s agent to get more information about their motivations and ideal timeline.
How to find out about a home?
You can find a lot about a home in its listing and public property records. If you attend an open house, you can also ask questions there. The listing agent or someone from their brokerage will be on site.
What percentage of money is considered earnest?
Earnest money deposits can vary but are typically in the 1 to 2 percent range. This can help your offer stand out from others and will show the seller you’re serious.
What is pre-approval for a mortgage?
A pre-approval is a dress rehearsal for your mortgage. It uses your actual income and credit info to calculate how much home you qualify for and provides proof that you’re qualified to buy the home.
How to get a good idea of what other homes are selling for?
This will give you an idea of what similar properties are selling for and point you in the right direction.
How to start a home search?
Start by browsing listings online, setting up listing alerts on various real estate platforms, and working with your real estate agent to schedule tours and attend open houses.
When making an offer on a house, should you include a pre-approval letter?
Always include your pre-approval letter when making an offer on a house. This shows sellers that you have the financing necessary to follow through on your offer.
How long does it take to get a cash offer on a house?
Underwriting a mortgage is one of the lengthiest steps in the timeline of buying a house. It can take 30 to 60 days. And there’s always the chance that some change in the buyer’s finances since pre-approval will cause the lender to deny them the loan.
What is a cash offer on a house?
A cash offer is when a home buyer offers a seller the entire cost of the house, with no mortgage or any other type of financing involved. Buyers often prefer cash offers, even if they’re lower than an offer from a buyer with mortgage pre-approval.
Why do you offer cash over mortgage?
The reasons are simple: they’ll close sooner (meaning they’ll get paid sooner), and without the mortgage underwriting and appraisal process there’s less of a risk that the deal will fall through.
Why do sellers' eyes light up when there is a cash offer on a house?
That’s because without a mortgage lender involved, they can close on a house faster without any concerns about the buyer’s financing falling through. But how does a cash offer on a house work?
Do you pay interest on a house when buying with cash?
And, of course, without a mortgage, cash buyers don’t pay any interest , saving tens of thousands of dollars over the years.
Do cash buyers need a mortgage?
Cash buyers may not need a mortgage lender, but they should still find a real estate agent to work with. Agents are invaluable in the nitty-gritty of negotiations, drawing up your purchase agreement, getting an appraisal, and more. And, as always, the seller pays the agents’ fees, so there’s no reason not to take advantage of an agent’s expertise.
Can you offer cash on a house?
Cash buyers can make an offer on any house. With some types of mortgages, like FHA or USDA loans, buyers are restricted to certain kinds of houses in certain locations or in a certain condition. But cash is always welcome anywhere.
How many comps are there to determine the value of a home?
In order to determine a home’s value using comps, three to five comps are collected and grouped together. Then, a report is generated determining a market value, based on the sale prices and details of these homes. You could get two types of reports, based on who is doing the calculations:
What are the factors that affect the value of a home?
Here are key location factors that can increase a home’s value: 1 Proximity to urban core 2 Cul-de-sac location or dead end (less traffic) 3 Farther away from railroad tracks, airports, freeway noise and power lines 4 Near parks or green spaces 5 Sidewalks and walkability 6 Proximity to public transit 7 Waterfront, water or mountain views
What is market value?
Simply put, market value is what a fully informed, willing buyer would pay for a home. It’s an amount informed by prices other buyers have recently paid for nearby, similar homes — called comparable homes.
What are comps in real estate?
Comps (short for comparables) are similar, recently sold properties that agents and appraisers use to help determine the value of a home. Comps are used for multiple purposes: to determine the listing price of a home about to list on the market, to help buyers determine a fair offer price and to help an existing homeowner find out the current value of their property and potential equity.
Why is buyer demand higher?
Buyer demand tends to be higher when long-term interest rates are lower, as low interest rates give buyers more purchasing power. Conversely, when interest rates are high, buyers may have a harder time paying off other debt, which can impact their ability to buy a home. When demand is lower, housing prices follow suit.
What should a comp have?
Home size: Comps should have the same number of bedrooms and bathrooms, same number of stories and a similar square footage. The lot size and presence of a garage or basement should be similar, too. Features: Comparable homes should have similar amenities and level of finishes and updates.
Is home value subjective?
Home values are somewhat subjective and always changing, so understanding how home values are calculated and what factors impact them can help you make a sound real estate investment. Buyers should always do their research, taking time to determine the market value of a home before making an offer.
