How Much to Offer on a House in 2020
Looking for a new home is exciting. When you find a home you want to call your own, the next big decision you need to make is how much to offer on a house. Should you offer less than the asking price or more? Should you ask the seller to contribute to the closing costs? The answer isn’t a simple one. It will depend on a number of factors that you need to consider to choose the offer price that will result in the best outcome. Here are the most critical factors you need to weigh before moving forward.
The homeowner will be concerned about the strength of your financial position. There’s nothing worse for someone selling their home than having an offer fall through because the buyer couldn’t get a mortgage. If you have received a pre-approval from a lender, the seller will be more likely to negotiate with you rather than someone who can’t demonstrate their ability to close the deal. If you’re not in a strong financial position, when you think of how much to offer on a house, think high.
If you haven’t chosen a lender, your real estate agent can help you find one. Becoming pre-approved before you even start your home search is the best way to ensure that neither you nor the seller will be disappointed.
If you have the income to qualify for a mortgage, but you’re short on money to put toward closing costs, you may be able to write an offer asking the seller to contribute. If you take this route, you may be able to make a higher offer and then offset that with the seller paying some or all of the closing costs. You need to be in a strong negotiating position to make this type of offer.
The easiest type of offer for a seller to accept has no contingencies. However, that rarely happens. Some contingencies are relatively standard. For example, most buyers want the sale to be contingent on a favorable home inspection. If the home inspection reveals defects in the home, the buyer and seller can often come to an agreement on how to handle them. If they can’t, the buyer can walk away from the deal if they have the right contingency in their offer.
Another common contingency makes the sale contingent on a successful Title investigation. If that investigation uncovers liens against the property that the Title Company can’t clear, the buyer has the right to rescind the offer without a penalty.
Other contingencies make the sale more complex and may hurt your chances for quick acceptance. Sometimes buyers need to sell their existing home before they can close on the new one. Since the seller has no idea how long it would take for you to sell your home, this makes your offer less attractive.
Your real estate agent can help you evaluate the indicators in your real estate market to determine how the market is trending. Here are simple descriptions of a buyer’s or seller’s market.
In a seller’s market, there are more buyers than there are homes on the market. That makes the market highly competitive as multiple buyers may make an offer on the same home. In a seller’s market, homes can often sell for more than the asking price, and they often sell very fast. If you’re in a seller’s market, when you think about how much to offer on a house you need to be prepared to make an offer over asking if necessary and do it quickly.
A buyer’s market is the opposite of a seller’s market. Many people are trying to sell their homes and there aren’t that many buyers looking. In a buyer’s market, homes don’t sell quickly and may stay on the market for a long time. Sellers are typically more open to negotiating and you may be successful in purchasing the home below market value.
There are times when a homeowner has an unrealistic idea of what their home is worth. If they don’t get the right advice from a professional real estate agent, they may insist on listing their home far above market value. In that situation, you need to be prepared for the fact that you may not reach an agreement with the seller. In general, you shouldn’t pay over market value for a home. Your agent will help you negotiate, but if the seller won’t accept a reasonable offer, the best thing to do is just walk away.
Your real estate agent can tell you the average number of days homes have been staying on the market in your area. That average will change depending on the type of market you’re in. If a home has been on the market longer than average, the homeowner will be more likely to negotiate. If you happen to see the home the day it enters the market, the homeowner may be reluctant to negotiate regardless of the type of market.
You need to consider how the home compares to similar homes in the neighborhood when you decide how much to offer on a house. Your real estate agent can help you by preparing a Comparative Market Analysis (CMA) for the house. If the house is in much better or worse shape than others in the neighborhood, that will affect its market value.
The market value of a house is the amount someone is willing to pay for it. Looking at homes that have sold in the area will help you and your agent identify a market value that should be reflected in your offer.
Choosing the right offer price will often determine if your offer is accepted. The biggest problem buyers have is thinking they should make an extremely low offer to “leave room for negotiation.” If you take that approach, you may be surprised at the result. The homeowner may be insulted, or they may conclude that you can’t afford their home, and they may refuse to consider another offer from you.
If you’re looking for a real deal, you’ll need to make an offer on a home that needs a lot of work to come up to the level of other homes in the neighborhood. In most cases, sellers whose home is in good condition and competitive with other homes in their area will expect to sell at a fair market value.
You can make your home buying experience even easier when you work with a real estate agent who understands your local market and can help you come up with a good offer strategy. LemonBrew can match you with the perfect local real estate agent for you. When you work with a LemonBrew partner agent, you can also take advantage of our home purchase process that includes a closing cost rebate.