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What should your offer be? How much below asking price should you offer on a house? Or is it something you shouldn't try at all? The not-so-simple answer: It depends on the market you're in and other factors you should weigh before you consider making an offer.
Every home buyer wants to score a deal, after all. But set your offer too low, and you could risk offending the sellers and having them write you off completely. As such, it's all about striking the right balance. Here are some questions to ask yourself to help you figure out that happy medium.
Are you in a buyer's or seller's market?
Your ability to present a lower offer will depend on the current housing market conditions--meaning if it's a buyer's or seller's market. So before you make any offer, determine what type of market you're in. Traditionally, buyer's markets come with a lot of flexibility on price, because available inventory is high and houses tend to sit on the market for longer. Sellers tend to be more willing to negotiate when offers are few and far between.
In a seller's market, on the other hand, it's much harder to go below asking price at all, because inventory is low, and multiple buyers tend to be interested in the same properties. So, in this case, it's best not to lowball at all, and offer close to list price. However, there may be some times when you might consider otherwise.
How long has the listing been active?
By paying attention to the property history, you can get a better idea of the demand for that house. Two days on the market? Probably not a good idea to go in with a low offer $50,000 below asking price. A whole year on the market, with multiple price reductions? Go ahead and roll the dice. The longer a house has been on the market, the less of an upper hand the seller has in negotiation. However, it is important to remember that you don't want to insult the seller if you want to be taken seriously. I generally advise that buyers not go more than 5% under list price, and even then pricing of similar homes in the neighborhood should be taken into consideration.
How does the list price compare to similar homes that have sold in the neighborhood?
Once you have a general sense of how much wiggle room you have based upon market conditions and length of time on the market, it's time to look more specifically at recent sales in your desired neighborhood. Below I've prepared a comparative market analysis (CMA) which will show you the list and sale prices for similar homes that have sold in the last six months in Lockwood Glen. Unfortunately, there were only two homes that closed. Both were new construction. Given that there are no other recent existing homes that have closed with 3-car garages, this has to be our benchmark. When comparing to new construction the days on market (DOA) will always be higher as builders typically list these homes months before they will be complete.
How badly do you want the home?
Last, but not least, ask yourself: How would you feel if your offer got rejected? If you think that you'll regret missing out on the home, it may be worth it to consider offering exactly what they're asking for to seal the deal and make the home yours. After all, you never know when a competing offer may come in.
If you want the seller to seriously consider your offer, you want to make it something they can't refuse. It's important to remember the terms of the offer can often be equally important as price. For example, in our current market a sale of home contingency is less desirable to sellers. Usually the only way they'll even take note is if the offer is asking price or above. A cash offer may be more appealing if accompanied by a quick closing date; 14 days or less. However, if a home is one of several that you're considering and you're able to move quickly on another property without issue, there's no harm in trying to score a deal.
Remember, submitting a low offer is always a risk. Ultimately, it's up to you to determine how much of a gamble you're willing to take on the house.
Lockwood Glen Comparable Home Sales with 3-Car Garage
Click address links for photos and listing data.
