The Art of the Offer- Things to Consider Before you Make an Offer

The most common question I am asked by buyers during the course of a real estate transaction is "How much should I offer?" It is a very simple question with a fairly complex answer. The reality is that the answer is different for each and every transaction, because there are no two real estate transactions exactly alike. In order to understand how much to offer on a house, you must first understand what elements are involved in making an offer.

The Human Element
The “human element” is far and away the most important and unpredictable aspect of making an offer. As you have probably experienced on a daily basis, people are different. People are different by the ways they communicate, the ways they negotiate, the ways they live, and sometimes drastically in the ways they think. You could offer $90,000 on a $100,000 house with the exact same terms and conditions to sellers in the exact same circumstances… one person might hate your guts and reject you outright, while the other might accept your offer and praise you as "their hero." The only difference between the two offers was the person you were asking. People often let emotions like sentimentality or desperation become involved in a negotiation. Your job, when making an offer on a property, is to keep emotion out of it as much as possible. Cooler heads always prevail at the negotiating table.

The Seller's Circumstances
The reason someone is selling directly affects their mood at the negotiating table. If someone is selling their home because they found the home of their dreams and they can't afford two mortgage payments, you may find that they are quite negotiable. If you are dealing with someone who is in a financial pinch and approaching foreclosure, they may want to sell but not have the financial flexibility to negotiate. There are also people who are just putting their house on the market because they are outgrowing their current home; they have no pressing need to sell, so often they are less negotiable. Another common situation is an instance where someone has moved away, and they are stuck with a second mortgage payment that is eating away at their checkbook. If that happens, you may really be able to get yourself a deal. Probably the hardest people to negotiate with are people who have inherited a home. They are difficult simply because they have no need for the money; selling the house is simply a bonus, and they can take their time.

The Condition of the Market
Currently the state of the market favors buyers in the Rolla-St. James area. When this is the case, most sellers understand that in order to sell their home, they are probably going to have to negotiate more than they normally might. As a buyer, you can be bolder with your offer in a market that favors you. When the market favors the sellers, you will see homes moving very quickly and selling prices staying quite close to the asking price. Sellers are typically less willing to listen to lower offers during this time. To get an idea of the condition of the market, simply ask a Realtor® what is going on in your local area.

The Community Element
In a smaller town or city, word travels fast. This is typically something that works against you as a buyer. People have very high opinions of their home; sometimes this is justified, but many times it is not. Because of their opinions, people in small towns often compare their homes to their neighbors’ homes or to someone who lives across town. Jack and Jill may feel like their home is "better" than Ricky and Lucy's, who sold their home for $150,000. So, their thought process is, "We should get at least that for ours." When people start playing the comparison game, buyers usually lose. Don't let this impact your offer, but do be aware that this is commonplace. Staying the course with your offer may shake that type of a seller back to their senses.

By considering these important elements of making a purchase offer, you will be better equipped to decide what price is right for your offer.