When you finally find the home of your dream, it is time to make an offer. When preparing for an offer to purchase a home, the only thing that is known to buyers is the listing price. This is the price that the seller is asking for. With that as a mere reference, how much should you offer and help do you come up with your offer price?
Here is a good process to go by:
1. Look at similar homes in the same neighborhood that are sold MOST RECENTLY. This is called comparable market analysis, which is the most common and practical ways to determine the value of residential properties. In the neighborhood that has a lot of transactions happening, you need to look at fairly large amount of data to make the comparison. Don't just look at homes that are most identical, also look at homes that are bigger and smaller in the SAME NEIGHBORHOOD, this will give you an overall understanding of where this property most likely stands in the greater scheme of things.
2. Look at additional data about this property. This includes the condition of the property and improvements made to this property.
3. Look at the current market conditions. This includes how many similar homes are sold over the last months or weeks; the homes at the same price range sold over the last months or weeks. What is the average sold price compared to list price? How many days do these type of homes stay on the market? This will tell you the intensity of the current market. I periodically prepare market trend reports of various cities throughout bay area to provide potential buyers information about most recent market condition. I also offer the same report on demand during my buyer's consultation.
4. Finally, after taking all of the above into consideration, it is up to the individual buyer to determine what is a fair price to offer based on the financial situation and the purpose of making such an offer. Every offer, whether above the list price or below, stands a chance, big or small, of getting the property. The above 3 steps will provide the most objective information about where your offer stands among all other competitions. It is finally up to the buyer to decide based on the facts.
In summary, regardless what type of buyer you are, whether you are just bidding or are seriously buying, you need to be well-informed with facts before making a decision on the offer. If you have specific question or scenario in mind and would like to get a more professional estimate about your offer, fill out the form below with the property address and comments. California Only.
