#5 Making An Offer To Purchase

You have found the home that you can't live without and are ready to make an offer. Your real estate agent is ready to guide you through the next step of this somewhat complex process. You can count on your agent's expertise again—this time in the art of negotiation.

Your agent will direct you toward at a price that both you and the home's sellers can agree upon. A formal purchase contract, written by you and your agent and signed by you, will be submitted to the seller for review and consideration. During this step, compromise is vital; you want to arrive at a fair price where everybody is satisfied.

Rely on your agent to communicate and negotiate with all parties and help you to achieve the desired outcome. Avoid providing any information directly to the seller or the seller's agent, either positive or negative, or the negotiation process could suffer.

What Should You Offer?

To start, your agent will show you how your potential home compares to others in the area in terms of today's market. Your agent will compare condition, features, size and potential renovation and repairs for you. When several homes have sold in your area, a review of historical sales activity may help you to arrive at a price that reflects area trends. Ask your real estate agent to show you what homes have sold in the last six months to a year. Compare original list prices to final list prices. Are the list prices lower or higher than the actual sold price? What is the average?

Condition

Determine the cost of needed repairs and cosmetic improvements as well as desired upgrades and renovations. A home that is in mint, turn-key condition will sell for more than a fixer upper that requires additional expense and labor.

Features

Knowing the common upgrades and features of homes in your new neighborhood, may help you determine the asking price. For example, if your home is in a neighborhood where a walk-out finished basement is popular, and your basement is unfinished, the offered price might be lower. The resale value of a 3-bedroom home in an area of 4-bedroom homes could be lower. In effect, all features and upgrades combined with needed repairs should be weighed and balanced to come up with an optimum offer.

The Market

Whether or not the current market is more favorable for a buyer or a seller will help determine the price of your offer. When more homes are for sale than there are buyers, then you are in a buyer's market. When there are fewer homes for sale than there are buyers, then you are in a seller's market. Higher prices exist in a sellers’ market and lower prices exist in a buyer's market. Make your offer accordingly.

Making Your Offer

The next step is figuring out what you want to pay for the home. Your offer is just the first step in negotiation. Counteroffers are common, and sometimes there are several. Your initial offer may be lower than the final agreed upon price. Depending on the market, a home may have multiple offers at the same time resulting in a sales price that is higher than the list price. The most financially attractive buyer with the highest offer and fewest number of contingencies will typically prevail in this type of situation. Because prices are more flexible in a buyer's market, sellers are more often open to negotiation.

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