How to Determine What to Offer During House Transaction?

Luckily, the home you want to make an offer on will most likely fall between these two extremes. Even so, there’s always the pressure to act fast or risk losing your dream house. If you have good taste and like the home, chances are others will too—usually at the same time. Experienced agents can relate many instances when homes have sat on the market for weeks with no activity, and then suddenly several offers came in the same day.

The first preoffer step is have your agent pull up a list of all the homes that have sold in the area over the past three months. Notice what the average listing price to sales price is. In a normal market, it’s in the 2 to 5 percent range. Next, look at the average days-on-market and compare with how many days the home you’re interested in has been for sale.

A note of caution here: A home that’s been on the market for two or three months doesn’t mean it’s been sitting there with no action. There could have been offers that didn’t work out or a sale could have failed, putting it back on the market. The MLS (Multiple Listing Ser-vice) days-on-market counter is like a taxi meter; it doesn’t stop or slow down until the ride ends. So it doesn’t hurt to ask the sellers if they’ve had any deals that have fallen through. Next, looking at past sales of similar homes in the area puts you in the ballpark as to value. But, other data such as days on market, area list price to sales price ratio and why the sellers are moving help you fine tune the offer. A transfer, job loss, or some other pressure situation as well as the home’s condition are also important factors. Russ and Linda went this route when they bought their first home. Their lender pre-qualified them for a $165,000 conventional with 10 percent down. Their agent pulled up all the homes in the areas they were interested in between $160,000 and $170,000. The list totaled 27 properties.

Going down the list with their agent, they were able to quickly eliminate 16 homes from the list—homes that were on busy streets, older homes that had not been updated, and styles Russ and Linda didn’t like. This narrowed the list down to 11 homes they would go through in the next day or two.

The first five homes on the list Russ and Linda looked at were disappointing and not at all tempting. Number eight was a possibility, and the ninth home they went through clicked. It had the feel of home. It was exactly what they were looking for but priced at $167,900. Hurrying through the other two homes on the list confirmed their choice on the well-maintained multilevel on a cul-de-sac. Generally, if two or three homes on the list are possibilities, then going back through these homes a second or even a third time is the best way to narrow your choice down to one. Sometimes the hardest part of house hunting is deciding which home among two or three to write an offer on.

Once you decide on the home you can’t live without, it’s important to put together an offer fast. It’s a competitive world, and other buyers have good taste also. Russ and Linda’s agent, Andrea, swung into action and looked at what other homes had sold for in the area. She noticed that the average listing sold for 98 percent of the list price, and the days-on-market was averaging 37. These are the numbers of a warm seller’s market, and Andrea didn’t think they should go any lower.

Andrea also called the listing agent and found out that the owners were building a new home nearby and it would be finished in about six weeks. That meant pressure was on the sellers to get their home sold, so that should soften the price a little. The next step was to write up the offer and get it presented to the sellers. Russ and Linda decided to offer $163,500, about 3 percent less than the asking price and included the refrigerator in the offer. Andrea then called the listing agent and set up an appointment to present the offer to the sellers that evening.

It’s important to note that when Andrea called the listing agent to set up the appointment, she didn’t disclose the price or terms of the offer. She didn’t want it shopped or used to leverage a competing offer if there were other buyers also looking seriously at the house. As it turned out, the buyers got lucky; no competing offers had come in. The prequalified letter convinced the sellers it was a bird-inthe-hand they shouldn’t pass up, especially when their new home would be finished soon. That the owners had just talked to their builder a few moments before Andrea arrived probably pushed up the pressure a notch or two to accept the offer.