When it’s time to get down to business, I’ve often been asked by home buyers and investors this simple but critical question: “What should we offer?”
Of course, they are asking in expectation that I will advise a number well below asking price, but what is realistic? What will provide a solid chance at getting the property? I think the appropriate answer is something along the lines of “as much as you are comfortable with”. While this question can be answered differently in a number of situations, knowing your “maximum” and areas of negotiation will be helpful in creating the best offer.
Making an offer on a house isn’t a total roll of the dice. While a crystal-ball element definitely exists, there are a few steps and ways of thinking that will help you get the best deal possible.
In an effort to help perspective home buyers and investors understand the offer process better, below are several tips and hypothetical situations along with my advice.
Do Your Research. Or Better Yet, Have A Real Estate Professional Do It For You.
In the Destin area, homes and condos are sold at an average of 93% of listing price, and often over 100% for well-priced distressed properties with multiple offers. When determining the value, ask your Realtor to do a comparative market analysis (CMA) for you.
Know What The Best Offers Look Like.
Sellers love to see cash offers with the least amount of contingencies. While asking for concessions (help with closing costs, etc) isn’t a bad idea, it should probably be kept to a minimum in multiple offer situations.
Be Aware If The Property Will Likely Draw Multiple Offers.
If the property is priced extra-well, expect an extra amount of attention from other buyers. Today, everyone is out for a deal and many are waiting on the sidelines for one to come along. If multiple offers come along, be prepared to give your “highest and best” offer from the start.
The Property Has Been On The Market For A Long Time.
When most buyers see that a property has been listed for an extended period of time, they automatically begin thinking about how low of an offer is reasonable. My advice to buyers is to be aware of the value of the property and what they are reasonably willing to offer. When presenting an offer for an otherwise “stagnant” listing, buyers need to know that there could be many reasons the property has not sold yet and need to do their homework (Liens, structural issues, etc.). Plus, presenting an extra-low offer to a seller will likely only create resentment.
The Property Has Just Been Reduced By A Large Amount.
While it may be true that the seller is ready to sell and has shown it by dropping the price considerably, offering much lower than this price is unlikely to be productive. When large price changes happen, they will likely draw the attention of other buyers and create competition. With interest comes competition, and competition will ensure market price is achieved.
When a short-sale is listed in the MLS, it can be a little tricky to find out the true selling price unless it has already been “bank approved”. Listing agents will sometimes list properties well below what the bank will accept (accidentally perhaps), and the bank will counter at a number higher. It should be noted that banks are in the business of making money, not giving it away for free. If the deal seems like it is too good to be true, it likely is. Bank owned and short sale properties are often neglected and in need of renovation or restoration so doing your homework will pay off.
Bank Owned Properties (REO).
Highly sought-after by contractor-investors, REO properties are often multiple offer material and/or major projects. Banks are often negotiable to a point, but have a minimum requirement they must/need to get from the sale. If you have cash and can close quickly, the bank is likely going to prefer your offer over others.
If you have questions about the offering process, or would like more information on the Destin Housing Market or Destin Homes for Sale, contact me directly for more detailed information.