Now that you’ve found the home you want, the hard work is done, right? Not exactly. Before you start submitting offers, you’ll want to figure out how much you should offer. Here are 4 factors that can help you decide what to offer on a home.
We won’t beat around the bush; one of the most important parts of your offer will be the price. Unfortunately, figuring out what to offer is a common pain point for many buyers.
Below are 4 questions you can ask yourself (and maybe your agent) to help you determine the best price for your offer.
1. What have similar homes sold for?
That’s right! Researching recent sales in the area is a great place to start when considering what to offer on a home. Comps (short for comparables) are a collection of recent, similar and nearby home sales. When generating comps for the property you want to buy, consider the following criteria:
- Location Construction type
- Bedroom/bathroom count
- Square footage
- Condition (i.e. new construction, updated or “fixer”)
Pulling comps for the area in which you’re shopping can help you begin to formulate a range of acceptable sale prices that your offer should probably fall within. Your buying agent will be able to help you access comps information.
2. How long has the home been on the market?
The amount of time a home has been on the market is a factor you should consider when setting your offer price. Generally speaking, the length of time a home has been on the market has a direct correlation to how much you could/should offer.
The longer the house has been on the market, the lower your offer can typically be. This means that, conversely, if a home has just been put on the market, your offer price should usually be higher. If you attempt to low-ball a newly listed home, you risk the seller passing on your offer in favor of another opportunity.
On the other hand, if a home has been sitting on the market for a while, the seller will be more likely to accept a lower offer or at least negotiate on the price. Please note that regardless of how long a home has been on the market, some sellers aren’t in a rush to sell. Therefore, submitting an offer too far below the asking price can actually backfire. If you intend to submit an offer below the asking price, it’s best to consult with your buying agent on how far under asking you should set it.
3. What’s the condition of the home?
This should come as no real surprise, but a property’s condition is another very important factor in how much money you should offer for it.
A turn-key home, or home that is move-in ready, will typically receive higher offer amounts than a rehab/fixer home that’s in need of a lot of repairs. While fixers and rehab properties can be great opportunities to save money on the purchase of a home, it’s important to consider how much work you’re willing to put into a home to make it livable.
When evaluating the condition of a home, you’ll want to pay attention to structural/functional issues. Structural issues you’ll want to check for include:
- A sagging or damaged roof
- Cracks in the foundation
- Rusty plumbing
- Water stains on walls
- Warped or uneven floors
- Damage from pest infestations
Given that some of these issues can be hard to identify simply by viewing the home, your buying agent can request disclosures from the seller’s agent to check for inspections and reports that might indicate any potential issues that aren’t visible to the eye. Please note, that disclosure packages won’t always include an itemized list of every issue; rather they will only document issues that are known to the seller.
4. How flexible are you on price?
If your budget doesn’t have the wiggle room to offer more money, you can play around with the other aspects to ensure that your offer is still compelling to the seller.
Aside from price, you can sweeten your offer by being flexible on factors like:
- Closing schedule
- Rent backs
- Closing costs
The idea is to entice the seller in other areas if you’re submitting an offer at a lower price. For a seller who favors a speedy close, a shorter closing schedule or waived contingencies could be more valuable than a higher offer price.
At the end of the day, the goal is to draft an offer that’s a win for you and the seller. Landing on the right price for the home you want to buy can be a little tricky, but it doesn’t have to be difficult. Just remember to ask the right questions, consider your alternatives and partner with your buying agent.
This article is meant for informational purposes only and is not intended to be construed as financial, tax, legal, or insurance advice. Opendoor always encourages you to reach out to an advisor regarding your own situation.